By Ed Hardin

On April 2, 2018, the United States Supreme Court issued its opinion in Encino Motorcars, LLC v. Navarro.  In a 5-4 decision, the Court ruled that automobile service advisors are not entitled to overtime under the federal Fair Labor Standards Act (“FLSA”).  In the Encino Motorcars case, the Court was asked to decide whether automobile dealership service advisors were exempt from federal overtime requirements based on an FLSA exemption for salesmen, partsmen, or mechanics primarily engaged in selling or servicing automobiles, trucks, or farm implements.  The Supreme Court held that the service advisors in question were exempt employees under the FLSA.  As Fox Business reported, the decision affects more than 18,000 dealerships and more than 100,000 service advisors.  However, the case has much broader implications, well beyond automobile dealerships.  In its decision, the five justice majority stated that pursuant to “a fair reading” of the exemption in question, service advisors were exempt from overtime because the service advisors sell goods or services.  Although the Court’s specific holding is somewhat narrow (applying to automobile service advisors), how the Court arrived at the holding represents a major shift in interpretation of the U.S. Department of Labor Wage and Hour Division’s regulations on the FLSA exemptions.  For decades, exemptions from overtime requirements were narrowly construed to provide overtime coverage under the FLSA.  In the Encino Motorcars case, the Supreme Court expressly rejected a narrow construction of the exemption “as a useful guidepost for interpreting the FLSA” in favor of a fair reading.  As the Court remarked, “We have no license to give the exemption anything but a fair reading.”  The door may now be open for employers and the courts to give less restrictive readings to FLSA exemptions in favor of a more “fair reading” of those exemptions, which may in turn lead to fewer employees being entitled to overtime, but may also certainly lead to more litigation.  For more on the decision see: https://www.foxbusiness.com/markets/supreme-court-rules-for-car-dealerships-in-overtime-case or http://www.latimes.com/politics/la-na-pol-court-autos-overtime-20180402-story.html