One of the most common debates in employment law is "exempt or not exempt." Human resource professionals are constantly asked to make a determination as to whether an employee is exempt from the federal Fair Labor Standards Act ("FLSA") and any applicable state law overtime requirements, or if such requirements must be satisfied.
Recently, the U.S. Supreme Court, in Encino Motorcars, LLC v. Navarro, provided guidance under the FLSA related to the exempt status of auto service advisors, or those who advise customers about their vehicle's repair work. As a general rule of thumb, most employers treat auto service advisors as non-exempt employees in reliance on 2011 U.S. DOL guidance. The Supreme Court, however, disagreed. The Supreme Court found that auto service advisors are primarily engaged in servicing automobiles through their sales of those services, and therefore, are covered by the FLSA's exemption that exempts "any salesman, partsman, or mechanic" who is "primarily engaged in selling or servicing automobiles."
Perhaps more important than the Supreme Court's ultimate finding is how they got there. In the past, courts narrowly construed FLSA exemptions. The Supreme Court, however, labeled that principle as flawed and stated that such a construction is not actually provided for in the FLSA. Instead, the Supreme Court determined that FLSA exemptions should be construed by giving each exemption a "fair reading." While the Supreme Court failed to define what a "fair reading" is, it would seem that employers may have a bit more flexibility to fairly and conservatively interpret the exemptions provided for them in the FLSA. Even with this seeming relaxation of the analytic framework for the "exempt versus non-exempt" debate, we do caution that this analysis applies only to the FLSA and its exemptions, and careful attention must still be paid to any applicable state laws that may deviate from the FLSA and its exemptions.
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