A New Standard for Overtime Exemption?

James R. Becker, Jr.

January 8, 2019

As a young lawyer, one phrase really stuck out for me, "this is a remedial statute and should be construed liberally in favor of the employee."  It's almost as catchy as its sister phrase, "exemptions are to be construed narrowly and against the employer."  Taken together, these two phrases made both the unemployment compensation law and (much more importantly) the Fair Labor Standards Act ("FLSA") most favored laws for a young lawyer to try to prosecute.  However, those halcyon days of my youth, much like my brown hair, appear to be gone.

In April 2018, the U.S. Supreme Court decided the case of Encino Motorcars, LLC v. Navarro.  In a 5-4 decision, the Court found that a little known exemption of the FLSA for workers "primarily engaged in...servicing automobiles" trumped the employee's right to receive overtime pay.  More significantly from this decision, however, is that the Court did not recite that most cherished language of the FLSA that exemptions are to be narrowly construed.  Rather, the Court interpreted this exemption by giving it a "fair reading."  This seems like a much more pro-employer interpretation than the interpretation that has been around since around 1940.  But what does it mean to lawyers advising their clients and to workers in their quest to get overtime pay?

It is probably too soon to answer that question definitively.  Early indications, however, seem to point to this interpretation leading to more expansive interpretations of the exemptions and possibly overturning decades of established precedent.  Bloomberg Law did an article in September 2018 which studied 20 court decisions post-Encino and which cited to this new standard.  Of those 20 cases, employers won 12 and employees won 8.  While it is probably too soon to make a definitive conclusion, the trend seems clear that employers and employees are looking at a new standard for judging overtime exemptions.