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Don’t Read Too Much into the Supreme Court’s Decision on Exemptions

This week, the Supreme Court issued a decision interpreting the automobile “salesman, partsman, or mechanic” exemption to the Fair Labor Standards Act (“FLSA”). The exemption exempts from the FLSA’s overtime obligations certain car dealership employees “primarily engaged in selling or servicing automobiles.” While the decision is certainly important for that industry segment in its own right, the Court also used the case as a “vehicle” to review its FLSA precedent more broadly, overturning an almost universal principle under FLSA law: Exemptions to the law’s overtime requirements are to be narrowly construed against the employer. In finding the exemption at issue applied to service advisors (and as part of a lengthy discussion about the meaning of the word “or”), the Supreme Court rejected “the principle that exemptions to the FLSA should be construed narrowly.”

While this shift away from a longstanding interpretation technique will certainly impact lower court interpretations of FLSA’s exemptions, it remains unknown what form the changes will take and how the decision will ultimately impact employers. And it may be a while before companies feel the effects of the decision.

To avoid FLSA liability, companies often take a careful approach in borderline situations — where a job classification doesn’t fit squarely within one of the exemptions — by classifying those jobs as non-exempt and paying overtime. Although some companies might employ a more aggressive exemption strategy, employers should remain cautious; practices shouldn’t change simply because the Supreme Court has altered the way lower courts view exemptions moving forward. Plaintiffs’ lawyers will still bring lawsuits, the Department of Labor will still initiate investigations, and it will take some time for the lower courts to adjust existing precedents — many of which relied on this now-defunct principle of interpretation — to fit within this changed landscape. Further, employers will still bear the burden of showing that employees fit within a specified exemption. The Supreme Court’s pronouncement is simply too abstract to have immediate on-the-ground consequences for companies.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.