Why the Encino Motorcars Case is a Big Deal for Small Business

Date: November 09, 2017

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Time and again we have seen federal courts rule against employers in Fair Labor Standard Act (FLSA) cases—employing questionable assumptions about Congressional intent, without searching for the best interpretation of statutory text. Case in point, the Ninth Circuit Federal Court of Appeals ruled, in Encino Motorcars LLC v. Navarro, that “service advisors” working for an auto-dealership were entitled to overtime under the FLSA. In rejecting the employer’s argument that they were properly classified as exempt employees, the Ninth Circuit emphasized that it was construing FLSA exemptions narrowly. For that matter, the Ninth Circuit was clear in saying that it would not have decided the case against the defendant auto-dealership, but for its presumption that FLSA exemptions should be narrowly construed.

But as NFIB Small Business Legal Center and the U.S. Chamber of Commerce argue in a recently filed amicus brief, it is time for the Supreme Court to expressly repudiate the idea that FLSA exemptions should always be construed against the employer. That ‘thumb-on the scale’ approach is not only unfair to small business, but it is fundamentally inappropriate. To be sure, the often-repeated mantra that exceptions to “remedial statutes” should be narrowly construed is wrong because it falsely presumes that Congress has one monolithic goal in mind when enacting legislation—which is never true.

On the contrary, enacted statutes always represent compromise. As such, exceptions and exemptions to otherwise general rules should be given full force as Congress intended because they represent part of a delicate bargain. To be sure, Congress is always seeking to balance competing interests when enacting law on difficult and complex matters. Accordingly, we should take seriously statutory text, whether setting out a general rule or spelling out the exception(s). Simply put, Courts should endeavor to decide upon the best interpretation, without automatically deferring to one side or the next.

Admittedly the Supreme Court has repeated the mantra that remedial statutes should be narrowly construed in numerous decisions over the years. But as far as we can tell, that supposed canon of interpretation has never been decisive in any Supreme Court case. Instead, the court has repeated this mantra in dicta to the point that the lower courts have accepted it as if it were doctrine. But that should not prevent the Court from reconsidering and rejecting this supposed canon—especially since the Court has never quite agreed upon when it should apply.

As Justice O’Connor said in Chevron U.S.A. v. Lingle: “On occasion, a would-be doctrinal rule or test finds its way into [this Court’s] case law through simple repetition of a phrase—however fortuitously coined.” But, when it becomes apparent that such “repetition of a phrase” is “doctrinally untenable,” the Supreme Court has properly stepped in to “correct course.” In such cases, the Supreme Court has properly repudiated false-rules—to make clear that they have no place in our jurisprudence.

That is precisely what we are asking the Supreme Court to do in Encino Motorcars. And at least some members of the Supreme Court have already signaled their agreement. Notably, Justices Alito and Thomas both suggested in Encino Motorcars I, that the time had come for the Supreme Court to repudiate “the made-up canon that courts must narrowly construe the FLSA exemptions.”

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