The Supreme Court’s Encino Motorcars Decision Levels the Playing Field in FLSA Cases

Date: May 22, 2018

In April 2018, the Supreme Court issued a 5-4 opinion in Encino Motorcars v. Navarro, which reversed the Ninth Circuit Federal Court of Appeals on a wage and hour issue under the Fair Labor Standards Act. Specifically, Encino Motorcars asked whether service advisors at auto dealerships should be treated as exempt or non-exempt employees. Because the FLSA dictates that non-exempt employees get overtime after 40 hours, the question was of practical importance to auto dealers. Yet, the decision had much broader implications for the business community.

When tackling difficult questions of statutory interpretation under the FLSA, the courts have often placed their thumb on the scales of justice, siding with the employee. Time and again the Supreme Court and the lower courts had repeated the mantra that “remedial statutes” should be construed to advance supposed legislative goals, therein siding against employers who have presented more compelling arguments.

But as we emphasized in our amicus brief—along with the U.S. Chamber of Commerce—there is no legitimate basis for the supposed remedial canon. If anything, in directing courts to disregard the best statutory interpretation the canon operated to undermine Congress’s deliberate legislative decisions. There can be no monolithic purpose for any legislative enactment because the statutory text always represents a delicate compromise among lawmakers weighing diverse concerns and interests.

The Court could have resolved the narrow question presented in Encino Motorcars without addressing the remedial canon; however, in the opinion below, Ninth Circuit’s decision sided with the plaintiff-employees because there were colorable arguments on both sides of the equation. This prompted an unequivocal repudiation. Writing for the Court Justice Thomas said:

“The Ninth Circuit [] invoked the principle that exemptions to the FLSA should be construed narrowly. … We reject this principle as a useful guidepost for interpreting the FLSA. … The narrow-construction principle relies on the flawed premise that the FLSA ‘pursues’ its remedial purpose ‘at all costs.’ … But the FLSA has over two dozen exemptions in §213(b) alone, including the one at issue here. Those exemptions are as much a part of the FLSA’s purpose and the overtime-pay requirement.”

It remains to be seen to what degree Encino Motorcars signals a shift in statutory interpretation under other laws. At the very least Encino Motorcars should prompt courts to employ an even-handed textual analysis without any assumption about which party should come out on top. To use a baseball analogy, judges must umpire with a consistent strike-zone for plaintiffs and defendants alike. And because this will have tremendous practical implications for small business in innumerable cases across the country, it is fair to say that Encino Motorcars was this year’s great ‘sleeper’ case.

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