A divided Supreme Court on Monday threw out an effort by the Obama administration to expand overtime laws to include a special class of workers at auto dealerships known as “service advisers.”
In the 5-4 decision, the court’s conservative justices said that despite some ambiguity in text of the law, Congress clearly meant to exempt service advisers from the requirement that they be paid time and a half after working 40 hours in a week.
Though the case, called Encino Motorcars v. Navarro, involved a limited class of employees, it was notable because it involved how far-reaching the Fair Labor Standards Act’s overtime coverage is and how much wiggle room administrations have in interpreting it. The 9th Circuit Court of Appeals had said that any exemptions to the FLSA had to be construed as narrowly as possible, but the Supreme Court overruled that decision.
“We reject this principle as a useful guidepost for interpreting the FLSA. Because the FLSA gives no ‘textual indication’ that its exemptions should be construed narrowly, ‘there is no reason to give [them] anything other than a fair (rather than a ‘narrow’) interpretation,” Justice Clarence Thomas wrote in an opinion joined by Chief Justice John Roberts and Justices Anthony Kennedy, Samuel Alito and Neil Gorsuch.
Federal law requires that employees be paid time and a half after 40 hours in a week but allows “managerial employees” to be exempted, which has become controversial in recent years. Congress in the mid-1960s also included a narrow exception for “any salesman, partsman or mechanic” who is “primarily engaged in selling or servicing automobiles.” This was to exempt service advisers, the dealership employees who tell customers which repairs or other work their cars need. The exception was made reportedly because that that they often worked odd hours to help with people buying farm equipment.
In 2011 the Obama administration changed the rule and said service advisers were covered, a move cheered by liberal groups who have long contended that employers try to exploit workers by misclassifying their duties. Business groups opposed the move, arguing the exception allows managers and workers to create flexible work schedules.
[Trump administration won’t save Obama-era overtime rule]
To a large extent, the Encino Motorcars case revolved around interpreting Congress’ use of the word “or.” The 9th Circuit said that because service advisers were involved in selling and servicing, while the text of the exemption referred to selling or servicing, they weren’t covered.
The Supreme Court’s majority said that couldn’t have been what Congress intended. “T]he use of ‘or’ to join ‘selling’ and ‘servicing’ suggests that the exemption covers a salesman primarily engaged in either activity,” Thomas wrote.
The court’s liberal justices thought otherwise. “Because service advisers neither sell nor repair automobiles, they should remain outside the exemption and within the act’s coverage,” Justice Ruth Bader Ginsburg wrote in an opinion joined by Justices Elena Kagan, Sonia Sotomayor and Stephen Breyer.
The Trump administration’s Labor Department is rewriting the entire overtime rule. It is expected to roll back the Obama administration’s expansion of the rule to automatically cover any employee who makes up to $47,000 annually, more than twice the level under previous administrations. The $47,000 overtime threshold a was struck down by a Texas court in 2016.
