THREE YEARS LATER, THE SEA-CHANGE PROMISED BY ENCINO MOTORCARS HAS YET TO APPEAR
By Nathan Bishop
June 7, 2021
Prior to 2018, exemptions to the overtime provisions of the Fair Labor Standards Act (“FLSA”) were, in legal parlance, to be narrowly construed against the employer in light of the statute’s broad remedial purpose. This changed with the Supreme Court’s decision in Encino Motorcars, LLC v. Navarro in which Justice Thomas, writing for the majority, noted that oft repeated dogma that exceptions to the FLSA be narrowly construed against the party claiming an exemption was erroneous since the statute did not explicitly state that exemptions should be construed narrowly. Encino Motorcars, LLC v. Navarro, 138 S. Ct. 1134, 1142 (2018). Since the Fair Labor Standards Act contains no instructions on whether exemptions from the requirements of the Act should be interpreted narrowly or broadly, the Court reasoned such exemptions should be given a “fair” reading.
This promised to be a sea-change. The dissent, authored by Justice Ginsburg, noted that the Court’s determination that exemptions to the FLSA should be given a fair reading rather than a narrow reading “… unsettles more than half a century of our precedent.” Encino Motorcars, LLC v. Navarro, 138 S. Ct. 1134, n.7 (2018) (Ginsberg, J., dissenting). Employer-side firms responded proportionately. Fisher Phillips noted that, “This rejection of the ‘narrow reading’ of FLSA exemptions should soon affect a whole host of FLSA exemption cases… the judicial thumb should now be off the scale when employers fairly assert that employees are overtime exempt under the FLSA.” Littler, encouraged by the ruling, invited employers to “Rev Your Engines,” and Kirkland and Ellis, the firm originating and defending the case noted that, “both employers and employees will now have a level playing field when it comes to FLSA’s requirements.”
Yet the sea-change never materialized. One year after the Court issued its opinion, corporate employment counsel blog “The Day Shift” rated the eight (8) appellate level cases which cited to Encino Motorcars as a “too soon to tell,” what the impact of the change from a “narrow” to a “fair” reading would be. One year out, only the Sixth Circuit in a non-precedential decision appeared to rely on Encino Motorcars narrow reading language to reach a conclusion it may not have under the previous standard. See Diaz v. Longcore, 751 F. App’x 755, 758 (6th Cir. 2018).
Three years out, the verdict is much the same, at least in the wage and hour context of the original decision. In the previous two (2) years, thirty seven (37) Circuit Court opinions cited to Encino Motorcars, but the analyses provided by the courts are indistinguishable in form or outcome from the sort of analysis provided before Encino Motorcar. This underlines the fact that Thomas’ opinion required that courts announce the new standard instead of the old standard before engaging in substantially the same analysis.
Lower Courts are not ignoring the Supreme Court’s opinion. Instead, the breadth that courts are required to give the FLSA exemptions should have little impact on district courts’ application of the law since exemptions to the FLSA already invited a “fair” rather than “narrow” reading. Typically, exemptions to the FLSA are determined by multi-factor tests, which often hinge on the degree to which an employer can establish an employee was primarily engaged in an exempt activity, or other economic realities of the employee’s work. For example, an analysis of whether a salaried manager of a fast-food restaurant is primarily engaged in management may inquire into if the manager is also attending to customer orders, customer complaints, bagging food, and cooking food. This requires a deep understanding of what the manager was doing as well as the importance of each task to the business. In a real-world example, the Seventh Circuit in Bigger v. Facebook, Inc., states the courts’ typical task when determining whether an exemption applies, in this case the administrative exemption, thusly, “First, while duties supporting an enterprise’s core function may qualify as an administratively exempt duty, actually engaging in that core function may not. And second, for us to decide as a matter of law that an employee customarily and regularly performed duties ‘directly related to management or general business operations,’ we need a clear factual picture of those duties, including how they relate to the employer’s and customers’ enterprises.” Bigger v. Facebook, Inc., 947 F.3d 1043, 1054 (7th Cir. 2020). Courts tend to approach such analyses in a deliberate and thorough manner which in turn tends to result in a “fair” rather than “narrow” reading of the exemption.
Three years out, Justice Ginsburg’s concern that, Encino Motorcars unsettled more than half a century of precedent seems overstated. Instead, Encino Motorcars has unsettled a half century of semantics, with the practical effect that opinions construing FLSA exemptions now stating that exemptions are to be given a “fair rather than narrow” reading rather than stating that the exemptions are, “to be narrowly construed against the employer.” While the new language is more accurate in light of the type of analysis demanded by the exemptions themselves, courts’ analyses of FLSA exemptions appear almost universally unchanged by the new scope set out in Encino Motorcars.
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