Mercedes Dealer Overtime Case Again Gets SCOTUS Review

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By Jay-Anne B. Casuga

The U.S. Supreme Court for the second time will review whether service advisers at car dealerships are exempt from federal overtime pay requirements ( Encino Motorcars v. Navarro, U.S., No. 16-1362, review granted 9/28/17 ).

The case may have ramifications on how courts interpret statutory exemptions under laws like the Fair Labor Standards Act, attorneys told Bloomberg BNA Sept. 28. Generally, FLSA exemptions have been narrowly construed in favor of employees.

“The rejection or reinforcement of that ‘exemptions are narrowly construed’ canon will have ripple effects across FLSA jurisprudence,” said Collin O’Connor Udell, of Counsel at Jackson Lewis in Hartford, Conn. Udell isn’t involved in the case, but her practice focuses on Supreme Court litigation.

A broader reading of the FLSA’s exemptions potentially could reduce the number of workers allowed to bring bring minimum wage and overtime claims against their employers.

“But only to the extent those workers would not be covered under traditional methods of statutory interpretation, such as examination of the text, the structure of the statute, and, if necessary, legislative history,” Udell said.

Salesmen, Mechanics, or Partsmen?

The present controversy, which centers on whether service advisers at a California Mercedes-Benz dealer are entitled to overtime wages, went before the high court last year when only eight justices sat on the bench. The court 6-2 sent the case back to the U.S. Court of Appeals for the Ninth Circuit without resolving the issue.

They found that the appeals court shouldn’t have relied on a 2011 Labor Department rule that said service advisers don’t fall within the FLSA’s exemption covering car salesmen, mechanics, and partsmen because they don’t sell or service automobiles. The majority said no judicial deference was warranted because the DOL didn’t give adequate reasons for the regulation, which changed the agency’s long-running stance that service advisers weren’t entitled to overtime pay.

On its second look, the Ninth Circuit in January again held that service advisers aren’t FLSA-exempt. The appeals court relied on examining the law’s text and legislative history.

The dealership filed its petition for Supreme Court review in May, and the service advisers filed their opposition brief in July.

“It’s safe to assume that the justices will focus on statutory interpretation since the question of agency deference is no longer front and center in this case,” Udell said.

The National Automobile Dealers Association filed a friend-of-the-court brief in the case.

“NADA will continue to actively support the case in anticipation that the court will resolve the issue in favor of the dealer defendants and of all those dealers who have for decades applied the overtime exemption to service advisers,” Jared Allen, an association spokesman, said in a Sept. 28 statement.

Narrow Versus Broad Interpretation

Although the justices could decide to examine whether FLSA exemptions should continue to be narrowly construed, Paul W. Mollica, a plaintiffs’ side attorney with Outten & Golden in Chicago, said the Ninth Circuit didn’t particularly rely on that rule to reach its conclusion. Mollica isn’t involved in the case, but has written numerous amicus briefs before the high court in employment cases.

The appeals court held that the ordinary meaning of the FLSA’s text, as well as a slate of legislative history, supports its interpretation that service advisers aren’t overtime-exempt.

“The opinion is written with almost surgical precision that this is an ‘ordinary meaning’ case, and not a case that rests on the ‘narrow reading’ rule,” Mollica said.

As such, the case may not be a “strong vehicle” for the justices to address the interpretation of statutory exemptions, he said.

Udell added that the “exemptions are narrowly construed” canon is an outgrowth of a broader rule that “remedial statutes are to be liberally construed” in favor of those they are designed to protect.

Former Justice Antonin Scalia was “highly critical of this canon,” she said.

Justice Neil Gorsuch, as Scalia’s heir, “will likely follow in his predecessor’s footsteps on this point,” Udell said. Justices Clarence Thomas and Samuel Alito “will likely join him in rejecting the canon,” she said.

“It remains to be seen if they can persuade enough justices to reach a majority, but if they do, courts will have to stop using the canon as an easy way to decide cases and, instead, carefully analyze the cases before them,” Udell said.

Stephanos Bibas of the University of Pennsylvania Law School’s Supreme Court Clinic, who represents the service advisers, declined to comment on the case.

Paul D. Clement of Bankcroft in Washington, who represents the dealership, wasn’t immediately available to respond to Bloomberg BNA’s Sept. 28 request for comment. Clement is a former U.S. solicitor general.

To contact the reporter on this story: Jay-Anne B. Casuga in Washington at jcasuga@bna.com

To contact the editor responsible for this story: Terence Hyland at thyland@bna.com

For More Information

The petition for review is available at http://src.bna.com/sV0. The opposition brief is available at http://src.bna.com/sV1.

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