Supreme Court Made It Easier to Nix Overtime Claims, Sometimes

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By Jon Steingart

Employers since spring have faced a lower bar for showing that federal wage law doesn’t apply in their case, but even that easier standard can be out of reach, a Bloomberg Law analysis of federal court rulings shows.

The Supreme Court in April ruled in favor of a California car dealer that argued it didn’t have to pay minimum wage and overtime to its car service advisers.

Patricia Smith, a New York-based senior counsel at the National Employment Law Project, predicted at the time that the court’s new precedent would cause fewer workers to be found eligible for minimum wage and overtime. It’s too early to tell the full reach, but courts are already beginning to cite the ruling. Smith served as solicitor in the Obama Labor Department.

The high court said in Encino Motorcars LLC v. Navarro that exemptions to wage and overtime requirements that Congress wrote into the federal Fair Labor Standards Act should get a “fair reading.” This approach was a shift from the court’s decades-old precedent of requiring exemptions to be construed narrowly in employees’ favor.

The decision was seen as more evenly balancing how a court decides whether a minimum wage or overtime exemption applies. It eliminated a “thumb on the scale” in favor of employees, Wendy McGuire Coats, a lawyer for Encino Motorcars LLC, told Bloomberg Law in April. She’s a partner and appellate counsel at Fisher & Phillips LLP’s San Francisco office.

Encino a Factor in 20 Rulings

The court’s shift toward a fair reading doesn’t mean employees can’t persuade a court that they’re eligible for minimum wage and overtime. Even under the new precedent, employees are still winning disputes over their eligibility, but employers are faring a little better.

There have been 20 federal court opinions since April that rely on Encino‘s new fair reading rule. Those decisions include 12 wins for employers and eight for employees. One of the employer wins is a magistrate judge’s report and recommendation that the employer should win, which is subject to a district judge’s approval.

In the most recent federal court opinion that cites Encino, a judge rejected an employer’s request to reconsider his earlier rulings—made before the Supreme Court’s Encino decision—that door-to-door salespeople are eligible for minimum wage and overtime. The judge said he would have ruled against the employer regardless of the Encino outcome because the employer didn’t convince him that the claimed exemption actually applied, he said.

In addition to the 20 court rulings that have relied on Encino in their rulings, another nine decisions cite portions of the Supreme Court’s April decision that discuss aspects unrelated to wage and overtime exemption issues.

Encino‘s Contours Undeveloped

There may be many rules that guide how a court decides the issue of wage and overtime eligibility, and court opinions usually don’t say how strongly one rule or another led to a particular conclusion. That makes it hard to tell how much of a role a particular precedent played in guiding the court’s decision.

The impact of Supreme Court precedents can take years to develop, and lower courts haven’t spelled out what might result in a win for an employer under a fair reading that would have been an employee’s victory under narrow construction.

None of the 29 decisions that have cited Encino since early April go into depth about how big the difference is between “narrow construction” and “fair reading.”

The closest some of them come is to say that Encino‘s fair reading standard may not be enough to persuade them that an employer could exempt their workers from wage or overtime requirements.

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