On April 2, 2018, the Supreme Court rejected the longstanding principle that Fair Labor Standards Act (“FLSA”) exemptions must be construed narrowly, holding that service advisors at a California automobile dealership are exempt from the overtime requirements under the FLSA.

The case hinged on the interpretation of one particular exemption to the FLSA overtime requirements, namely the exemption covering “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles,” as it was applied to the automobile service advisors.  The service advisors generally were required to meet with customers, suggest repairs and replacement parts, record service orders and follow up with customers.  Prior to reaching the Supreme Court, the Ninth Circuit Court of Appeals interpreted the exemption as only covering sales staff who were primarily engaged in selling automobiles, and not sales employees primarily engaged in servicing automobiles.  The Ninth Circuit therefore concluded that the service advisors did not fall within the exemption.

The Supreme Court, however, rejected the Ninth Circuit’s narrow construction, holding that the exemption was not limited to those employees that physically perform the service repairs.  In support of its holding, the Court reasoned that partsmen are covered under the same exemption and they are typically only responsible for obtaining the necessary parts for service work.  The Court further held that the exemption was not limited to sales employees primarily engaged in selling automobiles.  Ultimately, the Supreme Court held that service advisors were exempt because they are “salesm[e]n . . . primarily engaged in . . . servicing automobiles.”

Most of the Court’s opinion focuses on the proper interpretation of the particular exemption at issue—but what the decision will be remembered for is the majority’s rejection of the longstanding principal of narrow construction of FLSA overtime exemptions, noting that “the FLSA gives no ‘textual indication’ that its exemptions should be construed narrowly.”  Instead, the majority held that they “have no license to give the exemptions anything but a fair reading.”

The new “fair reading” standard will require lower courts to look beyond the statutory language of FLSA exemptions, and instead evaluate the intent of the exemption and the practices within the industry at issue, to name just a few other factors that may be considered.  While this may be welcome news to many employers seeking to take advantage of FLSA exemptions, the four dissenting Justices, led by Justice Ginsburg, offered pointed criticism for the majority for summarily rejecting the narrow construction principle “without even acknowledging that it unsettles more than a half a century of our precedent.”

How this decision will affect the interpretation of other exemptions under the FLSA remains to be seen, but the impact of this decision will almost certainly extend beyond the auto sales industry.  The decision to abandon the longstanding principle that FLSA exemptions are to be construed narrowly in favor of non-exempt status is significant, as the more common FLSA exemptions – such as the executive, administrative and professional employee exemptions – may  now be subject to the broader “fair reading” standard in cases that come before the High Court.