Early thoughts on this Supreme Court term
Articles / Publications
We are about midway through the 2017-18 term of the U.S. Supreme Court. One case the Court has already decided and another it refused to take up provide some insight on how the Court has handled employment cases it has been asked to review. While the justices can always surprise us, here's an assessment of how the high court seems to be interpreting employment law at this point in the current term.
Court backs fair interpretation of FLSA exemption
Encino Motorcars v. Navarro involved a dispute between a Mercedes-Benz dealership in California and its current and former service advisers, whose job duties include meeting customers to hear concerns about their cars, suggesting repair and maintenance services, and selling new or replacement parts. In 2012, the service advisers sued Encino Motors for back pay, alleging it violated the Fair Labor Standards Act (FLSA) by failing to pay them overtime.
As our readers know, the FLSA generally requires you to pay overtime to employees who work more than 40 hours in a workweek. The statute provides for some exemptions, but those exemptions are usually construed very strictly by the courts. One of the exemptions covers "any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles, trucks, or farm implements, if he is employed by a nonmanufacturing establishment primarily engaged in the business of selling such vehicles or implements to ultimate purchasers."
From its enactment in 1974 until 2011, the exemption was understood by several courts and the U.S. Department of Labor (DOL) to cover service advisers at auto dealerships. However, in 2011, the DOL issued a rule that interpreted "salesman" to exclude service advisers. The 2012 lawsuit filed against Encino Motorcars was based on that 2011 rule.
The California federal district court dismissed the service advisers' case, agreeing with Encino Motorcars' position that they fall under the auto dealers exemption. Not unsurprisingly the U.S 9th Circuit Court of Appeals reversed, finding the legislative history of the FLSA requires deference to the DOL's 2011 rule. Encino Motorcars asked the Supreme Court to review the case.
The high court disagreed with the 9th Circuit and sent the case back to the court of appeals with instructions that it reconsider the exemption without giving weight to the DOL rule, which the Court deemed procedurally defective. The 9th Circuit, purportedly following those instructions, again found that the auto dealers exemption doesn't include service advisers. Another appeal followed.
The Supreme Court again rejected the 9th Circuit's analysis and held that service advisers are in fact salesman within the meaning of the FLSA exemption. A key part of the Court's decision was its conclusion that service advisers are integral to servicing automobiles. According to the Court, the statutory language isn't constrained to include only employees who spend time physically repairing automobiles, and the exemption covers a salesperson primarily involved in either servicing or repairing cars and doesn't require the employee to be engaged in both activities.
In addition, the Court rejected the arguments against the exemption based on legislative history. The Court observed that silence in the legislative history cannot defeat a better reading of the text of the statute.
The broader importance of this decision for all employers is the majority's rejection of the principle that exemptions to the FLSA should be narrowly construed. The Court noted the narrow construction principle relies on the flawed premise that the FLSA's remedial purpose should be pursued at all costs. Instead, the Court found that exemptions should be construed under a "fair" interpretation. While employers still have the burden of proving that an exemption from overtime applies, a fair, rather than a narrow, interpretation of the exemption may make it easier to meet that burden.
Leave as an ADA reasonable accommodation
The Supreme Court chose not to review the 7th Circuit's decision in Severson v. Heartland Woodcraft, Inc., a case involving the availability of extended leaves of absence as a reasonable accommodation under the Americans with Disabilities Act (ADA). The 7th Circuit held that a two- to three-month leave of absence following an employee's exhaustion of his leave entitlement under the Family and Medical Leave Act (FMLA) isn't a reasonable accommodation under the ADA.
The court of appeals made it clear that leave may still be an appropriate reasonable accommodation under the ADA in certain circumstances, but there is no mandate or per se requirement that leave is always a reasonable accommodation. Significantly, the court characterized the ADA as an "antidiscrimination" statute as opposed to a "leave entitlement" statute.
The case shows how framing the issue on appeal may be important. In his petition to the Supreme Court, the employee posed the question as whether there is a per se rule that a finite leave of absence cannot be a reasonable accommodation under the ADA. The employer framed the issue as whether an individual who requires a multimonth leave following three months of FMLA leave can be considered a qualified individual under the ADA if the extended leave wouldn't enable him to perform the essential functions of his job.
Because the appellate court's decision was allowed to stand, employers in the 7th Circuit have some concrete guidance that a two- to three-month leave of absence after an employee's FMLA leave expires is likely not a reasonable accommodation under the ADA absent other considerations. South Carolina employers must still look to what the 4th Circuit says, but the 7th Circuit joins the 10th and 11th Circuits in deeming extended leave unreasonable under the ADA.
Lessons for employers
These two cases should provide some comfort that the Supreme Court, as it is now configured, is making an effort in employment cases to look at the statutory language and reach a conclusion that's true to the words used in the law in the context in which they are used. HR professionals at your organization should ask, in close consultation with your employment counsel, what does a particular employment law say, and what is the context of the statutory language? For now, it appears that kind of analysis will find a receptive audience at the Supreme Court.
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