Supreme Court Employment Law Update

In what has been a consequential and controversial Term, the U.S. Supreme Court recently issued two opinions that may impact employer policies and practices.

In Encino Motorcars v. Navarro, the Court ruled that service advisors (i.e., employees at car dealerships who consult with customers about servicing needs and sell servicing solutions) are overtime “exempt” under the Fair Labor Standards Act (“FLSA”). The Court reasoned that because the FLSA exempts car dealership salespeople, and because service advisors qualify as “salesm[e]n . . . primarily engaged in . . . servicing automobiles,” service advisors are exempt from the FLSA’s overtime pay requirement. In so holding, the Court rejected a 2011 Department of Labor rule that expressly excluded service advisors from the definition of “salesman.” Although this case resulted in a win for the employer, cases arising under the FLSA tend to be very fact-specific and require careful legal analysis. Employers should continue to evaluate not only an employee’s formal title, but also his or her job functions/duties (and salary) as part of the analysis in determining whether an overtime exemption exists.

Separately, in Epic Systems Corp. v. Lewis, the Court held that agreements between employers and employees to resolve all disputes through individual (“one-on-one”) arbitration – as opposed to lawsuits and class actions – are enforceable under the Federal Arbitration Act. (In 2012, the National Labor Relations Board had ruled otherwise.) In light of the Epic Systems case, employers may wish to consider whether the use of an arbitration and class action waiver provision makes sense for their employer/employee relationships.

Encino Motorcars and Epic Systems may be reflective of the “pendulum” having swung too far in favor of employee rights (at least from a legal perspective). While employers can take some comfort in these recent Supreme Court outcomes, it remains important to be vigilant in understanding legal obligations to minimize legal exposure.

Please stay tuned for future legal updates and contact Wright Beamer for assistance with your business and employment law needs.

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