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Looking Back: Encino Motorcars v. Navarro One Year Later

Until last April, the Supreme Court had construed Fair Labor Standards Act (FLSA) exemptions “narrowly.” For example, just 7 years after the FLSA’s passage, the Court ruled in A.H. Phillips, Inc. v. Walling, that “extend[ing] an exemption to other than those plainly and unmistakably within its terms and spirit is to abuse the interpretative process and to frustrate the announced will of the people.”  324 U.S. 490, 493 (1945).  Growing up as a baby lawyer, the narrow interpretation of any FLSA exemption was a fundamental truth of wage and hour law. For over 70 years, the Supreme Courts and appellate courts followed this rule.

On April 2, 2018, everything changed when the Supreme Court issued its (second) ruling in an FLSA case entitled Encino Motorcars, LLC v. Navarro.  The core of the ruling itself did not have wide application to most employers; the Court held that the FLSA’s overtime provisions do not apply to service advisors at an automobile dealership.  However, what made the case noteworthy a year ago is that the 5-4 majority’s decision authored by Justice Thomas upended that fundamental truth of wage and hour law. In Encino Motorcars, the Court rejected the “narrow” construction of FLSA exemptions.

The Ninth Circuit also invoked the principle that exemptions to the FLSA should be construed narrowly. We reject this principle as a useful guidepost for interpreting the FLSA. Because the FLSA gives no ‘textual indication’ that its exemptions should be construed narrowly, ‘there is no reason to give [them] anything other than a fair (rather than a “narrow”) interpretation.’

(Op. at 9 (citation omitted) (emphasis added).)

The Court also observed that “exemptions are as much a part of the FLSA’s purpose as the overtime-pay requirement.  We thus have no license to give the exemption anything but a fair reading.”  (Id. (citation omitted).) Wage and hour lawyers around the blogosphere predicted that this new interpretation would impact the outcome of numerous pending and future FLSA overtime exemption cases.

Well, here we are 12 months later. How impactful has Encino Motorcars proven to be?

Setting aside Justice Ginsburg’s dissent in Epic Systems, which employs the case to a different end, eight appellate court decisions have cited Encino Motorcars. The picture is a little mixed after one year. The Fifth Circuit has signaled that it will box Encino Motorcars in, and just one other case (Sixth Circuit) appears to have used the case to sway a decision.

TL;DR: Chalk this one up to “Too soon to tell.” Check back when this decision turns 2.

Some lengthier analysis below.

Limiting Encino Motorcars

Amaya v. NOYPI Movers, L.L.C., 741 F. App’x 203 (5th Cir. 2018)

This case is not particularly notable for its facts, which involved the FLSA’s Motor Carrier Act (MCA) exemption. Amaya worked as a furniture installer for NOYPI Movers LLC, a subcontractor to a relocation company, and filed a collective action lawsuit on behalf of other installers under the FLSA. The district court granted defendants’ motion for summary judgment asserting that Amaya’s overtime claim should be dismissed under the MCA exemption—an argument they had also raised as an affirmative defense. The employer’s best case was weak, though: the Fifth Circuit observed that only about 15 of 545 jobs over three years required deliveries across state lines. Amaya presented evidence that he “was hired for the purpose of installing office cubicles,” not loading trucks or ensuring their safe transit. Amaya, 741 F. App’x at 207. The defendants also failed to demonstrate “a sufficient evidentiary basis to tie the loading work done by [installers in Amaya’s job class] specifically to interstate commerce.” Id. Like the Mosquera and Flood cases out of the Sixth Circuit, one side (this time the employer) did not have the better facts to summon, or many facts at all, apparently.

But, this case is more notable for its for its footnote. Id. at 205-06, n.2. Referring to two cases that it cited throughout the opinion, the Fifth Circuit denied that Encino Motorcars had invalidated those rulings. Instead, the Court observed that.

[T]he central analyses of these decisions remain unaffected because they concern the interpretation and application of FLSA-implementing regulations, not the statute itself.”

Accordingly, our reliance on these cases and the regulations they evaluate (whose applicability is not disputed by the parties) remains unaffected by Encino Motorcars.

Amaya, 741 F. App’x at 205-06, n.2 (citations omitted)

While this case did not turn on this issue, the Fifth Circuit has clearly signaled that it believes that it can limit Encino Motorcars to that subset of cases involving the text of the FLSA itself and continue with narrow interpretations by another name in the rest of its FLSA docket.

Following Encino Motorcars

Diaz v. Longcore, 751 F. App’x 755, 758 (6th Cir. 2018)

The Sixth Circuit followed up two decisions I mention below in Diaz. Here, following Encino Motorcars seemed to swing the outcome of the case. Plaintiffs urged the Court “to provide broad rather than narrow protection to employees” under the FLSA. Id. at 758.

But the Supreme Court recently “reject[ed] this principle as a useful guidepost for interpreting the FLSA” because it is a “flawed premise that the FLSA pursues its remedial purpose at all costs.” Encino Motorcars, LLC v. Navarro, ––– U.S. ––––, 138 S.Ct. 1134, 1142, 200 L.Ed.2d 433 (2018) (internal quotation marks and citations omitted). We must instead give the FLSA a “fair” interpretation. Id. (quoting A. Scalia & B. Garner, Reading Law 363 (2012) ); accord Mosquera v. MTI Retreading Co., 745 F. App’x 568, 570–71 & n.1, 2018 WL 3860514, (6th Cir. Aug. 14, 2018).

Diaz, 751 F. App’x at 758

With the caveat that legal opinions are written by judges who have already decided how to rule, the Court certainly seemed to rely on Encino Motorcars and spent the rest of the opinion engaging in the exact kinds of interpretation contemplated by that case. The Court held that the defendant was not an “employer” and “[i]n so holding, we reject [plaintiffs’] argument that ’employer’ should be interpreted more broadly in the anti-retaliation context than in the wage-and-hour context.” Id.

Will Work For Favorable Dicta

Mosquera v. MTI Retreading Co., 745 F. App’x 568, 571 (6th Cir. 2018)

In Mosquera, the employee held an engineering degree, but argued he spent less than 50% of his time doing work requiring one, meaning that his employer could not be classify him as a professional employee exempt from overtime under the FLSA. The Sixth Circuit disagreed. The facts were not particularly favorable to the employee: the employee’s plant manager had testified in his deposition in detail about Mosquera’s supervisory work and, importantly, testified that he hired engineers because they “can be trained to successfully oversee a retreading operation without first obtaining several years of experience in retreading as would otherwise be a minimum requirement for such a role.”
Mosquera., 745 F. App’x at 571 (citations omitted). Conversely, Mosquera could only counter this deposition, numerous other affidavits, and “all [the] evidence that MTI amassed” with his own “unsubstantiated” and “self-serving” affidavit containing a “best guess.” Id. at 573.

The Sixth Circuit quoted the Encino Motorcars standard when reciting the governing legal standards and dropped a footnote observing that Encino Motorcars had overruled its prior “narrow interpretation” decisions. Id. at 570-71 & n.1. With my caveat about opinions applying again here, Encino Motorcars seems to have played little role in this case.

Flood v. Just Energy Marketing Corp., 904 F.3d 219 (2d Cir. 2018)

Flood, a door-to-door salesman, sued his employer alleging that the company violated the FLSA by failing to pay him (and the opt-in class of employees certified by the district court) overtime for the weeks that they worked in excess of forty hours. On appeal, the Second Circuit Court of Appeals upheld the district court’s ruling that Flood was not entitled to overtime pay based on the “outside salesman” exemption, 29 U.S.C. § 213 (a)(1). Encino Motorcars did not factor into the ruling other than in passing. In rejecting Flood’s arguments for a narrow interpretation of the exemption, the Second Circuit observed that although “[u]ntil recently, it was a rule of statutory interpretation [to] . . . narrowly construe an exemption to the FLSA in order to effectuate the statute’s remedial purpose,” the Supreme Court rejected that view in Encino Motorcars because “exemptions under the FLSA are ‘as much a part of the FLSA’s purpose as the overtime-pay requirement.'” 904 F.3d 219 at 235.

Somewhat hilariously, the Court relied on Flood’s own boasts in testimony: “When asked if he agreed that his job was “not doing sales,’ Flood disagreed, and he insisted that sales is “what I do.” He boasted that he ‘probably sold in excess of 8,000 accounts, all door to door.'” Flood, 904 F.3d at 229 (citations omitted). Doh! This case appears to come out the same way in either the pre- or post-Encino Motorcars world.

Munoz-Gonzalez v. D.L.C. Limousine Service, Inc., 904 F.3d 208 (2d. Cir. 2018)

Released on the same day in September 2018 as Flood, the Second Circuit affirmed a district court’s decision in Munoz-Gonzalez v. D.L.C. Limousine Service that a chauffeured transportation company fits the FLSA’s overtime “taxicab exemption” despite the company’s recurrent service contracts and its lack of several conventional taxicab features like a taxi meter or roof-mounted signage. The Court’s interpretation of the term “taxicab” prioritizes the public’s ability to engage the service at-will over many characteristics traditionally associated with taxis. This case appears to have come out the same way it would have pre-Encino Motorcars. After lengthy discussion of its existing case law, the Court concluded that “nothing in the structure of the FLSA that requires us to reconsider our focus” on that case law. Munoz-Gonzalez, 904 F.3d at 215. The Court observed briefly in dicta that Encino Motorcars only strengthened this conclusion, not that it changed it.

Carley v. Crest Pumping Techs., L.L.C., 890 F.3d 575 (5th Cir. 2018)

Carley is a MCA exemption case that only an FLSA nerd could love. Perhaps I’ll cover it in a future post! Carley offered some straightforward facts. The plaintiffs worked for Crest Pumping Technologies as “cementers.”  As a regular part of their job duties, they drove Ford F-350 trucks.  They were not paid overtime. The parties agreed that the plaintiffs’ job duties affected the safety of vehicles driven on highways, and that their duties affected interstate commerce.  However, they disagreed about whether, relevant to the MCA’s requirements, the F-350s met the 10,000 pound weight limit.  The trial court held that it was the defendants’ burden to prove that the truck was under 10,000 pounds, and the question was presented to the jury, which returned a verdict for the plaintiffs. Defendants moved for judgment as a matter of law because the trial court impermissibly placed the burden to prove the F-350s’ GVWRs on them instead of on the plaintiffs.

The Fifth Circuit reversed and held that it was the plaintiffs’ burden to prove that the vehicle’s GVWR was under 10,000 pounds.  This burden on the plaintiffs is unusual in an FLSA lawsuit, since in nearly every other case, the employer bears the burden of establishing an FLSA exemption. The history behind this case is the FLSA nerdy part, and we’ll hold off on that for now. The only mention here is the comparatively uninteresting matter-of-fact statement that Encino Motorcars required courts “to give FLSA exemptions ‘a fair reading,’ as opposed to the narrow interpretation previously espoused by this and other circuits.”  Carley, 890 F.3d at 579. Not much to see here.

Fun with Words

In the “fun with words” category, in addition to Epic Systems, you could include:

United States v. Lauderdale Cty., Mississippi, 914 F.3d 960 (5th Cir. 2019)

The statutory text “conduct by law enforcement officers or by officials or employees of any governmental agency” does not contain a string of terms; rather, it contains two independent clauses separated by a disjunctive “or.” See Encino Motorcars, LLC v. Navarro, ––– U.S. ––––, 138 S.Ct. 1134, 1141, 200 L.Ed.2d 433 (2018) (noting that “or” is “almost always disjunctive” (quoting United States v. Woods, 571 U.S. 31, 45, 134 S.Ct. 557, 187 L.Ed.2d 472 (2013))).

Lauderdale Cty., Miss., 914 F.3d at 967

Bunn v. Fed. Deposit Ins. Corp. for Valley Bank Illinois, 908 F.3d 290 (7th Cir. 2018)

A plain reading of this provision creates two ways in which the depository institution could sufficiently identify the assets subject to a bona fide deferred compensation plan. The institution could “recognize[ ] compensation expense and accrue[ ] a liability for the benefit payments according to GAAP,” or the institution could “segregate[ ] or otherwise set aside assets in a trust which may only be used to pay plan benefits.” Id.see Encino Motorcars, LLC v.Navarro, ––– U.S. ––––, 138 S.Ct. 1134, 1141, 200 L.Ed.2d 433 (2018) (“ ‘[O]r’ is ‘almost always disjunctive.’ ” (quoting United States v. Woods, 571 U.S. 31, 45, 134 S.Ct. 557, 187 L.Ed.2d 472 (2013))).

Bunn, 908 F.3d at 298

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