Supreme Court weighs in on overtime eligibility: What Finance needs to know

Right now, you’re probably hyper-focused on how the DOL’s new overtime salary threshold will impact your workforce — and that’s certainly understandable. But a recent Supreme Court ruling reminds employers that overtime eligibility is based on a lot more than just the salary threshold.

The case is Navarro v. Encino Motocars, LLC, and while the specifics may not apply to a broad cross-section of companies, there are some key takeaways for employers of all stripes.

The lawsuit centers around four service advisors who claimed that, despite the fact they fell under a “sales commission” employee status, Encino violated the FLSA by not paying them overtime.

A district court initially dismissed the overtime claims, ruling the service advisors fell within the FLSA’s exemption for dealership “salesmen,” because they sold services and the FLSA exempts “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles.”

On appeal, however, the Ninth Circuit disagreed with the ruling and relied on a 2011 DOL ruling, which limits the agency’s definition of salesmen, partsmen, and mechanics to just those salesmen who sell vehicles, and partsmen and mechanics who specifically service vehicles. Because the service advisors did none of those things, the court ruled these employees weren’t exempt from OT payments.

Eventually the case wound up before the Supreme Court because the Ninth Circuit’s ruling contradicted a number of court rulings that have extend the FLSA’s dealership exemption to service advisors.

The Supreme Court ordered the Ninth Circuit to reconsider the employees’ status without taking the DOL’s 2011 ruling into account because it provides “little explanation.”

What you can do

The Supreme Court’s ruling is particularly unsettling for employers. After all, if firms can’t even rely on the DOL’s own interpretation of the FLSA’s specific exemptions, how are they supposed to get it right?

Here are a few things employers should do in light of this ruling:

1. Stay up to date on any laws, regs and court rulings under the FLSA, keeping an eye out for any discrepancies between those things, and
2. Regularly review all of your employees’ job classifications carefully. Get all relevant departments — Finance, HR, Payroll, Legal, etc. — together to create the full picture of employees’ job duties to determine if everyone who’s currently classified as exempt should remain that way. Remember, employees’ roles and job duties often change and evolve over time.