by: Alexander J. Mezny

The United States Supreme Court has just rejected 50 years of precedent holding that overtime exemptions under the Fair Labor Standards Act (“FLSA”) must be narrowly construed against the employer.

The case, Encino Motorcars, LLC v. Hector Navarro, et al., involved one of the many industry-specific exemptions to the FLSA – the auto sales exemption of 29 U.S.C. § 213(b)(10)(A).

But the Supreme Court’s 5-4 decision will apply equally to all FLSA exemptions including the most commonly used executive, professional and administrative exemptions.

This decision provides new options for employers when determining whether to make a position exempt. In the past, close calls would be decided in favor of the employee so it was rarely worth the risk to make such a position exempt. Today, “close call” positions are more likely to survive challenge under the new standard which requires that exemptions be construed fairly and not narrowly. Depending on the number of hours of overtime and your business’ risk tolerance, it likely will be worthwhile to structure some of these positions as exempt.

Exemption questions are usually nuanced and experienced counsel should be sought before making such decisions. It is important not to rely on articles providing advice on a national scope because Illinois’ exemption regulations are no longer identical to the federal regulations and employers in Illinois must in each instance apply the regulation or part of the regulation which most favors the employee. HolmstromKennedyPC can provide you with Illinois-specific checklists which combine the more restrictive of the current federal and Illinois regulations and other tools such as an appropriate deduction policy to ensure you remain in compliance with wage and hour laws.