Despite its status as a seemingly antiquated piece of New Deal legislation, the Fair Labor Standards Act (FLSA) has constituted the battleground for a long-running legal conflict over the right of employees to claim overtime. The Supreme Court issued its first major FLSA ruling in A.H. Phillips Inc. v. Walling (1945), a decision which established strict construction of the law’s provisions for exemption (a status that precludes overtime pay) as the legal norm. The case, which involved A.H. Phillips’ decision to deny overtime pay to employees in its warehouse and central office, demonstrated the Court’s determination to vindicate congressional intent. Writing for the majority, Justice Murphy noted that because the act constituted “humanitarian and remedial legislation” and comported with “the announced will of the people,” its provisions for exemption should not be subjected to jurists who might “abuse the interpretative process.”1 The provisions of the law at issue, the Court held, should be applied only to “those plainly and unmistakably within its terms and spirit,” setting the stage for narrow construction of the FLSA’s rules for overtime exemption and affirming the central purpose of the law: to ensure that workers in low-wage industries receive fair pay for the hours they work.2

Ironically, however, there has been a recent rash of otherwise well-off plaintiffs eager to claim non-exemption under the FLSA and obtain additional compensation, a development which surely contradicts the intent of the law’s framers. In fact, as Law360 notes, “almost all of Wall Street’s biggest banks have been hit with lawsuits alleging that they violated the Fair Labor Standards Act by classifying brokers as administrators rather than as sales people,” a classification which would render them exempt from FLSA overtime rules.3 These claims lack merit – especially in light of guidelines published by the Department of Labor that assert that “[e]mployees in the financial services industry generally meet the duties requirements for the administrative exemption.”4 Even in light of the obvious weakness of these assertions, the alarming fact that workers in the financial services industry (a field generally known to be lucrative) lodged such claims at all demonstrated that the intent of the law needed to be clarified again by the nation’s highest court.

The Supreme Court did just that in Encino Motorcars v. Navarro (2018), a landmark FLSA case on par with A.H. Phillips. Writing for the majority, Justice Thomas rejected a claim that “service advisors” employed by an auto dealership met the definition of nonexempt workers under the FLSA.5 Even more importantly, Encino Motorcars signaled the Court’s willingness to apply a broad standard in assessing exemption under the law, rather than a narrow standard that grants exemption only to those employees “plainly and unmistakably within [the FSLA’s] terms and spirit.”1 Although the Court’s recent decision constitutes a departure from precedent, it vindicates both the intent of the FLSA’s drafters and reaffirms the common-sense understanding that employees should be remunerated only in proportion to their willingness to work hard and accomplish the tasks set before them. In other words, both congressional intent and common sense dictate that financial services employees should be paid a salary reflecting the quality of their work product, not merely the hours they work. They are professionals, after all.

1. A.H. Phillips v. Walling (1945), Murphy, J. Majority opinion.
2. Ibid.
3. https://www.law360.com/articles/34738/investment-banks-take-the-offensive-in-flsa-suits?copied=1, para. 2
4. https://www.dol.gov/whd/overtime/fs17m_financial.pdf, para. 3
5. Encino Motorcars v. Navarro (2018), Thomas, J. Majority opinion.

Tags: Employment, Joseph Pastore, Security