Seyfarth Synopsis: FLSA cases holding against employers typically invoke a canon of construction that the FLSA should be construed broadly, and any of its exemptions narrowly. But a study of the roots of this language shows that the canon has a dubious foundation and that it tends to be applied inconsistently to justify a result.
As our readers saw earlier this week, the Ninth Circuit recently issued a decision in McKeen-Chaplin v. Provident Bank, turning the traditional administrative vs. production dichotomy of the administrative exemption on its head. In Provident Bank, the Ninth Circuit held that the bank's mortgage underwriters are not exempt because their duties go to the heart of marketplace offerings rather than the administration of the bank's business. In our view, that decision wrongly interpreted the administrative vs. production dichotomy and parted ways with the Sixth Circuit's sound 2015 decision in Lutz v. Huntington Bank.
One additional point caught our eye: the prefatory language the Ninth Circuit used in Provident Bank in arriving at its conclusion that the administrative exemption did not apply. Indeed, the Ninth Circuit's holding could have been predicted at the very beginning of the Court's analysis. There, before even interpreting the administrative exemption, the court cleared its throat with a series of pronouncements we see all too frequently in FLSA jurisprudence: "exemptions" the pronouncement goes, "are to be construed narrowly," and must be "withheld except as to persons plainly and unmistakably within their terms and spirit." The Ninth Circuit hearkened back to this language later in its opinion as well.
But while exemptions must be construed narrowly, the quotation continues, the FLSA as a whole "is to be liberally construed to apply to the furthest reaches consistent with Congressional direction." This language is not unique; it appears in most, though not all, FLSA administrative exemption cases, and variants of it appear in other FLSA contexts, usually in those opinions permitting FLSA cases to move forward. Earlier this summer, for instance, the Sixth Circuit rejected an employer's decertification effort by first explaining that "Congress passed the FLSA with broad remedial intent," and that the provisions of the FLSA are "remedial and humanitarian in purpose and must not be interpreted or applied in a narrow, grudging manner."
This type of language, though perhaps useful in predicting the direction a court is heading without needing to read the opinion all the way through, is an otherwise meaningless canon of statutory construction and ought to be put out to pasture.
First, the language is applied inconsistently. Variants of the above language are often employed in cases in which courts find that an employee or groups of employees are or may be owed additional overtime compensation. But when no FLSA violation is found, this language is more frequently absent. Indeed, we studied all federal appellate decisions issued this century that interpret the administrative exemption, of which there are a total of 61. Of the 17 that find that an employee or group of employees do not or might not meet the requirements for application of the administrative exemption, 13 of them use this type of language (76%). But when an appellate court finds the administrative exemption to apply, and thus an employee or group of employees is not owed any additional overtime compensation, this type of language is found in only 21 of 44 opinions (48%).
The Ninth Circuit is the most result-oriented of the federal circuits. It has issued 10 decisions this century interpreting the administrative exemption. Four of those opinions find the employee to be non-exempt or potentially non-exempt, and 3 of the 4 (75%) contain language about narrowly construing exemptions and/or broadly construing the FLSA's overtime provisions. Six of those opinions find employees to be properly classified as exempt, and only one of those opinions contains this language (17%).
In other words, language providing that the FLSA's exemptions must be "narrowly construed" and/or which maintain that the FLSA is "remedial" or "humanitarian" and thus should be interpreted broadly appear to be used all too frequently as a tool to justify the outcome of a court's decision, not as a meaningful analytical framework for reviewing the statute, interpreting its regulations, and determining whether job duties do or do not fall within an applicable FLSA exemption.
Second, delving into the origins of this language reveals its flimsy legal foundation. The language dates back to a 1945 Supreme Court case entitled A.H. Phillips, Inc. v. Walling, which held that a grocery store chain was not exempt from the FLSA's requirements because it was not a "retail establishment" engaged primarily in the business of interstate commerce. The crux of Walling is that the employer was quite plainly trying to assert an exemption that did not apply. So the Supreme Court noted that it should not construe the FLSA's exemptions too broadly and should give "due regard to the plain meaning of statutory language and the intent of Congress." The Court then cited President Roosevelt's May 24, 1934 message to Congress regarding the purpose of the FLSA, and declared, based on Roosevelt's statement, that the FLSA is a "humanitarian and remedial" statute, and nebulously suggested that because the FLSA is "remedial" and "humanitarian" the exemptions should be "narrowly construed." But the Supreme Court cited no authority in Walling for this assertion and provided no true reasoning. At its best, as noted below, this language is just an imprecise statement that the FLSA's exemptions should not be construed so broadly that they swallow the statute's other material provisions. At its worst, this language is just unsupported dicta that had no bearing on the outcome of the particular case and was never intended to be a grand pronouncement of how courts should interpret the FLSA or its exemptions moving forward.
Third, and as a logical outgrowth of the second point, the way this canon of interpretation is now used by litigants and courts does not make sense. As an initial matter, it is hard to see why one section of a statute or regulation would be interpreted broadly and another narrowly, which is precisely what courts and litigants suggest when they cite to this language. Indeed, as suggested above and as Judge Posner noted in the Seventh Circuit's decision Yi v. Sterling Collision Centers, Inc., the language likely just means that an exemption should not be construed so broadly that it "renders the statutory remedy ineffectual or easily evaded." The language does not mean, though, that an employer bears a higher burden of proof in asserting an exemption–which, again, appears to be how this language is usually used. Further, courts and litigants justify their use of this language by reasoning that the FLSA is "humanitarian and remedial" legislation. If legislation is humanitarian and/or remedial, the reasoning goes, exemptions to the legislation must be viewed with a jaundiced eye and other provisions more generously. But this begs a key question: what piece of legislation passed by Congress is not intended as remedial or humanitarian? It would seem that one has to presume that Congress is always attempting to benefit the public, and that it does not classify its legislation as though some is for the public good, some is for the benefit of lobbying or business groups, and some is to score political points. All legislation is aimed in some way at benefitting the public interest (or at least we would like to, and have to, assume); it is both illogical and unjust that exceptions to one particular piece of legislation would be held to a higher standard of proof without articulation of that standard in the text of the statute itself. The FLSA should instead be interpreted to mean what it says, exemptions and all; one section should not receive a boost based solely on unsupported, gratuitous language drawn from a 72 year-old Supreme Court case.
And indeed, it appears that the Supreme Court may now be shying away from this "narrowly construe exemptions" language. The Supreme Court stated in Sandifer v. U.S. Steel and Christopher v. SmithKline Beecham Corp., for instance, that this language does not apply to the Supreme Court's interpretation of the FLSA's definitions section found at 29 U.S.C. § 203. The Court further intimated in Sandifer that it may revisit the "narrowly construed exemptions" language at a later date. And last year, Justice Thomas concluded his dissent in Encino Motorcars, LLC v. Navarro by noting that exemptions should not be construed any more narrowly than how they are written.
Perhaps the selective citation to unsound and outdated language applying the FLSA's exemptions and construing the FLSA as a whole is a symptom of our modern legal research model, in which "copy and paste" can all too often supplant reasoned analysis. Or maybe it is just how lawyers and judges have always supported their arguments and decisions–searching for language to bolster a position without giving due regard to the implications or background of the language itself. Whatever the reason, case language maintaining that the FLSA should be broadly construed but that exemptions should be construed narrowly is a nebulous, unsupported, illogical, and inconsistently applied canon of statutory construction and we should stop using it.
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