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Supreme Court to Rule on Payroll-Related Cases: What You Need to Know

Thursday November 9th 2017

The U.S. Supreme Court 2017-2018 session is under way and employers should pay close attention. The justices are expected to rule on several payroll cases specific to overtime, class actions, and joint employers. Here’s a look ahead at the biggest issues.


While much of the news concerning overtime for the past year has focused on the overtime rule passed by the Obama administration’s Labor Department, the Supreme Court is looking at a different aspect.

In Encino Motorcars, LLC v. Navarro, the issue at hand is whether service advisers at car dealerships are exempt under 29 U.S.C. § 213(b)(10)(A) from the Fair Labor Standards Act’s overtime pay requirements.

In previous appeals court rulings, the Fourth and Fifth circuits have said that service advisers are not eligible for overtime pay. However, the Ninth Circuit ruled in January that these advisers in question are, in fact, eligible for overtime pay under the FLSA.

In its ruling, the Ninth Circuit relied on statutory language in the FLSA that provides an overtime exemption for “any salesman, parts man, or mechanic primarily engaged in selling or servicing automobiles.” The court also relied on past Congressional action that narrowed the exemption further by limiting the exemption to specific positions. The Ninth Circuit said the statutory language is flexible enough to support their interpretation that service advisers are “servicing automobiles” by contributing to the car dealership’s process for supplying maintenance and repair.

Collective and Class Actions

The Supreme Court will also hear several cases concerning workers who attempt to file class actions against their employers, despite the obligation to follow arbitration procedures designed to prevent such litigation.

The court will consider three consolidated cases—NLRB v. Murphy Oil USA, Inc., Epic Systems Corp. v. Lewis, and Ernst & Young LLP v. Morris. In Murphy Oil, the Fifth Circuit upheld the use of a class waiver in its arbitration agreement. In both Epic Systems and Ernst & Young, the Seventh and Ninth circuit courts, respectively, rejected class waivers in mandatory arbitration agreements.

Employers use arbitration agreements that cover employment-related disputes to reduce the number of class and collective actions in labor and employment law. Arbitration allows the parties in a dispute to select a neutral third party—referred to as the arbitrator—to hear arguments, review evidence, and issue a decision.

Arbitration is a voluntary process and cannot be a condition of employment. When using arbitration, the Federal Arbitration Act requires enforcement of the agreement and generally supersedes state laws barring arbitration of employment disputes.

However, while arbitration agreements generally prevent employees from suing their employers in court, federal and state agencies can file lawsuits on behalf of workers, which is what’s happening with these three cases.

Joint Employers

Finally, the Supreme Court has yet to decide on a petition to hear arguments in DirectTV LLC v. Hall, a case involving joint employment. In this case, several technicians who performed work for DirecTV were hired by the intermediary DirectSat. They’re claiming that DirecTV is liable as a joint employer in their claim that they are owed overtime pay.

This case also deals with worker classification, as the technicians claim they were incorrectly classified as independent contractors, which prevented them from being covered by federal wage and hour laws. Under the workers’ employment relationship with DirecTV, the company dictated their schedules and supervised their work.

These cases relate to overtime, joint employers, and class actions, making them hot issues for those involved in the process of payroll.

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