SCOTUS: No Chevron deference to DOL's oscillating regulation

The Supreme Court didn't tell us whether car dealership “service advisors” are exempt from FLSA’s overtime provisions, but the Court did remind us that deferral under Chevron U.S.A. Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984) is not always available when an administrative agency changes its interpretation of the statute the agency administers. In Encino Motorcars, LLC v. Navarro (US Supreme Court 06/20/2016) all eight Justices agreed that no deference was warranted as to the Department of Labor's most recent iteration of an interpretation of the Fair Labor Standards Act. But rather than giving us its interpretation of the statute, the Court (6-2) sent the case back to the 9th Circuit to do that work. DOL's view of whether service advisors are overtime exempt has vacillated over the years. In 1970 DOL said they were non-exempt, but that was met with a host of courts rejecting that position. So from 1978 until 2011 DOL said they were exempt. Then in an abrupt about face, a 2011 regulation said they were non-exempt.

Using familiar Chevron analysis, the 9th Circuit deferred to DOL’s new position because (1) the statute was ambiguous and (2) the regulation was reasonable.

The Supreme Court unanimously held that Chevron deference cannot be applied to the DOL's current interpretation for two reasons: (1) The auto industry had relied on DOL's prior interpretation since 1978 and compensation systems were negotiated and structured against that background, and (2) DOL did not give adequate reasons for its changed interpretation. As the Court put it, DOL "said almost nothing" about why it was changing its policy.

Whatever potential reasons the Department might have given, the agency in fact gave almost no reasons at all. In light of the serious reliance interests at stake, the Department’s conclusory statements do not suffice to explain its decision. [citation] This lack of reasoned explication for a regulation that is inconsistent with the Department’s longstanding earlier position results in a rule that cannot carry the force of law. [citation] It follows that this regulation does not receive Chevron deference in the interpretation of the relevant statute.

Is this high school? DOL's "explanation" was pathetic. DOL recited that it had “carefully considered all of the comments, analyses, and arguments made for and against the proposed changes,” and then said it would not treat service advisors as exempt because “the statute does not include such positions and the Department recognizes that there are circumstances under which the requirements for the exemption would not be met.” And finally, DOL said it “believes that this interpretation is reasonable” and “sets forth the appropriate approach.” So, folks, in case you're not paying attention, all DOL has to do is explain why it is doing what it is doing. That's not asking much.

Anyhow, the case goes back to the 9th Circuit to decide afresh. Well, almost afresh. Justices Thomas and Alito opined that service advisors are exempt. And Justices Ginsburg and Sotomayor provided some support for them being non-exempt. That leaves four Justices who prefer to say nothing about the ultimate merits of the case.

[For recent decisions and pending employment law cases, see US Supreme Court Watch.]