Supreme Court Rules That No Deference Is Owed To Unexplained Changes In Agency Positions

On June 20, 2016, the United States Supreme Court decided Encino Motorcars v. Navarro, which reinforces that no Chevron deference by courts to an agency's position is warranted when an agency reverses its position and fails to explain its change of course—particularly when the agency's prior position was longstanding and had engendered significant actions relying on it. The case involved the Department of Labor's unexplained decision to reverse a long-held position exempting service advisors at auto dealerships from overtime under the Fair Labor Standards Act. On remand, the Ninth Circuit will analyze that question in the absence of Chevron deference, as well as in the face of two Justices' separate opinion rejecting as "made up" the canon that courts must narrowly construe FLSA exemptions. Background About the Fair Labor Standards Act and Service Advisors at Auto Dealerships The underlying issue in Encino Motorcars was whether service advisors at an auto dealership were entitled to overtime pay under the Fair Labor Standards Act ("FLSA"). That statute requires that employers pay overtime to employees who are covered by the Act when they work more than 40 hours in a given work week. In 1966, Congress added an exemption to the FLSA's overtime requirements for "any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles" at an auto dealership. 29 U.S.C. § 213(b)(10)(A). The Department of Labor issued regulations in 1970 that defined a "salesman" for purposes of this overtime exemption to mean "an employee who is employed for the purpose of and is primarily engaged in making sales or obtaining orders or contracts for sale of the vehicles ... which the establishment is primarily engaged in selling." 29 C.F.R. § 779.372(c)(1) (1971). The effect of this definition was that service advisors, who sell maintenance and repair services but not vehicles, did not fall within the exemption (and were therefore entitled to overtime-pay protections). After numerous courts rejected the Department of Labor's view that service advisors did not fall within the exemption for "salesman," however, the Department issued a 1978 opinion letter stating that service advisors could fall within the exemption. And in 1987, the Department updated its Field Operations Handbook to make clear that service advisors should be treated as exempt from the FLSA. Decades later, the Department again reversed course. In 2011, it promulgated a regulation...