Law Hub

Encino Motorcars, LLC v. Navarro

Justia Summary

The Fair Labor Standards Act (FLSA) requires employers to pay overtime compensation to covered employees who work more than 40 hours in a week; a 1966 exemption covers “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles” at a covered dealership, 29 U.S.C. 213(b)(10)(A). In 1970, the Department of Labor defined “salesman” 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.” The regulation excluded service advisors, who sell repair and maintenance services but not vehicles, from the exemption. Several courts rejected that exclusion. In 1978, the Department changed its position, stating that service advisors could be exempt. In 1987, the Department confirmed its new interpretation, amending its Field Operations Handbook. In 2011, the Department issued a final rule that followed the original 1970 regulation and interpreted the statutory term “salesman” to mean only an employee who sells vehicles. The Ninth Circuit reversed dismissal of a suit by service advisors, alleging violation of the FLSA by failing to pay overtime compensation. The Supreme Court vacated. Section 213(b)(10)(A) must be construed without placing controlling weight on the 2011 regulation. Chevron deference is not warranted where the regulation is “procedurally defective.” An agency must give adequate reasons for its decisions. An “[u]nexplained inconsistency” in agency policy is “a reason for holding an interpretation to be an arbitrary and capricious change from agency practice,” not entitled to deference. The 2011 regulation was issued without the reasoned explanation that was required in light of the Department’s change in position and the significant reliance interests.

About Author