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Argument analysis: Justices dubious about exempting car dealership “service advisors” from overtime rules

The last argument of the week brought the Justices a dispute under the Fair Labor Standards Act (FLSA), Encino Motorcars v. Navarro. The case involves service advisors at car dealers – the employees who meet with the customers to discuss what services the customers should buy. Because many of those advisors are paid a salary, rather than commissions, the only basis for exempting them from the FLSA is a provision that exempts any “salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles.” The provision obviously covers those who sell cars and those who fix them, but its application to those who sell services is not nearly so clear.

Although the question of statutory interpretation is simple, the case involves a sufficiently unusual historical background to make it interesting as a matter of administrative law. Because the advisors do not themselves sell or service automobiles, the Department of Labor originally took the view that the service advisors should receive overtime. Decades ago, long before the Court in Chevron v. Natural Resources Defense Council ruled that courts should defer to an agency’s interpretation of a law that it administers, most of the courts that considered the matter rejected the department’s view; eventually the department acquiesced. Eventually, though, in the wake of Chevron, the department considered the matter again. After notice and comment, it adopted a formal rule that puts the service advisors under the overtime regime. The dealers’ dissatisfaction with the obligation to reorganize their employment practices brings the Justices to the task of making sense of that back-and-forth between the department and the courts.

It became clear almost as soon as Paul Clement stood up (on behalf of Encino Motorcars, the employer) that some of the Justices start from the view that the service advisors should have overtime protection. Justice Sonia Sotomayor, for example, commented early on: “If they want a job, it’s a job, and unless the law protected them no employer would pay overtime. . . . . I don’t know how I can take from the fact that service advisors accept what’s given to them because they have no choice, that they prefer not to have overtime.”

Justice Stephen Breyer, in the same vein, seemed to start from the premise that the statute’s purposes almost compelled overtime protection for the service advisors:

[I]f we’re only talking about those who sell service who are not on commission, what basis is there for giving them an exception? Do they work regular hours? I take it if they work regular hours and if they aren’t paid on commission, why wouldn’t they be treated like secretaries or others? I mean, apparently Congress thought that the mechanics themselves were special because they go out into agricultural areas or something in the middle of the night and fix a tractor. So they work irregular hours. But these people don’t work irregular hours and they’re not paid on commission. So why wouldn’t they be treated like a secretary?

Clement also faced a group that thought the statute was at least ambiguous enough to warrant Chevron deference to the department’s views. So, when Clement pointed to the department’s shifting views, Justice Ruth Bader Ginsburg commented: “They said now we’re going to rethink this, and our decision is that we were right the first time, that these people are not exempt. And that decision is made in the Chevron era when we defer to the expert, and this Department of Labor is certainly expert in this area.” Indeed, Justice Elena Kagan found the case for Chevron deference overwhelming: “I mean, it’s kind of the case for Chevron deference and notice-and-comment rulemaking. They clearly considered exactly this question. They made a judgment on it. They have effected that judgment within a notice-and-comments setting. I mean, if that’s not Chevron, what is?”

That is not to say the argument presages an easy win for the employees. The same Justices who thought that the case presents an obvious Chevron problem thought it just as plain that the department’s regulation did a poor job of explaining the decision to shift back to the original reading of the statute. In a colloquy with Assistant to the Solicitor General Anthony Yang (representing the department), Justice Stephen Breyer stated outright that he finds the statute ambiguous, recounting two different ways to read it. But, referring to the lengthy era in which the department acquiesced in the contrary viewpoint, he concluded that “the real question is why they don’t have to address” the thirty-year acquiescence? “There’s some protection in the” Administrative Procedure Act, he observed, that is designed to prevent “too big a shift too quickly, the protection being ‘address it.’ ‘Address it.’ ‘Think about it.’” Despite his best efforts, Yang did not seem to assuage Justice Breyer’s concerns on that point.

The scrutiny of the department’s work reached a low point in a colloquy between Yang and Justice Kagan. At one point, she asked Yang if he could respond to one of Clement’s most pointed criticisms:

For the most part th[e Department’s] explanation seems like not the world’s best explanation to me but perfectly adequate. But Mr. Clement does have a point that somehow the agency took out this more specific explanation. I guess if I were just looking at the explanation itself I would say ‘not an A-plus job, but fine.’ But it is a little bit perplexing as to why they took this out. Why was that?”

Yang’s response was surprising; he told Kagan that “we don’t have this in the record, but I have been informed that there was an inadvertent mistake in drafting.” Floored at his candor, Kagan retorted. “Wow. I really did not expect you to say that.”

It is pretty clear that when the Justices return to their chambers they will have to do some work sorting through the various documents in which the Department of Labor has expressed its position. But none of the Justices seemed to think the Department had read the statute incorrectly, and so at the end of the day it is pretty hard to believe that a majority of them will reject the department’s determination that it should stick to its guns. Indeed, we might even get some interesting analysis of the administrative law niceties of what an agency has to do to justify changing a long-held regulatory position.

Recommended Citation: Ronald Mann, Argument analysis: Justices dubious about exempting car dealership “service advisors” from overtime rules, SCOTUSblog (Apr. 21, 2016, 1:53 PM),