How much deference is DOL due? Supreme Court takes up FLSA exemption’s application to auto service advisors
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Thursday, January 21, 2016

How much deference is DOL due? Supreme Court takes up FLSA exemption’s application to auto service advisors

By Pamela Wolf, J.D. The Supreme Court has agreed to review the Ninth Circuit’s determination that an auto dealership’s service advisors did not fall within the FLSA’s exemption for “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles.” The appeals court decision relied on Department of Labor interpretive guidance and also created a circuit split. On January 15, the High Court granted the petition for certiorari in Encino Motorcars, LLC v. Navarro, agreeing to resolve the question of whether the service advisors are exempt under 29 U.S.C. §213(b)(10)(A) from the FLSA’s overtime-pay requirements. In reaching its conclusion, the Ninth Circuit departed from the approach taken by the Fourth and Fifth Circuits, granting Chevron deference to the DOL’s regulatory definitions in the face of statutory ambiguity and reversing the district court’s dismissal of the service advisors’ FLSA and state-law overtime claims. “[There are good arguments supporting both interpretations of the exemption,” the appeals court wrote. “But where there are two reasonable ways to read the statutory text, and the agency has chosen one interpretation, we must defer to that choice.” The regulation. In its 2011 rulemaking, the DOL explained that the auto dealership exemption at issue here, 29 C.F.R. Sec. 779.372(c), applied only “to salesmen who sell vehicles and partsmen and mechanics who service vehicles.” Under the DOL’s interpretation, the service advisors didn’t meet either of those definitions and thus were not exempt. To determine if the DOL interpretation was controlling, the Ninth Circuit applied the two-step Chevron analysis, noting at the threshold that the FLSA is to be read liberally in favor of employees, and consequently, exemptions are to be narrowly construed. Statute was ambiguous. First, the court found that the relevant statutory text was capable of several different interpretations. Thus, the court could not readily find that the service advisors “plainly and unmistakably” fell within the reach of the exemption. Deference. In the face of this statutory ambiguity, the appeals court looked to the DOL regulation and, having been promulgated after notice-and-comment rulemaking, considered the rule under the Chevron “reasonableness” standard. “The Department of Labor’s regulations consistently—for 45 years—have interpreted the statutory exemption to apply narrowly. The agency reaffirmed that interpretation most recently in 2011, after thorough consideration of opposing views and after a formal notice-and-comment process. Under these circumstances, Chevron provides the appropriate legal standard.” Even if the agency’s 2011 final rule did amount to a change of position on the reach of the exemption, the appeals court said the DOL would still be entitled to Chevron-level deference, citing the Supreme Court’s 2009 decision in FCC v. Fox Television Stations, Inc., and, more recently, the High Court’s March 2015 holding in Perez v Mortgage Bankers Assoc. Turning to the next step in the Chevron analysis, the Ninth Circuit held the DOL’s interpretation of the ambiguous statutory provision was a reasonable one and would not be disturbed. The court disagreed with Fourth and Fifth Circuits on this issue, along with several district courts and the Supreme Court of Montana, that the contrary reading of the statute was the only reasonable one or that the agency’s interpretation was unreasonable.

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