Justices Call for New Look at Overtime Case

     WASHINGTON (CN) — Because the U.S. Department of Labor gave little insight when it changed course on overtime exemptions, the Supreme Court said Monday the 2011 guidelines cannot control the outcome of a lawsuit.
     Hector Navarro and two other employees of Encino Motorcars, a Mercedes-Benz dealership in California, brought the lawsuit at hand.
     Despite working from 7 a.m. to 6 p.m. at least five days a week, the employees said Encino paid them commissions only for services or repairs they sold customers.
     They said they also had to be available for work during meal breaks and while on vacation, according to court documents.
     Though a federal judge dismissed the lawsuit, the U.S. Supreme Court agreed to weigh in after the Ninth Circuit created a circuit split last year in reversing.
     Vacating the lower court’s holding 6-2 Monday, the justices called for the Ninth Circuit to take another look.
     The ruling focuses on decades of fine-tuning the Fair Labor Standards Act, which requires overtime for employees who work more than 40 hours in a week.
     While “any salesman, parts-man, or mechanic primarily engaged in selling or servicing automobiles” has been exempt from the overtime rule since 1966, the blanket exemption has specifically applied to employees who sell automotive services since 1978.
     When the Department of Labor departed from this scheme in 2011, it issued a rule change that said “salesmen” meant only employees who sold vehicles, not those who sold car services, for the purposes of overtime exemption.
     The Ninth Circuit found the 2011 rule ambiguous because service advisers were neither true salesmen, partsmen or mechanics.
     Writing for a three-person panel, Judge Susan Graber found it unclear “whether Congress intended broadly to exempt any salesman who is involved in the servicing of cars or, more narrowly, only those salesmen who are selling the cars themselves.”
     Faults the Ninth Circuit for deferring to the Labor Department, the Supreme Court noted that the 2011 rule change included “little explanation for its decision to abandon its decades-old practice of treating service advisors as exempt.”
     The United States has even attributed the change to “an inadvertent mistake in drafting,” according to the ruling.
     Justice Anthony Kennedy said “the unavoidable conclusion is that 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 involved.”
     “In promulgating the 2011 regulation, the department offered barely any explanation,” Kennedy added. “A summary discussion may suffice in other circumstances, but here — in particular because of decades of industry reliance on the department’s prior policy — the explanation fell short of the agency’s duty to explain why it deemed it necessary to overrule its previous position.”
     Kennedy emphasized that the courts are not meant “to speculate on reasons that might have supported an agency’s decision.”
     “In light of the serious reliance interests at stake, the department’s conclusory statements do not suffice to explain its decision,” Kennedy added. “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.”
     Justice Ruth Bader Ginsberg joined the lead opinion but also wrote separately to emphasize that the Department of Labor could easily revisit or reissue the 2011 rule.
     Justice Sonia Sotomayor joined Ginsburg’s concurrence.
     Justice Samuel Alito meanwhile joined a dissent by Justice Clarence Thomas that criticizes his colleagues for not determining whether the Ninth Circuit correctly interpreted the 2011 rule. Saying the FLSA reveals that service advisers are salesmen primarily engaged in the selling of services for automobiles, Thomas said he would reverse.

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