Encino Motocars, LLC v. Navarro

Whether a government agency who has been given the authority to interpret and promulgate a regulation may be given deference in the absence of an explanation for a change that is inconsistent with the agency's longstanding earlier position.

The Fair Labor Standards Act (FLSA) demands that employers pay overtime to certain employees who work more than 40 hours in a week. However, the FLSA also contains an exemption under § 213(b)(10)(A) for certain employees, as enacted by Congress. Congress authorized the Department of Labor to interpret the exception. The Department of Labor changed their regulation and interpretation of the exception multiple times and most recently in 2011 interpreting “salesman” to mean only “an employee who sells automobiles, trucks, or farm implements.” Respondents are or were employed as service advisors by Petitioner, an automobile dealership. Respondents filed suit arguing that Petitioner violated the FLSA by not paying them overtime. Petitioners moved to dismiss, arguing that service advisors are covered by the FLSA § 213(b)(10)(A) exception. The District Court granted the motion but the Ninth Circuit reversed. The Supreme Court granted certiorari. The court applied a two-part test as set forth in Chevron to determine whether the court should defer to the Department’s interpretation. First, a court must determine if Congress has directly addressed the question at hand. If Congress has then the issue is resolved, but if Congress has not then the court must defer to the agency’s interpretation, so long as it is reasonable. Such a change is reasonable so long as agencies specify a coherent explanation for the change. In this case the regulation was changed without any explanation and the conclusory assertions were insufficient to explain the change that was inconsistent with the Department’s longstanding earlier position. Therefore, the court remanded to the Court of Appeals to interpret in the first stance. VACATED AND REMANDED