Following the Remand of a Contentious Overtime Case, Chevron Deference May Be Murky

Last summer, in the waning stages of the Supreme Court’s 2015-2016 term, the U.S. Supreme Court issued an opinion reversing the U.S. Court of Appeals for the Ninth Circuit’s use of Chevron deference to overrule a district court which had decided that neither the Fair Labor Standards Act (FLSA) nor the varying interpretations of the special automotive dealership regulatory interpretations excluded service advisors from the exemptions for overtime compensation. The case is Encino Motorcars, LLC v. Navarro. Now, on remand, the Ninth Circuit, again, has concluded that service advisors are entitled to overtime pay and compensation.

The FLSAlaw requires employers to pay overtime compensation to covered employees. But, in 1966, Congress enacted an exemption from the overtime compensation requirement for “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles” at a covered dealership. The Department of Labor (DOL) later interpreted “salesman” to include service advisors as also being excluded, but this interpretation changed from time to time.  In 2011, the DOL issued a final rule reaffirming the DOL’s original position: service advisors are not exempt.

A federal district court granted the defendant’s motion to dismiss, agreeing with them that the FLSA overtime provisions do not apply to the plaintiffs because service advisors are covered by the 29 U.S.C. § 213(b)(10)(A) exemption. But, the Ninth Circuit reversed this determination, holding that the DOL’s regulation was entitled to Chevron deference.

The U.S. Supreme Court disagreed, ruling that Chevron deference did not apply to a rule whose promulgation was defective, as was the rule here because the DOL’s change in position was insufficiently explained.

On remand to the Ninth Circuit, that Ninth Circuit held, on January 9, 2017, that the service advisors were not exempted from the benefits of overtime compensation. The Ninth Circuit assumed it must now give no weight to the DOL’s interpretation, so “we interpret the statute in the first instance.” What followed is a painstaking review of the statutory, text and legislative history, covering over twenty pages. The Ninth Circuit concludes by stating that, “after a thorough de novo review of congressional intent, we hold the exemption… does not cover service advisors.”

The Ninth Circuit also notes that its decision conflicts with published opinions by the Fourth and Fifth Circuits, and the Supreme Court of Montana, suggesting further appeals are in prospect. The fate of Chevron deference may now be a bit murkier.