Civil Rights,
Labor/Employment,
U.S. Supreme Court
Jun. 22, 2016
Labor Department must explain policy change, U.S. Supreme Court rules
The U.S. Supreme Court ruled Monday that the federal Labor Department must explain why it changed a longstanding policy in order to entitle workers at a California auto dealership to overtime pay.
Daily Journal Staff Writer
The U.S. Supreme Court ruled Monday that the federal Labor Department must explain why it changed a longstanding policy in order to entitle workers at a California auto dealership to overtime pay.
In a 6-2 ruling, the majority asked why the Labor Department applied a 2011 interpretation of a 1966 amendment to the Fair Labor Standards Act that exempted from overtime "any salesman, parts-man, or mechanic primarily engaged in selling or servicing automobiles."
"The Department gave little explanation for its decision to abandon its decades-old practice of treating service advisors as exempt under [the amendment]," wrote Justice Anthony M. Kennedy for the majority.
The Supreme Court sent the case back to the 9th U.S. Circuit Court of Appeals, which upheld the Labor Department's 2011 interpretation.
"It is not clear from the text of the statute 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," wrote 9th Circuit Judge Susan Graber in a March 2015 opinion on the issue.
That opinion reversed in part a Central District judge's dismissal of the lawsuit and remanded it there for further proceedings.
"There are good arguments supporting both interpretations of the [overtime] exemption," noted Graber in the 2015 ruling. "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."
On remand from the U.S. Supreme Court, the 9th Circuit must "interpret the statute in the first instance." Encino Motorcars LLC v. Navarro et al., 15--415.
The lawsuit involves current and former employees of Mercedes-Benz car seller Encino Motorcars. They are seeking to apply an interpretation of exempt rules that only use the word "salesman" instead of how it was applied to "service advisors," which the company treated synonymously.
Service advisors at Encino Motorcars sell repair services, according to Monday's opinion.
"Agencies are free to change their existing policies as long as they provide a reasoned explanation for the change," Kennedy wrote.
He noted that the Labor Department offered "barely any explanation."
Justices Clarence Thomas and Samuel Alito dissented, saying a service advisor is a salesman.
"The service advisor is the customer's liaison for purposes of deciding what parts are necessary to maintain or repair a vehicle, and therefore is primarily engaged in 'the action of maintaining or repairing a motor vehicle' or 'the action of providing a service' for an automobile," wrote Thomas in the dissent, citing the Fair Labor Standards Act.
"The plain meaning of the various terms in the [overtime] exemption establish that the term 'salesman' is not limited to only those who sell automobiles," Thomas added..""A service advisor is a "salesman" who sells servicing solu
tions."
Paul D. Clement, a Washington, D.C.-based partner at Bancroft PLLC, represented Encino Motorcars on appeal, according to an online docket. He could not be reached.
A representative from the solicitor general's office did not return a request for comment.
saul_sugarman@dailyjournal.com
Saul Sugarman
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