Encino Motorcars, LLC v. Navarro

Background

A Mercedes‑Benz dealership in Los Angeles employed five current and former service advisors who say they worked long hours without overtime pay. The employees sued under the Fair Labor Standards Act (FLSA), while the dealership argued that service advisors fall within an overtime exemption for certain sales and service workers at vehicle dealerships in 29 U.S.C. § 213(b)(10)(A).

Reasoning

The Court focused on whether courts should defer to the Labor Department’s 2011 regulation that said service advisors are not exempt. Normally courts give weight to an agency’s reasonable interpretation when a law is unclear, but an agency must explain changes in policy. The Court found the 2011 regulation gave almost no reasoned explanation for abandoning decades of prior agency practice and industry reliance, so it is arbitrary and cannot control the statute.

Real world impact

Because the Court refused to treat the 2011 rule as controlling, the Ninth Circuit’s decision (which had relied on that rule) was vacated and the case was sent back for the appeals court to interpret the statute from scratch. The core question—whether service advisors are exempt from overtime under the FLSA—remains unresolved and must be decided by the lower court without deferring to the 2011 regulation.

Dissents or concurrances

Justice Ginsburg (joined by Justice Sotomayor) agreed the agency failed to explain its change. Justice Thomas (joined by Justice Alito) dissented, arguing the Court should have decided on the merits and would have held service advisors exempt.