The U.S. Supreme Court recently pushed back against the U.S. Department of Labor's (DOL) attempt to stretch the boundaries of Chevron deference in Encino Motorcars, LLC v. Navarro et al. In 2008, DOL issued a proposed rule updating its implementing regulations for the Fair Labor Standards Act (FLSA).  The proposal would have codified a longstanding interpretation that automobile dealership service advisors are exempt from the FLSA overtime requirement. In 2011, however DOL issued the FLSA final rule, which eliminated the automobile dealership service advisors exemption. DOL provided a brief overview of comments supporting and opposing the provision but gave little explanation for its decision to abandon its decades-old practice of treating service advisors as exempt from the FLSA under the statute.  

In Encino Motorcars, a group of service advisors filed suit against the petitioner, a car dealership, for failing to pay overtime.  The petitioner asserted that the service advisors were exempt from the FLSA overtime requirement and filed a motion to dismiss, which the U.S. District Court for the Central District of California granted. The Ninth Circuit reversed the decision, giving Chevron deference to DOL's interpretation of the FLSA. 

The Supreme Court reversed. It held that DOL's actions were arbitrary and capricious and violated a "basic procedural requirement...that an agency must give adequate reasons for its decisions." In noting this, the Court stated that an agency "'need not always provide a more detailed justification than what would suffice for a new policy created on a blank state."  However, an agency "must at least 'display awareness that it is changing position' and 'show that there are good reasons for the new policy.'" DOL did neither.  The agency "did not analyze or explain why the statute should be interpreted to exempt dealership employees who sell vehicles but not dealership employees who sell services (that is, service advisors)."  This was particularly troublesome for the Court because DOL's previous policy created "reliance interests" for the automobile industry.  As such, "'...a reasoned explanation is needed for disregarding facts and circumstances that underlay or were engendered by the prior policy.'"   

The Court remanded the case to the Ninth Circuit to determine “the meaning of the statute in the first instance.”  Justice Thomas, joined by Justice Alito, dissented with the Court's decision to leave the question of whether FLSA applies to service advisors to the Ninth Circuit.  Justice Thomas asserted that based on the statutory text, a service advisor is clearly exempt from the FLSA overtime requirement.