Encino Motorcars, LLC v. Navarro et al – No. 15-415 Case Brief - a.The facts of
ID: 333572 • Letter: E
Question
Encino Motorcars, LLC v. Navarro et al – No. 15-415
Case Brief -
a.The facts of the case (Tell me what happened prior to trial that led up to the case).
b. The issues of the case (This will be the topic that you chose. Cases are usually based on one issue (question to be answered): if there are more issues than your topic, just concentrate on your issue)
c. The court’s decision.
d. The court’s reasoning or rationale (Why the court ruled the way it did)
e. Was the court’s decision ethical and fair or not? Explain your opinion in detail! This is an important part of this assignment. Do not skip this part or think you will receive credit for anything less than a full discussion of your opinion. Your opinion needs to include a discussion of the meaning of ethical and which ethical decision-making approach you followed in coming to your conclusion.
(Slip Opinion) OCTOBER TERM, 2015 1 Syllabus NOTE: Where it is feasible, a syllabus (headnote) will be released, as is being done in connection with this case, at the time the opinion is issued. The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader. See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.
SUPREME COURT OF THE UNITED STATES
Syllabus
ENCINO MOTORCARS, LLC v. NAVARRO ET AL.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT No. 15–415.
Argued April 20, 2016—Decided June 20, 2016
The Fair Labor Standards Act (FLSA) requires employers to pay overtime compensation to covered employees who work more than 40 hours in a given week. 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. Fair Labor Standards Amendments of 1966, §209, 80 Stat. 836, codified as amended at 29 U. S. C. §213(b)(10)(A). Congress authorized the Department of Labor to promulgate necessary rules, regulations, or orders with respect to this new provision. The Department exercised that authority in 1970 and issued a regulation that defined “salesman” to mean “an employee who is employed for the purpose of and is primarily engaged in making sales or obtaining orders or contracts for sale of the vehicles . . . which the establishment is primarily engaged in selling.” 29 CFR §779.372(c)(1) (1971). The regulation excluded service advisors, who sell repair and maintenance services but not vehicles, from the exemption. Several courts, however, rejected the Department’s conclusion that service advisors are not covered by the statutory exemption. In 1978, the Department issued an opinion letter departing from its previous position and stating that service advisors could be exempt under 29 U. S. C. §213(b)(10)(A). In 1987, the Department confirmed its new interpretation by amending its Field Operations Handbook to clarify that service advisors should be treated as exempt under the statute. In 2011, however, the Department issued a final rule that followed the original 1970 regulation and interpreted the statutory term “salesman” to mean only an employee who sells vehicles. 76 Fed. Reg. 18859. The Department gave little explanation for its decision to abandon its decades-old practice of treating service advisors 2 ENCINO MOTORCARS, LLC v. NAVARRO Syllabus as exempt under §213(b)(10)(A). Petitioner is an automobile dealership. Respondents are or were employed by petitioner as service advisors. Respondents filed suit alleging that petitioner violated the FLSA by failing to pay them overtime compensation when they worked more than 40 hours in a week. Petitioner moved to dismiss, arguing that the FLSA overtime provisions do not apply to respondents because service advisors are covered by the §213(b)(10)(A) exemption. The District Court granted the motion, but the Ninth Circuit reversed in relevant part. Deferring under Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U. S. 837, to the interpretation set forth in the 2011 regulation, the court held that service advisors are not covered by the §213(b)(10)(A) exemption. Held: Section 213(b)(10)(A) must be construed without placing controlling weight on the Department’s 2011 regulation. Pp. 7–12. (a) When an agency is authorized by Congress to issue regulations and promulgates a regulation interpreting a statute it enforces, the interpretation receives deference if the statute is ambiguous and the agency’s interpretation is reasonable. See Chevron, supra, at 842– 844. When Congress authorizes an agency to proceed through noticeand-comment rulemaking, that procedure is a “very good indicator” that Congress intended the regulation to carry the force of law, so Chevron should apply. United States v. Mead Corp., 533 U. S. 218, 229–230. But Chevron deference is not warranted where the regulation is “procedurally defective”—that is, where the agency errs by failing to follow the correct procedures in issuing the regulation. 533 U. S., at 227. One basic procedural requirement of administrative rulemaking is that an agency must give adequate reasons for its decisions. Where the agency has failed to provide even a minimal level of analysis, its action is arbitrary and capricious and so cannot carry the force of law. Agencies are free to change their existing policies, but in explaining its changed position, an agency must be cognizant that longstanding policies may have “engendered serious reliance interests that must be taken into account.” FCC v. Fox Television Stations, Inc., 556 U. S. 502, 515. An “[u]nexplained inconsistency” in agency policy is “a reason for holding an interpretation to be an arbitrary and capricious change from agency practice,” National Cable & Telecommunications Assn. v. Brand X Internet Services, 545 U. S. 967, 981, and an arbitrary and capricious regulation of this sort receives no Chevron deference. Pp. 7–10. (b) Applying those principles, the 2011 regulation was issued without the reasoned explanation that was required in light of the Department’s change in position and the significant reliance interests Cite as: 579 U. S. ____ (2016) 3 Syllabus involved. The industry had relied since 1978 on the Department’s position that service advisors are exempt from the FLSA’s overtime pay requirements, and had negotiated and structured compensation plans against this background understanding. In light of this background, the Department needed a more reasoned explanation for its decision to depart from its existing enforcement policy. The Department instead said almost nothing. It 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. This lack of reasoned explication for a regulation that is inconsistent with the Department’s longstanding earlier position results in a rule that cannot carry the force of law, and so the regulation does not receive Chevron deference. It is appropriate to remand for the Ninth Circuit to interpret §213(b)(10)(A) in the first instance. Pp. 10–12. 780 F. 3d 1267, vacated and remanded. KENNEDY, J., delivered the opinion of the Court, in which ROBERTS, C. J., and GINSBURG, BREYER, SOTOMAYOR, and KAGAN, JJ., joined. GINSBURG, J., filed a concurring opinion, in which SOTOMAYOR, J., joined. THOMAS, J., filed a dissenting opinion, in which ALITO, J., joined.
Explanation / Answer
Part A - Facts of the case
About the case
1. Respondents - Are or were employed by petitioner as service advisors.
2. Petitioner is an automobile dealership at Encino
3. Contention - Respondents filed suit alleging that petitioner violated the FLSA by failing to pay them overtime compensation when they worked more than 40 hours in a week.
Changes in the regulations
1. Fair Labor Standards Act (FLSA) - Requires employers to pay overtime compensation to covered employees who work more than 40 hours per week.
2. 1966-
a. Congress provided an exemption to “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles” at a covered dealership
b. Congress authorized the Department of Labor (DOL) to promulgate necessary rules, regulations, or orders with respect to this new provision.
3. 1970
a. DOL exercised authority and issued a regulation that defined “salesman” to mean “an employee who is employed for the purpose of and is primarily engaged in making sales or obtaining orders or contracts for sale of the vehicles. The regulation excluded service advisors, who sell repair and maintenance services but not vehicles, from the exemption.
4. 1978,
a. DOL issued an opinion letter departing from its previous position and stating that service advisors could be exempt.
5. 1987
a. DOL confirmed its new interpretation by amending its Field Operations Handbook to clarify that service advisors should be treated as exempt under the statute
6. 2011
a. DOL issued a final rule that followed the original 1970 regulation and interpreted the statutory term “salesman” to mean only an employee who sells vehicles. The regulation excluded service advisors, who sell repair and maintenance services but not vehicles, from the exemption. The Department did not give an adequate reason for the change
Case History
Part B - The issues of the case –
Part C - The court’s decision.-
Supreme Court vacated the Ninth District's decision and remanded the case back to that court citing that DOL regulation did not qualify for the "Chevron deference". Supreme court concluded that service advisors are excluded from the exemption.
Part d
Court’s ruling was based on three rationales -
o Chevron deference". - Deference is only allowable when agencies make these regulations with "good reasons for the new policy". However, In 2011 DOL changed the policy without citing adequate rationale for its change hence DOL regulation of 2011 did not qualify.
o The broader definition of original regulation should include service provider as they are selling services.
o Service providers were getting compensation with the premise that they are exempted. Now if the exemption is not applicable then compensation structure also becomes invalid. Allowing high compensation and benefits along with overtime compensation would have been unjust.
Part e -
1. Supermen court decision was ethical as the original exemption provided by Congress included salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles”. While service providers are not selling an actual vehicle or doing actual repair work yet they are selling services.
2. Secondly, Industry for a decade was functioning on premise that service providers were exempted and hence industry would have set their compensation structure accordingly.
3. 2011 deviation of DOL came without any adequate reasoning or assessment on how the compensation structure will be adjusted.
4. If SC had ruled in favour of excluding the service providers from the exemption, it could have impacted the current compensation structure and other benefits which the service provider might be getting.
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