All Things in Moderation

Encino Motor Cars is a Supreme Court case from 2016. It isn’t over yet as the case was sent back to the 9th which recently ruled again. Here is the background.

The 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, parts-man, or mechanic primarily engaged in selling or servicing automobiles” at a covered dealership.

Congress authorized the DoL 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.” 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.

So here DoL simply dropped service advisors, who at that time were always engaged in selling services as well as scheduling, from the exemption created by Congress. Not a big stretch for Fed Courts to say “WTF?”

From 1978, then, until 2011, DoL treated service advisors as exempt, bowing to the various court rulings.

In 2011, without explanation, DoL reversed field and reiterated its 1970 regulation, denying the exemption.

Then the 9th Circuit ruled that “Chevron deference” applied and upheld DoL.

In 2016, the Supremes, all 8 who were sitting, agreed that Chevron deference could not apply to reversal of a long standing regulation without any explanation. The decision was 6-2, with Thomas and Alito wanting to Render and throw out the reg, but the majority Remanded to the 9th with instructions to decide without reference to Chevron deference. Who was right procedurally is an interesting side argument. The law school view is that the Supremes announce policy of the law but don’t weigh facts, but here it may have been that there were no facts to weigh. I didn’t read the record, so I don’t know. IOW, Thomas and Alito might have been exactly on point, or not.

So as a practitioner I would have wanted to know whether service writers had become mere schedulers or not. In my own experience, American dealerships sell service through the writers but Lexus and Subaru do not. YMMV. To justify a change in the reg, if I were at DoL, I would have attached a certified finding that service writers were not primarily sales force and exhibited the service writers’ employment descriptions or other materials before requesting that the 9th rule that the case had become moot on Remand, based on the Supremes’ requirement for a justifiable explanation. Or something like that.

But the DoL stood pat. And now the 9th has said “service writers are not primarily sales force” from the record before them, thus ruling the same way, but without any Chevron deference.

Maybe so. Maybe not. Again, gotta read the record, not just the opinions, and I have not. But there will likely be an Encino II at the Supremes.

If the Supremes had simply decided as Alito and Thomas wanted, the DoL could still have gone back to the drawing board and justified the change going forward, if there were facts to support it.

My gut says that Subaru and Lexus service writers, who never tried to sell me anything, should not be exempt, but that Ford service writers who always tried to sell me the Moon should be exempt. And I think that the regulation should not be “one size fits all” but rather one size fits the statutory definition, administrative convenience be damned. “Administrative convenience” is especially a problem when dealing with the FLSA, because the Wage and Hour guys have had a history of setting traps for the unwary.

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