This morning the U.S. Supreme Court issued its latest decision (read, “non-decision”) in Encino Motorcars, LLC v. Navarro. The case involves a decades-old question of whether auto dealership “service advisors” are exempt under a specific FLSA overtime exemption covering any “salesman, partsman, or mechanic…engaged in selling or servicing automobiles, trucks, or farm implements” at a covered dealership. Over the span of several decades, the DOL had flip-flopped on this issue until 2011, when it issued a formal regulation concluding that service advisors do not qualify under the exemption. The Ninth Circuit Court of Appeals held that the DOL’s 2011 rule was entitled to substantial deference, and therefore sided with the DOL on the issue.
The Supreme Court rejected the Ninth Circuit’s analysis. The Court concluded that the DOL’s 2011 regulation was not entitled to any deference at all because the DOL failed to provide any meaningful explanation for its 2011 180-degree change in its interpretation of the exemption. Even so, the Supreme Court failed to address the issue that has been pending for decades—the application of the exemption to service advisors—choosing instead to send the case back to the Ninth Circuit to re-analyze the issue without deference to the DOL. This appears to be yet another example of the Supreme Court trying to cope, extremely inefficiently, with the death of Justice Scalia, and the seemingly inexorable split of opinions among the 8 justices on important issues. On the bright side, it is yet another recognition by the Court that the DOL’s actions are not sacrosanct, and the DOL must explain itself when it makes radical changes in its interpretation of the FLSA.