Supreme Court of the United States · 2016 · Administrative Law
Administrative LawChevronarbitrary and capricious reviewreasoned explanationagency policy changereliance interestsnotice-and-comment rulemakingDepartment of Labor
Facts
The Fair Labor Standards Act generally requires overtime pay for covered employees who work more than 40 hours per week, but it exempts certain dealership employees under 29 U.S.C. § 213(b)(10)(A). Respondents were current and former service advisors at petitioner Mercedes-Benz dealership; they sold repair and maintenance services to customers and were paid by commission rather than salary or hourly wage. For decades, the Department of Labor had shifted positions on whether service advisors were exempt, treating them as exempt from 1978 onward and proposing in 2008 to revise its rules accordingly. In 2011, however, the Department issued a final rule returning to the view that service advisors are not exempt, while giving only minimal explanation for that change despite asserted longstanding industry reliance on the prior policy.
Issue
Whether courts should give Chevron deference to the Department of Labor's 2011 regulation interpreting § 213(b)(10)(A) to exclude service advisors from the FLSA overtime exemption. Relatedly, whether the Ninth Circuit could rely on that regulation to resolve the statutory question.
Rule
Chevron deference is unavailable when an agency regulation is procedurally defective, including when the agency fails to provide the reasoned explanation required by the APA. When an agency changes an existing policy, it must display awareness of the change, show good reasons for the new policy, and account for serious reliance interests engendered by the prior policy; unexplained inconsistency renders the regulation arbitrary and capricious and unable to carry the force of law.
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One of 10 multiple-choice questions for this case. Pick an answer to see why.
The Federal Workplace Standards Bureau administers a wage statute and has long interpreted it to exclude marina dispatch coordinators from overtime. After notice-and-comment rulemaking, the Bureau adopts the opposite interpretation in a final rule, stating only that the statute "does not cover these positions" and that the agency's view is "reasonable," even though employers in Miami and Tampa had structured compensation plans around the prior policy for decades.
If a court reviews the final rule, which is the best analysis of whether Chevron deference applies?
Explanation. Chevron rests on the premise that Congress delegated authority to agencies to resolve ambiguity through procedures carrying the force of law. But deference is unavailable when the rule is procedurally defective. One basic APA requirement is a satisfactory explanation connecting the facts found to the choice made. When an agency changes policy, it must show awareness of the change, give good reasons, and take serious reliance interests into account. Conclusory statements are insufficient, so the rule cannot receive Chevron deference. (Derived from Encino Motorcars, LLC v. Navarro (2016).)