Encino Motorcars, LLC v. Navarro , 195 L. Ed. 2d 282 ( 2016 )

(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 over-
time 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 automo-
biles” 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 employ-
ee 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 ex-
emption. Several courts, however, rejected the Department’s conclu-
sion 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 deci-
sion 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 al-
leging that petitioner violated the FLSA by failing to pay them over-
time compensation when they worked more than 40 hours in a week.
Petitioner moved to dismiss, arguing that the FLSA overtime provi-
sions do not apply to respondents because service advisors are cov-
ered 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 regula-
tion, 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 control-
ling 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 notice-
and-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 regula-
tion 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 ex-
plaining its changed position, an agency must be cognizant that
longstanding policies may have “engendered serious reliance inter-
ests that must be taken into account.” FCC v. Fox Television Sta-
tions, Inc., 556 U. S. 502, 515. An “[u]nexplained inconsistency” in
agency policy is “a reason for holding an interpretation to be an arbi-
trary 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 re-
ceives no Chevron deference. Pp. 7–10.
(b) Applying those principles, the 2011 regulation was issued with-
out the reasoned explanation that was required in light of the De-
partment’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 back-
ground, the Department needed a more reasoned explanation for its
decision to depart from its existing enforcement policy. The Depart-
ment 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 re-
ceive 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.
Cite as: 579 U. S. ____ (2016) 1
Opinion of the Court
NOTICE: This opinion is subject to formal revision before publication in the
preliminary print of the United States Reports. Readers are requested to
notify the Reporter of Decisions, Supreme Court of the United States, Wash­
ington, D. C. 20543, of any typographical or other formal errors, in order
that corrections may be made before the preliminary print goes to press.
SUPREME COURT OF THE UNITED STATES
_________________
No. 15–415
_________________
ENCINO MOTORCARS, LLC, PETITIONER v.
HECTOR NAVARRO, ET AL.
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE NINTH CIRCUIT
[June 20, 2016]
JUSTICE KENNEDY delivered the opinion of the Court.
This case addresses whether a federal statute requires
payment of increased compensation to certain automobile
dealership employees for overtime work. The federal
statute in question is the Fair Labor Standards Act
(FLSA), 29 U. S. C. §201 et seq., enacted in 1938 to “pro­
tect all covered workers from substandard wages and
oppressive working hours.” Barrentine v. Arkansas-Best
Freight System, Inc., 450 U. S. 728, 739 (1981). Among its
other provisions, the FLSA requires employers to pay
overtime compensation to covered employees who work
more than 40 hours in a given week. The rate of overtime
pay must be “not less than one and one-half times the
regular rate” of the employee’s pay. §207(a).
Five current and former service advisors brought this
suit alleging that the automobile dealership where they
were employed was required by the FLSA to pay them
overtime wages. The dealership contends that the posi­
tion and duties of a service advisor bring these employees
within §213(b)(10)(A), which establishes an exemption
from the FLSA overtime provisions for certain employees
2 ENCINO MOTORCARS, LLC v. NAVARRO
Opinion of the Court
engaged in selling or servicing automobiles. The case
turns on the interpretation of this exemption.
I
A
Automobile dealerships in many communities not only
sell vehicles but also sell repair and maintenance services.
Among the employees involved in providing repair and
maintenance services are service advisors, partsmen, and
mechanics. Service advisors interact with customers and
sell them services for their vehicles. A service advisor’s
duties may include meeting customers; listening to their
concerns about their cars; suggesting repair and mainte­
nance services; selling new accessories or replacement
parts; recording service orders; following up with custom­
ers as the services are performed (for instance, if new
problems are discovered); and explaining the repair and
maintenance work when customers return for their vehi­
cles. See App. 40–41; see also Brennan v. Deel Motors,
Inc., 475 F. 2d 1095, 1096 (CA5 1973); 29 CFR
§779.372(c)(4) (1971). Partsmen obtain the vehicle parts
needed to perform repair and maintenance and provide
those parts to the mechanics. See §779.372(c)(2). Me­
chanics perform the actual repair and maintenance work.
See §779.372(c)(3).
In 1961, Congress enacted a blanket exemption from the
FLSA’s minimum wage and overtime provisions for all
automobile dealership employees. Fair Labor Standards
Amendments of 1961, §9, 75 Stat. 73. In 1966, Congress
repealed that broad exemption and replaced it with a
narrower one. The revised statute did not exempt dealer­
ship employees from the minimum wage requirement. It
also limited the exemption from the overtime compensa­
tion requirement to cover only certain employees—in
particular, “any salesman, partsman, or mechanic primar­
ily engaged in selling or servicing automobiles, trailers,
Cite as: 579 U. S. ____ (2016) 3
Opinion of the Court
trucks, farm implements, or aircraft” at a covered dealer­
ship. Fair Labor Standards Amendments of 1966, §209,
80 Stat. 836. Congress authorized the Department of
Labor to “promulgate necessary rules, regulations, or
orders” with respect to this new provision. §602, id., at
844.
The Department exercised that authority in 1970 and
issued a regulation that defined the statutory terms
“salesman,” “partsman,” and “mechanic.” 35 Fed. Reg.
5896 (1970) (codified at 29 CFR §779.372(c)). The De­
partment intended its regulation as a mere interpretive
rule explaining its own views, rather than a legislative
rule with the force and effect of law; and so the Depart­
ment did not issue the regulation through the notice-and­
comment procedures of the Administrative Procedure Act.
See 35 Fed. Reg. 5856; see also 5 U. S. C. §553(b)(A) (ex­
empting interpretive rules from notice and comment).
The 1970 interpretive regulation 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 or farm imple­
ments which the establishment is primarily engaged in
selling.” 29 CFR §779.372(c)(1) (1971). By limiting the
statutory term to salesmen who sell vehicles or farm
implements, the regulation excluded service advisors from
the exemption, since a service advisor sells repair and
maintenance services but not the vehicle itself. The regu­
lation made that exclusion explicit in a later subsection:
“Employees variously described as service manager, ser­
vice writer, service advisor, or service salesman . . . are not
exempt under [the statute]. This is true despite the fact
that such an employee’s principal function may be dis­
agnosing [sic] the mechanical condition of vehicles brought
in for repair, writing up work orders for repairs authorized
by the customer, assigning the work to various employees
and directing and checking on the work of mechanics.”
4 ENCINO MOTORCARS, LLC v. NAVARRO
Opinion of the Court
§779.372(c)(4).
Three years later, the Court of Appeals for the Fifth
Circuit rejected the Department’s conclusion that service
advisors are not covered by the statutory exemption. Deel
Motors, supra. Certain District Courts followed that
precedent. See Yenney v. Cass County Motors, 81 CCH LC
¶33,506 (Neb. 1977); Brennan v. North Bros. Ford, Inc., 76
CCH LC ¶33,247 (ED Mich. 1975), aff ’d sub nom. Dunlop
v. North Bros. Ford, Inc., 529 F. 2d 524 (CA6 1976) (table);
Brennan v. Import Volkswagen, Inc., 81 CCH LC ¶33,522
(Kan. 1975).
In the meantime, Congress amended the statutory
provision by enacting its present text, which now sets out
the exemption in two subsections. Fair Labor Standards
Amendments of 1974, §14, 88 Stat. 65. The first subsec­
tion is at issue in this case. It exempts “any salesman,
partsman, or mechanic primarily engaged in selling or
servicing automobiles, trucks, or farm implements” at a
covered dealership. 29 U. S. C. §213(b)(10)(A). The second
subsection exempts “any salesman primarily engaged in
selling trailers, boats, or aircraft” at a covered dealership.
§213(b)(10)(B). The statute thus exempts certain employ­
ees engaged in servicing automobiles, trucks, or farm
implements, but not similar employees engaged in servic­
ing trailers, boats, or aircraft.
In 1978, the Department issued an opinion letter de­
parting from its previous position. Taking a position
consistent with the cases decided by the courts, the opin­
ion letter stated that service advisors could be exempt
under §213(b)(10)(A). Dept. of Labor, Wage & Hour Div.,
Opinion Letter No. 1520 (WH–467) (1978), [1978–1981
Transfer Binder] CCH Wages–Hours Administrative
Rulings ¶31,207. The letter acknowledged that the De­
partment’s new policy “represent[ed] a change from the
position set forth in section 779.372(c)(4)” of its 1970
regulation. In 1987, the Department confirmed its 1978
Cite as: 579 U. S. ____ (2016) 5
Opinion of the Court
interpretation by amending its Field Operations Hand­
book to clarify that service advisors should be treated as
exempt under §213(b)(10)(A). It observed that some courts
had interpreted the statutory exemption to cover service
advisors; and it stated that, as a result of those decisions,
it would “no longer deny the [overtime] exemption for such
employees.” Dept. of Labor, Wage & Hour Div., Field
Operations Handbook, Insert No. 1757, 24L04–4(k)
(Oct. 20, 1987), online at https://perma.cc/5GHD-KCJJ (all
Internet materials as last visited June 16, 2016). The
Department again acknowledged that its new position
represented a change from its 1970 regulation and stated
that the regulation would “be revised as soon as is practi­
cable.” Ibid.
Twenty-one years later, in 2008, the Department at last
issued a notice of proposed rulemaking. 73 Fed. Reg.
43654. The notice observed that every court that had
considered the question had held service advisors to be
exempt under §213(b)(10)(A), and that the Department
itself had treated service advisors as exempt since 1987.
Id., at 43658–43659. The Department proposed to revise
its regulations to accord with existing practice by inter­
preting the exemption in §213(b)(10)(A) to cover service
advisors.
In 2011, however, the Department changed course yet
again. It announced that it was “not proceeding with the
proposed rule.” 76 Fed. Reg. 18833. Instead, the Depart­
ment completed its 2008 notice-and-comment rulemaking
by issuing a final rule that took the opposite position from
the proposed rule. The new final rule followed the original
1970 regulation and interpreted the statutory term
“salesman” to mean only an employee who sells automo­
biles, trucks, or farm implements. Id., at 18859 (codified
at 29 CFR §779.372(c)(1)).
The Department gave little explanation for its decision
to abandon its decades-old practice of treating service
6 ENCINO MOTORCARS, LLC v. NAVARRO
Opinion of the Court
advisors as exempt under §213(b)(10)(A). It was also less
than precise when it issued its final rule. As described
above, the 1970 regulation included a separate subsection
stating in express terms that service advisors “are
not exempt” under the relevant provision. 29 CFR
§779.372(c)(4) (1971). In promulgating the 2011 regula­
tion, however, the Department eliminated that separate
subsection. According to the United States, this change
appears to have been “an inadvertent mistake in drafting.”
Tr. of Oral Arg. 50.
B
Petitioner is a Mercedes-Benz automobile dealership in
the Los Angeles area. Respondents are or were employed
by petitioner as service advisors. They assert that peti­
tioner required them to be at work from 7 a.m. to 6 p.m. at
least five days per week, and to be available for work
matters during breaks and while on vacation. App. 39–40.
Respondents were not paid a fixed salary or an hourly
wage for their work; instead, they were paid commissions
on the services they sold. Id., at 40–41.
Respondents sued petitioner in the United States Dis­
trict Court for the Central District of California, alleging
that petitioner violated the FLSA by failing to pay them
overtime compensation when they worked more than 40
hours in a week. Id., at 42–44. Petitioner moved to dis­
miss, arguing that the FLSA overtime provisions do not
apply to respondents because service advisors are covered
by the statutory exemption in §213(b)(10)(A). The District
Court agreed and granted the motion to dismiss.
The Court of Appeals for the Ninth Circuit reversed in
relevant part. It construed the statute by deferring under
Chevron U. S. A. Inc. v. Natural Resources Defense Coun-
cil, Inc., 467 U. S. 837 (1984), to the interpretation set
forth by the Department in its 2011 regulation. Applying
that deference, the Court of Appeals held that service
Cite as: 579 U. S. ____ (2016) 7
Opinion of the Court
advisors are not covered by the §213(b)(10)(A) exemption.
780 F. 3d 1267 (2015). The Court of Appeals recognized,
however, that its decision conflicted with cases from a
number of other courts. Id., at 1274 (citing, inter alia,
Walton v. Greenbrier Ford, Inc., 370 F. 3d 446 (CA4 2004);
Deel Motors, 475 F. 2d 1095; Thompson v. J. C. Billion,
Inc., 368 Mont. 299, 294 P. 3d 397 (2013)). This Court
granted certiorari to resolve the question. 577 U. S. ___
(2016).
II
A
The full text of the statutory subsection at issue states
that the overtime provisions of the FLSA shall not apply
to:
“any salesman, partsman, or mechanic primarily en­
gaged in selling or servicing automobiles, trucks, or
farm implements, if he is employed by a nonmanufac­
turing establishment primarily engaged in the busi­
ness of selling such vehicles or implements to ultimate
purchasers.” §213(b)(10)(A).
The question presented is whether this exemption should
be interpreted to include service advisors. To resolve that
question, it is necessary to determine what deference,
if any, the courts must give to the Department’s 2011
interpretation.
In the usual course, when an agency is authorized by
Congress to issue regulations and promulgates a regula­
tion interpreting a statute it enforces, the interpretation
receives deference if the statute is ambiguous and if the
agency’s interpretation is reasonable. This principle is
implemented by the two-step analysis set forth in Chev-
ron. At the first step, a court must determine whether
Congress has “directly spoken to the precise question at
issue.” 467 U. S., at 842. If so, “that is the end of the
8 ENCINO MOTORCARS, LLC v. NAVARRO
Opinion of the Court
matter; for the court, as well as the agency, must give
effect to the unambiguously expressed intent of Congress.”
Id., at 842–843. If not, then at the second step the court
must defer to the agency’s interpretation if it is “reasona­
ble.” Id., at 844.
A premise of Chevron is that when Congress grants an
agency the authority to administer a statute by issuing
regulations with the force of law, it presumes the agency
will use that authority to resolve ambiguities in the statu­
tory scheme. See id., at 843–844; United States v. Mead
Corp., 533 U. S. 218, 229–230 (2001). When Congress
authorizes an agency to proceed through notice-and­
comment rulemaking, that “relatively formal administra­
tive procedure” is a “very good indicator” that Congress
intended the regulation to carry the force of law, so Chev-
ron should apply. Mead Corp., supra, at 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; cf. Long Island Care at
Home, Ltd. v. Coke, 551 U. S. 158, 174–176 (2007) (reject­
ing challenge to procedures by which regulation was is­
sued and affording Chevron deference). Of course, a party
might be foreclosed in some instances from challenging
the procedures used to promulgate a given rule. Cf., e.g.,
JEM Broadcasting Co. v. FCC, 22 F. 3d 320, 324–326
(CADC 1994); cf. also Auer v. Robbins, 519 U. S. 452, 458–
459 (1997) (party cannot challenge agency’s failure to
amend its rule in light of changed circumstances without
first seeking relief from the agency). But where a proper
challenge is raised to the agency procedures, and those
procedures are defective, a court should not accord Chev-
ron deference to the agency interpretation. Respondents
do not contest the manner in which petitioner has chal­
lenged the agency procedures here, and so this opinion
assumes without deciding that the challenge was proper.
Cite as: 579 U. S. ____ (2016) 9
Opinion of the Court
One of the basic procedural requirements of administra­
tive rulemaking is that an agency must give adequate
reasons for its decisions. The agency “must examine the
relevant data and articulate a satisfactory explanation for
its action including a rational connection between the facts
found and the choice made.” Motor Vehicle Mfrs. Assn. of
United States, Inc. v. State Farm Mut. Automobile Ins. Co.,
463 U. S. 29, 43 (1983) (internal quotation marks omitted).
That requirement is satisfied when the agency’s explana­
tion is clear enough that its “path may reasonably be
discerned.” Bowman Transp., Inc. v. Arkansas-Best
Freight System, Inc., 419 U. S. 281, 286 (1974). But where
the agency has failed to provide even that minimal level of
analysis, its action is arbitrary and capricious and so
cannot carry the force of law. See 5 U. S. C. §706(2)(A);
State Farm, supra, at 42–43.
Agencies are free to change their existing policies as
long as they provide a reasoned explanation for the
change. See, e.g., National Cable & Telecommunications
Assn. v. Brand X Internet Services, 545 U. S. 967, 981–982
(2005); Chevron, 467 U. S., at 863–864. When an agency
changes its existing position, it “need not always provide a
more detailed justification than what would suffice for a
new policy created on a blank slate.” FCC v. Fox Televi-
sion Stations, Inc., 556 U. S. 502, 515 (2009). But the
agency must at least “display awareness that it is chang­
ing position” and “show that there are good reasons for the
new policy.” Ibid. (emphasis deleted). In explaining its
changed position, an agency must also be cognizant that
longstanding policies may have “engendered serious reli­
ance interests that must be taken into account.” Ibid.; see
also Smiley v. Citibank (South Dakota), N. A., 517 U. S.
735, 742 (1996). “In such cases it is not that further justi­
fication is demanded by the mere fact of policy change; but
that a reasoned explanation is needed for disregarding
facts and circumstances that underlay or were engendered
10 ENCINO MOTORCARS, LLC v. NAVARRO
Opinion of the Court
by the prior policy.” Fox Television Stations, supra, at
515–516. It follows that an “[u]nexplained inconsistency”
in agency policy is “a reason for holding an interpretation
to be an arbitrary and capricious change from agency
practice.” Brand X, supra, at 981. An arbitrary and ca­
pricious regulation of this sort is itself unlawful and re­
ceives no Chevron deference. See Mead Corp., supra, at
227.
B
Applying those principles here, the unavoidable conclu­
sion is that the 2011 regulation was issued without the
reasoned explanation that was required in light of the
Department’s change in position and the significant reli­
ance interests involved. In promulgating the 2011 regula­
tion, the Department offered barely any explanation. A
summary discussion may suffice in other circumstances,
but here—in particular because of decades of industry
reliance on the Department’s prior policy—the explanation
fell short of the agency’s duty to explain why it deemed it
necessary to overrule its previous position.
The retail automobile and truck dealership industry had
relied since 1978 on the Department’s position that service
advisors are exempt from the FLSA’s overtime pay re­
quirements. See National Automobile Dealers Associa­
tion, Comment Letter on Proposed Rule Updating Reg­
ulations Issued Under the Fair Labor Standards Act
(Sept. 26, 2008), online at https://www.regulations.gov/
#!documentDetail;D=WHD-2008-0003-0038. Dealerships
and service advisors negotiated and structured their com­
pensation plans against this background understanding.
Requiring dealerships to adapt to the Department’s new
position could necessitate systemic, significant changes to
the dealerships’ compensation arrangements. See Brief
for National Automobile Dealers Association et al. as
Amici Curiae 13–14. Dealerships whose service advisors
Cite as: 579 U. S. ____ (2016) 11
Opinion of the Court
are not compensated in accordance with the Department’s
new views could also face substantial FLSA liability, see
29 U. S. C. §216(b), even if this risk of liability may be
diminished in some cases by the existence of a separate
FLSA exemption for certain employees paid on a commis­
sion basis, see §207(i), and even if a dealership could
defend against retroactive liability by showing it relied in
good faith on the prior agency position, see §259(a). In
light of this background, the Department needed a more
reasoned explanation for its decision to depart from its
existing enforcement policy.
The Department said that, in reaching its decision, it
had “carefully considered all of the comments, analyses,
and arguments made for and against the proposed changes.”
76 Fed. Reg. 18832. And it noted that, since 1978, it
had treated service advisors as exempt in certain circum­
stances. Id., at 18838. It also noted the comment from the
National Automobile Dealers Association stating that the
industry had relied on that interpretation. Ibid.
But when it came to explaining the “good reasons for the
new policy,” Fox Television Stations, supra, at 515, the
Department said almost nothing. It stated only that it
would not treat service advisors as exempt because “the
statute does not include such positions and the Depart­
ment recognizes that there are circumstances under which
the requirements for the exemption would not be met.” 76
Fed. Reg. 18838. It continued that it “believes that this
interpretation is reasonable” and “sets forth the appropri­
ate approach.” Ibid. Although an agency may justify its
policy choice by explaining why that policy “is more con­
sistent with statutory language” than alternative policies,
Long Island Care at Home, 551 U. S., at 175 (internal
quotation marks omitted), the Department 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).
12 ENCINO MOTORCARS, LLC v. NAVARRO
Opinion of the Court
And though several public comments supported the De­
partment’s reading of the statute, the Department did not
explain what (if anything) it found persuasive in those
comments beyond the few statements above.
It is not the role of the courts to speculate on reasons
that might have supported an agency’s decision. “[W]e
may not supply a reasoned basis for the agency’s action
that the agency itself has not given.” State Farm, 463
U. S., at 43 (citing SEC v. Chenery Corp., 332 U. S. 194,
196 (1947)). Whatever potential reasons the Department
might have given, the agency in fact gave almost no rea­
sons at all. In light of the serious reliance interests at
stake, the Department’s conclusory statements do not
suffice to explain its decision. See Fox Television Stations,
556 U. S., at 515–516. 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. See 5 U. S. C. §706(2)(A); State
Farm, supra, at 42–43. It follows that this regulation does
not receive Chevron deference in the interpretation of the
relevant statute.
* * *
For the reasons above, §213(b)(10)(A) must be construed
without placing controlling weight on the Department’s
2011 regulation. Because the decision below relied on
Chevron deference to this regulation, it is appropriate to
remand for the Court of Appeals to interpret the statute in
the first instance. Cf. Mead, 533 U. S., at 238–239. The
judgment of the Court of Appeals is vacated, and the case
is remanded for further proceedings consistent with this
opinion.
It is so ordered.
Cite as: 579 U. S. ____ (2016) 1
GINSBURG, J., concurring
SUPREME COURT OF THE UNITED STATES
_________________
No. 15–415
_________________
ENCINO MOTORCARS, LLC, PETITIONER v.
HECTOR NAVARRO, ET AL.
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE NINTH CIRCUIT
[June 20, 2016]
JUSTICE GINSBURG, with whom JUSTICE SOTOMAYOR
joins, concurring.
I agree in full that, in issuing its 2011 rule, the Depart­
ment of Labor did not satisfy its basic obligation to explain
“that there are good reasons for [a] new policy.” FCC v.
Fox Television Stations, Inc., 556 U. S. 502, 515 (2009).
The Department may have adequate reasons to construe
the Fair Labor Standards Act automobile-dealership
exemption as it did. The 2011 rulemaking tells us pre­
cious little, however, about what those reasons are.1
——————
1 Unlike JUSTICE THOMAS, I am not persuaded that, sans Chevron, the
Ninth Circuit should conclude on remand that service advisors are
categorically exempt from hours regulations. As that court previously
explained, “[s]ervice advisors may be ‘salesmen’ in a generic sense, but
they [may fall outside the exemption because they] do not personally
sell cars and they do not personally service cars.” 780 F. 3d 1267, 1274
(2015). Moreover, in its briefing before this Court, the Department of
Labor responded to the argument that “the exemption’s application to a
‘partsman’ ” “confirm[s] that a service advisor is a salesman primarily
engaged in servicing automobiles.” Post, at 3–4 (THOMAS, J, dissent­
ing). See Brief for United States as Amicus Curiae 22–23 (maintaining
that partsmen, unlike service advisors, actually engage in maintenance
and repair work); Brief for Respondents 11 (contending that partsmen
“ge[t] their hands dirty” by “work[ing] as a mechanic’s right-hand man
or woman”); id., at 32–35 (cataloguing descriptions of partsmen respon­
sibilities drawn from occupational handbooks and training manuals).
The Court appropriately leaves the proper ranking of service advisors
2 ENCINO MOTORCARS, LLC v. NAVARRO
GINSBURG, J., concurring
I write separately to stress that nothing in today’s opin­
ion disturbs well-established law. In particular, where an
agency has departed from a prior position, there is no
“heightened standard” of arbitrary-and-capricious review.
Id., at 514. See also ante, at 9. An agency must “display
awareness that it is changing position” and “show that
there are good reasons for the new policy.” Fox, 556 U. S.,
at 515 (emphasis deleted). “But it need not demonstrate
to a court’s satisfaction that the reasons for the new policy
are better than the reasons for the old one; it suffices that
the new policy is permissible under the statute, that there
are good reasons for it, and that the agency believes it to
be better, which the conscious change of course adequately
indicates.” Ibid.The Court’s bottom line remains unaltered:
“ ‘[U]nexplained inconsistency’ in agency policy is ‘a reason
for holding an interpretation to be an arbitrary and capri­
cious change from agency practice.’ ” Ante, at 10 (quoting
National Cable & Telecommunications Assn. v. Brand X
Internet Services, 545 U. S. 967, 981 (2005)). Industry
reliance may spotlight the inadequacy of an agency’s
explanation. See ante, at 10 (“decades of industry reli­
ance” make “summary discussion” inappropriate). But
reliance does not overwhelm good reasons for a policy
change. Even if the Department’s changed position would
“necessitate systemic, significant changes to the dealer­
ships’ compensation arrangements,” ante, at 10, the De­
partment would not be disarmed from determining that
the benefits of overtime coverage outweigh those costs.2
——————
to the Court of Appeals in the first instance.
2 If the Department decides to reissue the 2011 rule, I doubt that
reliance interests would pose an insurmountable obstacle. As the Court
acknowledges, ante, at 11, an affirmative defense in the Fair Labor
Standards Act (FLSA) protects regulated parties against retroactive
liability for actions taken in good-faith reliance on superseded agency
guidance, 29 U. S. C. §259(a). And a separate FLSA exemption covers
Cite as: 579 U. S. ____ (2016) 3
GINSBURG, J., concurring
“If the action rests upon . . . an exercise of judgment in an
area which Congress has entrusted to the agency[,] of
course it must not be set aside because the reviewing court
might have made a different determination were it em­
powered to do so.” SEC v. Chenery Corp., 318 U. S. 80, 94
(1943).
——————
many service advisors: retail or service workers who receive at least
half of their pay on commission, so long as their regular rate of pay is
more than 1½ times the minimum wage. Ante, at 11 (citing §207(i));
see Brief for Petitioner 13, n. 4 (many service advisors are paid on a
commission basis). Thus, the cost of the Department’s policy shift may
be considerably less than the dealerships project. Finally, I note, the
extent to which the Department is obliged to address reliance will be
affected by the thoroughness of public comments it receives on the
issue. In response to its 2008 proposal, the Department received only
conclusory references to industry reliance interests. See ante, at 10
(citing comment from National Automobile Dealers Association). An
agency cannot be faulted for failing to discuss at length matters only
cursorily raised before it.
Cite as: 579 U. S. ____ (2016) 1
THOMAS, J., dissenting
SUPREME COURT OF THE UNITED STATES
_________________
No. 15–415
_________________
ENCINO MOTORCARS, LLC, PETITIONER v.
HECTOR NAVARRO, ET AL.
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE NINTH CIRCUIT
[June 20, 2016]
JUSTICE THOMAS, with whom JUSTICE ALITO joins,
dissenting.
The Court granted this case to decide whether an ex-
emption under the Fair Labor Standards Act (FLSA), 29
U. S. C. §201 et seq., “requires payment of increased com-
pensation to certain automobile dealership employees”—
known as service advisors—“for overtime work.” Ante, at
1; see also ante, at 2, 7. The majority declines to resolve
that question. Instead, after explaining why the Court
owes no deference to the Department of Labor’s regulation
purporting to interpret this provision, see Chevron U. S. A.
Inc. v. Natural Resources Defense Council, Inc., 467 U. S.
837, 843 (1984), the majority leaves it “for the Court of
Appeals to interpret the statute in the first instance.”
Ante, at 12.
I agree with the majority’s conclusion that we owe no
Chevron deference to the Department’s position because
“deference is not warranted where [a] regulation is ‘proce-
durally defective.’ ” Ante, at 8. But I disagree with its
ultimate decision to punt on the issue before it. We have
an “obligation . . . to decide the merits of the question
presented.” CBOCS West, Inc. v. Humphries, 553 U. S.
442, 472 (2008) (THOMAS, J., dissenting). We need not
wade into the murky waters of Chevron deference to de-
cide whether the Ninth Circuit’s reading of the statute
2 ENCINO MOTORCARS, LLC v. NAVARRO
THOMAS, J., dissenting
was correct. We must instead examine the statutory text.
That text reveals that service advisors are salesmen pri-
marily engaged in the selling of services for automobiles.
Accordingly, I would reverse the Ninth Circuit’s judgment.
Federal law requires overtime pay for certain employees
who work more than 40 hours per week. §207(a)(2)(C).
But the FLSA exempts various categories of employees
from this overtime requirement. §213. The question
before the Court is whether the following exemption en-
compasses service advisors:
“The provisions of section 207 of this title shall not
apply with respect to—
. . . . .
“(10)(A) any salesman, partsman, or mechanic
primarily engaged in selling or servicing automo-
biles, trucks, or farm implements, if he is employed
by a nonmanufacturing establishment primarily
engaged in the business of selling such vehicles or
implements to ultimate purchasers.” §213(b).
I start with the uncontroversial notion that a service
advisor is a “salesman.” The FLSA does not define the
term “salesman,” so “we give the term its ordinary mean-
ing.” Taniguchi v. Kan Pacific Saipan, Ltd., 566 U. S. ___,
___ (2012) (slip op., at 5). A “salesman” is someone who
sells goods or services. 14 Oxford English Dictionary 391
(2d ed. 1989) (“[a] man whose business it is to sell goods or
conduct sales”); Random House Dictionary of the English
Language 1262 (1966) (Random House) (“a man who sells
goods, services, etc.”). Service advisors, whose role it is to
“interact with customers and sell them services for their
vehicles,” ante, at 2, are plainly “salesm[e]n.” See ibid.
(cataloguing sales-related duties of service advisors).
A service advisor, however, is not “primarily engaged in
selling . . . automobiles.” §213(b)(10)(A). On the contrary,
Cite as: 579 U. S. ____ (2016) 3
THOMAS, J., dissenting
a service advisor is a “salesman” who sells servicing solu-
tions. Ante, at 2. So the exemption applies only if it cov-
ers not only those salesmen primarily engaged in selling
automobiles but also those salesmen primarily engaged in
servicing automobiles.
The exemption’s structure confirms that salesmen could
do both. The exemption contains three nouns (“salesman,
partsman, or mechanic”) and two gerunds (“selling or
servicing”). The three nouns are connected by the disjunc-
tive “or,” as are the gerunds. So unless context dictates
otherwise, a salesman can either be engaged in selling or
servicing automobiles. Cf. Reiter v. Sonotone Corp., 442
U. S. 330, 339 (1979).
Context does not dictate otherwise. A salesman, namely,
one who sells servicing solutions, can be “primarily
engaged in . . . servicing automobiles.” §213(b)(10)(A).
The FLSA does not define the term “servicing,” but its
ordinary meaning includes both “[t]he action of maintain-
ing or repairing a motor vehicle” and “the action of provid-
ing a service.” 15 Oxford English Dictionary 39; see also
Random House 1304 (defining “service” to mean “the
providing . . . of . . . activities required by the public, as
maintenance, repair, etc.”). A service advisor’s selling of
service solutions fits both definitions. The service advisor
is the customer’s liaison for purposes of deciding what
parts are necessary to maintain or repair a vehicle, and
therefore is primarily engaged in “the action of maintain-
ing or repairing a motor vehicle” or “the action of provid-
ing a service” for an automobile.
Other features of the exemption confirm that a service
advisor is a salesman primarily engaged in servicing
automobiles. Consider the exemption’s application to a
“partsman.” Like a service advisor, a partsman neither
sells vehicles nor repairs vehicles himself. See 29 CFR
§779.372(c)(2) (2015) (defining “partsman” as “any em-
ployee employed for the purpose of and primarily engaged
4 ENCINO MOTORCARS, LLC v. NAVARRO
THOMAS, J., dissenting
in requisitioning, stocking, and dispensing parts”). For
the provision to exempt partsmen, then, the phrase “pri-
marily engaged in . . . servicing” must cover some employ-
ees who do not themselves perform repair or maintenance.
So “servicing” refers not only to the physical act of repair-
ing or maintaining a vehicle but also to acts integral to the
servicing process more generally.
Respondents’ contrary contentions are unavailing. They
first invoke the distributive canon: “Where a sentence
contains several antecedents and several consequents,”
the distributive canon instructs courts to “read [those
several terms] distributively and apply the words to the
subjects which, by context, they seem most properly to
relate.” 2A N. Singer & S. Singer, Sutherland on Statu-
tory Construction §47.26, on p. 448 (rev. 7th ed. 2014).
Respondents accordingly maintain that 29 U. S. C.
§213(b)(10)(A) exempts only salesmen primarily engaged
in selling automobiles. Brief for Respondents 20–26. But
the distributive canon is less helpful in cases such as this
because the antecedents and consequents cannot be read-
ily matched on a one-to-one basis. Here, there are three
nouns to be matched with only two gerunds, so the canon
does not overcome the exemption’s plain meaning. Per-
haps respondents might have a better argument if the
statute exempted “salesman or mechanics who primarily
engage in selling or servicing automobiles.” In such a
case, one might assume that Congress meant the nouns
and gerunds to match on a one-to-one basis, and the dis-
tributive canon could be utilized to determine how the
matching should occur. But that is not the statute before
us. For the reasons explained, supra, at 3–4, the plain
meaning of the various terms in the exemption establish
that the term “salesman” is not limited to only those who
sell automobiles. It also extends to those “primarily en-
gaged in . . . servicing automobiles.” §213(b)(10)(A).
Respondents also resist this natural reading of the
Cite as: 579 U. S. ____ (2016) 5
THOMAS, J., dissenting
exemption by invoking the made-up canon that courts
must narrowly construe the FLSA exemptions. Brief for
Respondents 41–42. The Ninth Circuit agreed with re-
spondents on this score. 780 F. 3d 1267, 1271–1272, n. 3
(2015). The court should not do so again on remand. We
have declined to apply that canon on two recent occasions,
one of which also required the Court to parse the meaning
of an exemption in §213. Christopher v. SmithKline Bee-
cham Corp., 567 U. S. ___, ___–___, n. 21 (2012) (slip op.,
at 19–20, n. 21); see also Sandifer v. United States Steel
Corp., 571 U. S. ___, ___, n. 7 (2014) (slip op., at 11, n. 7).
There is no basis to infer that Congress means anything
beyond what a statute plainly says simply because the
legislation in question could be classified as “remedial.”
See Scalia, Assorted Canards of Contemporary Legal
Analysis, 40 Case W. Res. L. Rev. 581, 581–586 (1990).
Indeed, this canon appears to “res[t] on an elemental
misunderstanding of the legislative process,” viz., “that
Congress intend[s] statutes to extend as far as possible in
service of a singular objective.” Brief for Chamber of
Commerce of the United States of America et al. as Amici
Curiae 7.
* * *
For the foregoing reasons, I would hold that the FLSA
exemption set out in §213(b)(10)(A) covers the service
advisors in this case. Service advisors are “primarily
engaged in . . . servicing automobiles,” given their integral
role in selling and providing vehicle services. Accordingly,
I would reverse the judgment of the Ninth Circuit.