This Wednesday, January 17, the Supreme Court will hear a case that demonstrates the practical power of the judiciary’s longstanding deference to administrative agencies. Encino Motorcars, LLC v. Navarro comes to the Court as a dispute over whether “service advisors” at car dealerships are exempt from the Fair Labor Standards Act’s overtime requirements. But its implications are far more sweeping.
Almost forty years ago, after a string of unsuccessful efforts in the federal courts to mandate overtime for service advisors, the Department of Labor issued an interpretation of “salesman” under the act that would exclude “service advisors” from the act’s overtime requirements. The retail automobile dealership industry relied on this interpretation over the following decades—basing compensation plans and myriad employment contracts on the understanding that federal law did not require “service advisors” to receive overtime pay.
Then, in 2011, the Obama DOL abruptly changed course, flipping its interpretation of “salesman” back to the discarded 1970 interpretation. This change effectively rendered unlawful almost four decades of employment relations in the retail automobile dealership industry. “Service advisors” could suddenly use the Act’s nationwide collective action provision to sue for unpaid overtime, even though their existing compensation had been set at levels that assumed ineligibility for overtime pay.
When the Supreme Court heard a challenge to the 2011 rule change, it rightly noted that the Obama DOL failed to consider the industry’s built-up reliance on the agency’s decades-old interpretation. Given that longstanding reliance, the Supreme Court said “the Department needed a more reasoned explanation for its decision to depart” from its prior interpretation. The Court’s interpretation was based in the common sense recognition that when an agency changes its understanding of a longstanding law, it disrupts the ability of ordinary Americans to know the law, comply with it, and plan their business accordingly—saying nothing of how sudden agency about-faces can upset fundamental notions of due process. Properly, the Court sent the case back down to the 9th Circuit and ordered it to afford no deference to DOL’s about-face interpretation.
Perhaps, given the infamous ire the 9th Circuit stokes in the Supreme Court, we should have expected what happened next. The 9th Circuit ignored the Supreme Court's warnings about overturning 40 years of settled expectations and gave the act the exact same interpretation as the Obama DOL.
For their part, Justices Thomas and Alito would have already decided that the act itself prohibited DOL’s interpretation. Now, they will have the chance to convince their colleagues that the 9th Circuit’s interpretation is just as void and just as dangerous to self-government’s integral requirement that the law be accessible, knowable, and stable to the ordinary citizen, not subject to the whim of whoever happens to be in power.
Encino Motorcars demonstrates the pervasive effects of repeated abdications to the administrative state. An agency is capable of upending decades of clear legal guidance without any input from Congress, and without any regard for the erosion of legal certainty and predictability. And the lower courts, so used to passive review of agency action, will exercise a sort of phantom deference to agency interpretations even when the Supreme Court specifically instructs the lower court not to do so.
Hopefully, the Supreme Court, applying the standard tools of statutory construction, will give the act a plain reading to restore the citizenry’s settled expectations.
John Eastman is a Senior Fellow of the Claremont Institute and founding director of its Center for Constitutional Jurisprudence. He is also the Henry Salvatori Professor of Law & Community Service at Chapman University's School of Law.
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