WASHINGTON – The U.S. Supreme Court, on a 6-2 decision involving a case originally filed in California’s 9th Circuit Court, ordered the Department of Labor to clarify its regulation regarding an overtime pay exemption for people who work at auto dealerships as car salesmen or sales advisers.

The case was supposed to determine which workers at auto dealerships are exempt under federal overtime laws as determined by the Department of Labor. Under the current statute’s blanket exemption, car salesmen cannot receive overtime pay, but a group of sales advisers at a Los Angeles-based dealership argued that, despite working well over 40 hours per week, overtime pay has been unfairly withheld from them.

The problem is that the statute being argued, written in 1961 and revised as recently as 2011, provides the exemption, but it is unclear whether or not advisers fall under the exemption. In the majority opinion, written by Justice Anthony Kennedy in June, the associate justice said that the Department of Labor’s actions were not protected by judicial deference. 

“Agencies are free to change their existing policies, but in explaining its changed position, an agency must be cognizant that longstanding policies may have ‘engendered serious reliance interests that must be taken into account.’” Kennedy said.

UC-Davis law professor and labor law expert Leticia Saucedo told the Northern California Record in an email that the Supreme Court is essentially forcing the courts of appeal to develop a consensus to frame the dispute.

“Justice Thomas argues that there is really only one way to interpret the statute, but the Supreme Court does not tend to interpret statutes in the first instance,” she said.

The court’s ruling said that the Department of Labor was unable to prove that it had a valid explanation for altering the original rules regarding the overtime exemption to include the advisers in the case brought to it by the 9th Circuit in California.

“My sense is that the Supreme Court is asking the 9th Circuit on remand to make a decision using statutory interpretation principles as to the meaning of the statute,” Saucedo said.

The decision to punt the case back down to the lower courts has been a relatively common practice since the death of the late Justice Antonin Scalia. Although the decision was made with only two dissenters, Justice Clarence Thomas, who wrote the dissenting opinion, made the argument that the original ruling should simply be overturned instead of the case going back to the lower court.

“We need not wade into the murky waters of Chevron deference to decide whether the 9th Circuit’s reading of the statute was correct,” Thomas said in the dissenting opinion. “We must instead examine the statutory text. That text reveals that service advisors are salesmen primarily engaged in the selling of services for automobiles. Accordingly, I would reverse the 9th Circuit’s judgment.” 

But now that the case is back in the lower court, it will be wholly up to California’s 9th Circuit to provide a ruling.

“The 9th Circuit now has to interpret the statute without deference to the agency's interpretation,” Saucedo said.


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