Encino Motorcars, LLC v. Navarro

(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.