Petition for Writ of Certiorari — Encino Motorcars, LLC v. Navarro, 138 S. Ct. 54 (2017) (No. 16-1362)
Supreme Court brief2017
Ask Donna
What actually matters in this document.
Text
we?
FILED
16-1362 west
OFFICE OF THE CLERK _
No.
—
In the
Supreme Court of the Anited States
—
ENCINO MOTORCARS, LLC,
Petitioner,
Vv.
HECTOR NAVARRO, MIKE SHIRINIAN, ANTHONY
PINKINS, KEVIN MALONE, REUBEN CASTRO,
Respondents.
On Petition for Writ of Certiorari to the
United States Court of Appeals
for the Ninth Circuit
PETITION FOR WRIT OF CERTIORARI
KARL R. LINDEGREN PAUL D. CLEMENT
TODD B. SCHERWIN Counsel of Record
WENDY MCGUIRE COATS JEFFREY M. HARRIS
FISHER MATTHEW D. ROWEN
& PHILLIPS LLP KIRKLAND & ELLIS LLP
444 S. Flower Street 655 Fifteenth Street, NW
Suite 1500 Washington, DC 20005
Los Angeles, CA 90071 (202) 879-5000
paul.clement@kirkland.com
Counsel for Petitioner
May 10, 2017
aR er estore Aa ETT 0 I TTT ROLES EE
QUESTION PRESENTED
Respondents are “service advisors” at a car
dealership whose primary job responsibilities involve
identifying service needs and selling service solutions
to the dealership’s customers. Respondents brought
suit against the dealership under the Fair Labor
Standards Act (“FLSA”), 29 U.S.C. §§201-219, seeking
time-and-a-half overtime pay for working more than
40 hours per week.
The FLSA exempts from its overtime
requirements “any salesman, partsman, or mechanic
primarily engaged in selling or servicing automobiles.”
Id. §213(b)(10)(A). In its first decision in this case, the
Ninth Circuit found Respondents non-exempt by
deferring to a 2011 Department of Labor regulation.
This Court granted certiorari, considered merits
briefing and argument, and vacated that decision,
holding that Ҥ213(b)(10)(A) must be construed
without placing controlling weight on _ the
Department’s 2011 regulation.” Pet.App.44.
On remand, the Ninth Circuit once again found
Respondents non-exempt. As it had in its initial
vacated decision, the Ninth Circuit acknowledged that
its holding conflicts with published decisions of the
Fourth and Fifth Circuits, several district courts, and
the Supreme Court of Montana, all of which hold that
service advisors are exempt. Pet.App.30, 65.
As it was last time around, the question presented
is: Whether service advisors at car dealerships are
exempt under 29 U.S.C. §213(b)(10)(A) from the
FLSA’s overtime-pay requirements.
li
PARTIES TO THE PROCEEDING
Petitioner Encino Motorcars, LLC, was defendant
in the district court and appellee in the Ninth Circuit.
Respondents Hector Navarro, Anthony Pinkins, Kevin
Malone, and Reuben Castro were plaintiffs in the
district court and appellants in the Ninth Circuit.
il
CORPORATE DISCLOSURE STATEMENT
Encino Motorcars, LLC is a limited liability
corporation doing business as Mercedes Benz of
Encino. It has no parent corporation and no publicly
held corporation owns 10% or more of its stock.
iV
TABLE OF CONTENTS
QUESTION PRESENTED ...........0ccccccecsccececsessssscesesenee i
PARTIES TO THE PROCEEDING ........................... ii
CORPORATE DISCLOSURE STATEMENT........... iti
ee ee BI ientnssesevestnccessinienersnninesse vii
PETITION FOR WRIT OF CERTIORART ................ 1
I tid crnll dccaemennihinbeniisstnibbonmininionenge 5
I si sicicndiinindulanepindsiungningsinienimbinittabuoe 5
STATUTORY PROVISIONS INVOLVED................. 5
STATEMENT OF THE CASE ...............ccccecscseeerereees 5
A. The “Salesman, Partsman, or Mechanic”
Exemption and DOL's Shifting
FESR Tet eae erent 5
B. Respondents’ Complaint and the District
CLS SE eR a oe ne 10
C. The Ninth Circuit’s Initial Decision .......... 13
D. This Court’s Merits Decision...................... 14
E. The Ninth Circuit on Remand Again
Departs From Every Other Court To
Consider The Scope of §213(b)(10)(A)........ 15
REASONS FOR GRANTING THE PETITION....... 17
I. The Ninth Circuit’s Decision Conflicts With
The Decisions Of Several Other Courts And
hl Sees 20
A. The Ninth Circuit’s Decision Openly
Conflicts With Decisions of the Fourth
and Fifth Circuits and the Montana
Supreme Court. ........... ‘cladastichdlaiaiddakombataeaactads 20
Vv
B. The Ninth Circuit Badly Misconstrued
ties Be I occccceccccccecoccesesaseccessees 24
C. The Ninth Circuit Erred by Holding That
FLSA Exemptions Should Be “Narrowly
a ia eae adiihs 30
Il. The Ninth Circuit’s Erroneous Decision Will
Have Far-Reaching Implications’ For
Dealerships And Will Inject Uncertainty Into
A Previously Settled Area Of The Law............. 31
I a cc eleeieeioeet Sadieubiiel 34
APPENDIX
Appendix A
Opinion of the United States Court of Appeals
for the Ninth Circuit, Hector Navarro;
Anthony Pinkins; Kevin Malone; and Reuben
Castro v. Encino Motorcars, LLC, No. 13-
RG RR RRR i App-1
Appendix B
Opinion of the Supreme Court of
the United States, Hector Navarro; Anthony
Pinkins; Kevin Malone; and Reuben Castro v.
Encino Motorcars, LLC, No. 15-415
A a AR ER RSS re App-31
Appendix C
Opinion of the United States Court of Appeals
for the Ninth Circuit, Hector Navarro;
Anthony Pinkins; Kevin Malone; and Reuben
Castro v. Encino Motorcars, LLC, No. 13-
DD NS , atccresececcnssssciccncstecsnes App-55
vi
Appendix D
Order of the United States Court of Appeals
for the Ninth Circuit Denying Rehearing En
Banc, Hector Navarro, et al. v. Encino
Motorcars, LLC, No. 13-55323
I i uieuaeiiiennaid App-74
Appendix E
(In Chambers) Order Re: Defendant’s
Motion to Dismiss of the United States
District Court for the Central District of
California, Navarro, et al. v. Mercedes Benz of
Encino, No. 2:12-cv-08051-RGK-MRW
I ee App-76
Appendix F
REESE SpE SEs App-86
vil
TABLE OF AUTHORITIES
Cases
Arnold v. Ben Kanowsky, Inc.,
ee a SL csucspecnseneonsensooses 17, 30
Brennan v. Deel Motors,
475 F.2d 1095 (5th Cir. 1973)........................ passim
Brennan v. Import Volkswagen, Inc.,
No. W-4982, 1975 WL 1248
Se I III TE IT. coc snnesspensnansqneunenshoussent 23
Brennan v. N. Bros. Ford,
No. 40344, 1975 WL 1074 (E.D. Mich. 1975).... 9, 22
Christopher v. SmithKline Beecham,
gg | eee passim
FCC v. Pacifica Found.,
a dueaiabidunennlia 26
Haro v. City of Los Angeles,
745 F.3d 1249 (9th Cir. 2014)................cccccceeeeee eens 13
Integrity Staffing Sols. v. Busk,
SS Tne IE ITT ocinssneicioutsieduevenencocoevessesadees 4, 31
OWCP v. Newport News Shipbuilding,
nS cdipusiillinaenecatanensnensiee 30
Ratzlaf v. United States,
TE ee eee NEES a 29
Reiter v. Sonotone Corp.,
i aspeiaeeneeidion 26
Solis v. Washington,
656 F.3d 1079 (9th Cir. 2011)................00..c0000 13, 30
Thompson v. J.C. Billion, Inc.,
294 P.3d 397 (Mont. 2013)................20..c00eee 1, 14, 22
vill
United States v. Gonzales,
ee as ea dncencntnisneesnnnsionnisensiuasentaien 26
Walton v. Greenbrier Ford,
370 F.3d 446 (4th Cir. 2004)............0............. passim
Yenney v. Cass Cty. Motors,
No. 76-0-294, 1977 WL 1678
en ee I ss sc asetmhansdavemoadonsionhianin 22
Yi v. Sterling Collision Ctrs.,
460 F.OG GSS CTEM Car. BOOT)... .cccccccescsccsessccccesse 4, 32
Statutes
I nna sai coiniaieniiagiinahiaenenetomenenen 5
ssid ni esbahancagemdnimesimenaibile 28
I elepiiinmeiindiciienals 6, 28
I i ionic ctihcitgsicintnighlansdyhgndiiaeadhedisiaeiaséelans 6
fT EE RSERSERE Reena ay Weare aoeer un ONTOS ete? 6
4 | TERE an ree ne Emre enn ee nates © 6
ee ie PIED ss sevcacccceoncnasenénhonsssncecses passim
os onc ssnernailpenclenmainedsaniennadiionie 6
SS ERS ERE eae pi ae ae 24, 33
Pub. L. No. 89-601, 80 Stat. 830 (1966)..................... 6
Pub. L. No. 93-259, 88 Stat. 55 (1974)... 8
Rule and Regulations
ga AE AE ee a eS en gD 23
ee es ee ee IT OD Kapri scntnctnnsincdessncnicmiesendins 6
a ee ee EE Oe CR CT OD vekidvcccciceseccccicosscece G, 10
Be Gr ie ee Fe GF BD wavidvvsccccccsicccscessisnstececs 6
BD CF ee OF Ce ee CT eicvccsccvescsccncceccecconssccces 7
BS C.F. ST TO.STAE) CATE) 5... ccsecercceccsscncssccceseceses 7
ix
35 Fed. Reg. 5856 (Apr. 9, 1970) .........cccccscoccscccesceccees 6
Updating Regulations Issued Under the
FLSA, 73 Fed. Reg. 43,654 (July 28, 2008)............. G
Updating Regulations Issued Under the
FLSA, 76 Fed. Reg. 18,832 (Apr. 5, 2011)............. 10
Other Authorities
Antonin Scalia, Assorted Canards of
Contemporary Legal Analysis,
40 Case W. Res. L. Rev. 581 (1990)...........00000000.... 30
Br. in Opp., Encino Motorcars v. Navarro,
BO BE Cs Ge Bn cvcicccdncesesccsccncccesccecess 3, 23
Dep’t of Labor, Wage & Hour Div., Field
Operations Handbook, Insert No. 1757,
24L04-4 (Oct. 20, 1987), avazlable at
EEE ENE IIL 9
Reply Br. for Pet’r, Encino Motorcars v.
Navarro, No. 15-415 (Apr. 13, 2016)..................... 29
Tr. of Oral Arg., Encino Motorcars LLC v.
Navarro, 136 S. Ct. 2117 (2016)
RE MMR TEAC EE ES: Mie a Ce 10
U.S. Dep’t of Labor, Wage & Hour Div.,
Opinion Letter on Fair Labor Standards
Act, 1978 WL 51403 (July 28, 1978) .............0......... 8
PETITION FOR WRIT OF CERTIORARI
This petition presents, for the second time, the
question whether “service advisors” at car dealerships
are exempt from the mandatory-overtime
requirements of the Fair Labor Standards Act
(“FLSA”). Respondents are service advisors whose
primary job responsibilities include identifying service
needs and selling service solutions to the dealership’s
customers. Their duties include “listening to
[customers’] concerns about their cars; suggesting
repair and maintenance services; selling new
accessories or replacement parts; [and] recording
service orders.” Pet.App.32. Service advisors are an
integral part of the servicing process and are the
salesmen dedicated to the servicing business at their
dealerships.
The FLSA, 29 U.S.C. §§201-219, exempts from its
overtime-pay requirements “any salesman, partsman,
or mechanic primarily engaged in selling or servicing
automobiles.” Jd. §213(b)(10)(A). For more than 40
years, federal and state courts across the country had
uniformly held that service advisors like Respondents
were covered by §213(b)(10)(A)’s exemption because
they are “salesm[e]n ... engaged in... servicing
automobiles.” See, e.g., Walton v. Greenbrier Ford, 370
F.3d 446 (4th Cir. 2004); Brennan v. Deel Motors, 475
F.2d 1095 (5th Cir. 1973); Thompson v. J.C. Billion,
Inc., 294 P.3d 397 (Mont. 2013).
Relying on that unbroken line of precedent, the
district court dismissed Respondents’ complaint.
Pet.App.76-85. But the Ninth Circuit reversed,
deferring to the Department of Labor's (“DOL”)
narrow interpretation of §213(b)(10)(A) under which
2
service advisors were not exempt because they did not
personally sell or service automobiles. Pet.App.55-73.
This Court granted certiorari, considered merits
briefing and argument, and vacated and remanded the
Ninth Circuit’s decision. Pet.App.31-45. The Court
held that DOL’s regulation was not entitled to
deference because the agency had changed its
previous policy regarding service advisors without
“reasoned explanation.” Pet.App.43. In particular,
the Court emphasized that DOL had provided “barely
any explanation” for its change of policy and had
utterly failed to consider “decades of industry reliance
on [DOL’s] prior policy.” Pet.App.42. The Court
remanded the case to the Ninth Circuit with
instructions to construe the exemption in
§213(b)(10)(A) “without placing controlling weight on
[DOL’s] 2011 regulation.” Pet.App.44. In addition,
two Justices would have definitively construed the
statute to hold service advisors exempt. See
Pet.App.49-54 (Thomas, J., dissenting).
On remand, the same panel of the Ninth Circuit
reached the same conclusion for largely the same
reasons. Pet.App.1-30. While acknowledging that
service advisors came within the “literal” terms of the
exemption, the Ninth Circuit found them non-exempt
for “the reasons stated in [its] earlier opinion (except
those reasons concerning deference to the agency).”
Pet.App.30. Just as it had done in its previous
decision, the Ninth Circuit relied heavily on a
purported canon of construction under which
exemptions to the FLSA must be interpreted
“narrowly” rather than being interpreted in
accordance with their plain or literal text. Pet.App.20-
3
21. The court explicitly acknowledged that its decision
“conflicts with published decisions by the Fourth and
Fifth Circuits and by the Supreme Court of Montana.”
Pet.App.30.
* * _
Certiorari is plainly warranted to resolve the
ongoing circuit conflict over whether service advisors
are exempt under §213(b)(10)(A). Indeed,
Respondents’ principal (albeit unsuccessful) argument
against certiorari the last time around was that DOL’s
2011 regulation was a game-changer that was not
available to the Fourth and Fifth Circuits, and thus
the “courts are not divided on whether DOL’s 2011
legislative regulation warrants Chevron deference.”
Br. in Opp. at 10, Encino Motorcars v. Navarro, No.
15-415 (Dec. 4, 2015) (“BIO”). Now that the 2011 DOL
regulation and issues of deference are off the table, no
one can seriously dispute what the Ninth Circuit has
twice expressly acknowledged: the decision below
squarely conflicts with the decisions of several other
circuit courts, state supreme courts, and federal
district courts.
It is unsurprising that the Ninth Circuit's
interpretation of §213(b)(10)(A) is an outlier, as it
badly misconstrues the statutory text. Congress’ use
of the disjunctive “or” in the phrase “primarily
engaged in selling or servicing automobiles” makes
clear that a salesman is exempt if he is “engaged in”
either of those activities, which a service advisor
plainly is. Every other court to consider this issue has
correctly recognized that the phrase “primarily
engaged in ... servicing automobiles” encompasses
service advisors who are engaged in the selling of the
4
servicing of automobiles even though they do not go
under the hood and personally perform the service.
The Ninth Circuit's departure from nearly four
decades of precedent injects uncertainty into a
previously settled area of the law, and will have
serious consequences for the nation’s 18,000 car and
truck dealerships, which collectively employ tens of
thousands of service advisors. As this Court observed,
“(djealerships and service advisors negotiated and
structured their compensation plans against [the]
background understanding” that service advisors
were exempt from FLSA overtime rules. Pet.App.42.
If allowed to stand, the Ninth Circuit’s decision would
require a wholesale (and wholly unwarranted)
restructuring of those employees’ compensation,
forcing dealerships to divide their salesforces into
exempt and non-exempt categories in ways that are
both divisive and contrary to Congress’ plain intent.
This Court has repeatedly rejected attempts to
impose significant FLSA liability on employers who
have done nothing more than pay workers in
conformity with long-settled industry practice. See,
e.g., Integrity Staffing Sols. v. Busk, 135 S. Ct. 513
(2014) (rejecting novel FLSA claims for time spent in
security screenings); Christopher v. SmithKline
Beecham, 567 U.S. 142 (2012) (rejecting FLSA claims
by pharmaceutical sales representatives, who had
long been treated as exempt); see also Yi uv. Sterling
Collision Ctirs., 480 F.3d 505, 510 (7th Cir. 2007)
(rejecting novel FLSA challenge to a “system of
compensation [that] ... is industry-wide, and of long
standing”). The attempt here should fare no better.
This Court should grant certiorari to correct the Ninth
5
Circuit’s deeply flawed interpretation of
§213(b)(10)(A) and restore uniformity once and for all
to this important area of the law.
OPINIONS BELOW
The Ninth Circuit’s opinion on remand is reported
at 845 F.3d 925 and reproduced at Pet.App.1-30. The
Court’s previous merits opinion in this case is reported
at 136 S. Ct. 2117 and reproduced at Pet.App.31-54.
The Ninth Circuit’s initial decision is reported at 780
F.3d 1267 and reproduced at Pet.App.55-73. The
district court’s opinion is unpublished and is
reproduced at Pet.App.76-85.
JURISDICTION
The Ninth Circuit issued its opinion on remand on
January 9, 2017. On April 3, 2017, Justice Kennedy
extended the time for filing this petition to May 10,
2017. See No. 16A9. This Court has jurisdiction under
28 U.S.C. §1254(1).
STATUTORY PROVISIONS INVOLVED
The relevant provisions of the FLSA, 29 U.S.C.
§213, are reproduced at Pet.App.86-110.
STATEMENT OF THE CASE
A. The “Salesman, Partsman, or Mechanic”
Exemption and DOL’s Shifting
Interpretations
1. The FLSA generally requires employers to pay
overtime compensation at a rate of one-and-a-half
times an employee’s regular rate of pay for all hours
worked in excess of forty in a week. 29 U.S.C.
§207(a)(1). Accompanying these overtime-pay
requirements are numerous exemptions for certain
6
types of employees. See id. §213(a), (b). The
exemptions range from very broad (all employees of
certain rail carriers and air carriers, td. §213(b)(2), (3))
to very narrow (employees “engaged in the processing
of maple sap into sugar,” id. §213(b)(15)).
As relevant here, the FLSA provides that the
overtime-pay requirements do not apply to “any
salesman, partsman, or mechanic primarily engaged
in selling or servicing automobiles, 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.” Jd. §213(b)(10)(A); see Pub. L. No. 89-
601, 80 Stat. 830 (1966). In other words, a dealership
employee is exempt from the overtime rules if he: (1)
is a “salesman, partsman, or mechanic,” and (2) is
“primarily engaged in_ selling or _ servicing
automobiles.”
2. In 1970, the Secretary of Labor promulgated
interpretive regulations that sought to define several
terms in §213(b)(10)(A). See 29 C.F.R. §779.372
(1971); 35 Fed. Reg. 5856, 5895-96 (Apr. 9, 197Q).
Those regulations defined “salesman” as “an employee
who is employed for the purpose of and is primarily
engaged in making sales or obtaining orders or
contracts for sale of [vehicles].” 29 C.F.R.
§779.372(c)(1) (1971)... DOL further asserted that
' The regulation defined a “partsman” as “any employee
employed for the purpose of and primarily engaged in
requisitioning, stocking, and dispensing parts.” 29 C_F.R.
§779.372(c)(2) (1971). It also defined a “mechanic” as “any
employee primarily engaged in doing mechanical work ... in the
7
“[e]mployees variously described as service manager,
service writer, service advisor, or service salesman
who are not themselves primarily engaged in the work
of a salesman, partsman, or mechanic ... are not
exempt.” Jd. §779.372(c)(4). DOL believed that
service advisors should be deemed non-exempt even
though “such an employee's principal function may be
diagnosing 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.” Jd.
In the years after DOL promulgated this
interpretive regulation, numerous courts uniformly
rejected the agency’s narrow interpretation of the
exemption in the course of rejecting DOL enforcement
actions. Most significantly, the Fifth Circuit flatly
rejected DOL’s position and held that service advisors
were exempt. See Deel Motors, 475 F.2d at 1097-98.
DOL had advanced the narrow interpretation of the
exemption set forth in its 1970 regulation, arguing
that service advisors should not be exempt because
they do not personally service vehicles. The Fifth
Circuit rejected that view based on both the text and
purpose of the exemption.
As a textual matter, the court concluded that
service advisors were plainly “salesm[e]n ... engaged
in selling or servicing automobiles.” Jd. at 1098. And,
with regard to the purpose of the exemption, the Fifth
Circuit noted that “service salesmen are functionally
servicing of an automobile, trailer, truck, farm implement, or
aircraft for its use and operation as such.” Id. §779.372(c)(3).
8
similar to the mechanics and partsmen who service
the automobiles.” /d. at 1097. All of these employees
“work as an integrated unit, performing the services
necessary for the maintenance of the customer's
automobile.” Jd. And like countless other salesmen
who are exempt from FLSA’s overtime rules, service
advisors “are more concerned with their total work
product than with the hours performed.” Jd. The Fifth
Circuit thus concluded that service advisors were
exempt under §213(b)(10)(A).?
3. Within a few years of the Fifth Circuit's
decision in Deel Motors, DOL ceased bringing
enforcement actions and retreated from the position
advanced in its interpretive regulations. In 1978, the
Secretary of Labor issued a policy letter changing the
agency's position and providing that service advisors
should be treated as exempt as long as a majority of
their sales were for non-warranty work. See U.S.
Dep't of Labor, Wage & Hour Div., Opinion Letter on
Fair Labor Standards Act, 1978 WL 51403 (July 28,
1978) (acknowledging that “[t]his position represents
a change from the position set forth in” the 1970
regulations).
DOL’s 1987 Field Operations Handbook similarly
instructed agency employees to “no longer deny the
[overtime] exemption for [service advisors].” Dep’t of
2 In 1974, one year after the decision in Deel Motors, Congress
made other changes to the §213(b)(10)(A) exemption by, for
example, narrowing the exemption for trailer, boat, and aircraft
dealerships. See Pub. L. No. 93-259, §14, 88 Stat. 55, 65 (1974).
But, notably, Congress did not make any comparable changes for
other types of dealerships, nor did it purport to modify or override
the Fifth Circuit's interpretation of the statute in Deel Motors.
9
Labor, Wage & Hour Div., Field Operations
Handbook, Insert No. 1757, 24L04-4 (Oct. 20, 1987),
available at perma.cc/5ghd-kcjj. The Handbook
explained that “two appellate courts (Fifth and Sixth
Circuits) and two district courts (in the Eighth and
Tenth Circuits)” have construed the exemption to
cover service advisors. Id.3 The Handbook
acknowledged that “this policy ... represents a change
from the position in [the 1970 regulations],” and
indicated that the agency’s regulations “will be revised
as soon as is practicable.” Jd.
“[A]s soon as is practicable” turned out to be not
very soon. The 1970 interpretive regulations with
their repudiated interpretation of §213(b)(10)(A)
remained on the books until 2008, when DOL initiated
a formal rulemaking process to update the regulations
to confirm that service advisors are exempt from the
overtime-pay requirements. See Updating
Regulations Issued Under the FLSA, 73 Fed. Reg.
43,654 (July 28, 2008). As DOL explained, “[u]niform
appellate and district court decisions ... hold that
service advisors are exempt under [29 U.S.C.
§213(b)(10)(A)] because they are ‘salesmen’ who are
primarily engaged in ‘servicing’ automobiles.” Jd. at
43,658 (citing Walton, 370 F.3d at 452; Deel Motors,
475 F.2d at 1097; Brennan, 1975 WL 1074, at *3).
DOL’s notice of proposed rulemaking included a
3 In addition to the Fifth Circuit’s decision in Deel Motors, the
Sixth Circuit had summarily affirmed a district court decision
finding service advisors to be exempt under §213(b)(10)(A). See
Brennan v. N. Bros. Ford, No. 40344, 1975 WL 1074, at *3 (E.D.
Mich. 1975), aff'd sub nom. Dunlop v. N. Bros. Ford, 529 F.2d 524
(6th Cir. 1976) (Table).
10
modified version of 29 C.F.R. §779.372(c)(4) that
would have codified this unbroken line of case law.
In 2011, however, DOL changed course yet again.
It issued a final rule that neither adopted the proposed
regulation nor brought the regulation in line with the
governing case law. See Updating Regulations Issued
Under the FLSA, 76 Fed. Reg. 18,832, 18,859 (Apr. 5,
2011). DOL maintained the 1970 regulation’s
definition of “salesman,” see 29 C.F.R. §779.372(c)(1),
but simultaneously eliminated from its regulations
any explicit discussion of whether service advisors
were covered by the §213(b)(10)(A) exemption, see 76
Fed. Reg. at 18,859.‘ In its explanation accompanying
the final rule, DOL said nothing at all about the
substantial reliance interests the new rule would
upset. Instead, it merely stated that service advisors
should not be treated as exempt because the
regulatory definitions “limit{] the exemption to
salesmen who sell vehicles and partsmen and
mechanics who service vehicles.” Id. at 18,838.
B. Respondents’ Complaint and _ the
District Court’s Decision
Petitioner Encino Motorcars, LLC, sells and
services new and used Mercedes Benz automobiles.
Respondents are current and former employees of
Petitioner who worked at the dealership as “service
advisors.” On September 18, 2012, Respondents filed
4 At oral argument before this Court, counsel for the United
States represented that the elimination of any reference to
service advisors in the regulations represented “an inadvertent
mistake in drafting.” Tr. of Oral Arg. at 50, Encino Motorcars
LLC v. Navarro, 136 S. Ct. 2117 (2016) (No. 15-415).
11
a complaint alleging several violations of the FLSA
and California Labor Code.
Respondents’ sales activities were integral to the
process of servicing vehicles at the dealership. The
complaint alleges that, as service advisors,
Respondents would meet and greet car owners as they
entered the service area; evaluate the customers’
service and repair needs; suggest services to be
performed on the vehicle to address the customers’
complaints; solicit supplemental services to be
performed (such as preventive maintenance); prepare
price estimates for repairs and services; and inform
the owner about the status of the vehicle. See
Complaint 416 (DN 2). And, like countless other
salesmen in both vehicle dealerships and other
industries, Respondents were paid by commission. Jd.
9918-19.5 The more services an advisor sold, the
higher his or her commission. Jd. In _ short,
Respondents were primarily engaged in selling the
servicing of automobiles.
Respondents alleged that they often worked more
than 40 hours per week, and that Petitioner violated
the FLSA by failing to pay them time-and-one-half
overtime compensation for that excess time. Id. J924-
31. Petitioner moved to dismiss the FLSA claims on
the ground that Respondents were exempt employees
under 29 U.S.C. §213(b)(10)(A).
5 Some dealerships pay their service advisors a combination of
salary or hourly wages and commissions, whereas other
dealerships (like Petitioner) pay service advisors solely by
commission.
12
On January 25, 2013, the district court granted
Petitioner's motion to dismiss the FLSA claims,
holding that Respondents were clearly covered by the
overtime-pay exemption in §213(b)(10)(A).
Pet.App.76-85. The district court began by noting that
several other courts “have applied this exemption to
Service Advisors.” Pet.App.80 (citing Deel Motors, 475
F.2d at 1097; Walton, 370 F.3d at 453).
The district court acknowledged that DOL had
stated in 1970 and again in 2011 that §213(b)(10)(A)
did not apply to service advisors. Jd. But the court
refused to defer to those interpretations, agreeing
with the Fourth and Fifth Circuits that DOL’s
interpretations were an “impermissibly restrictive
construction of the statute.” Pet.App.83 (quoting
Walton, 370 F.3d at 452). Because “Service Advisors
are functionally equivalent to salesmen and
mechanics and are similarly responsible for the
‘selling and servicing’ of automobiles,” the district
court concluded that it would be “unreasonable” to
carve those employees out of the exemption. /d.
(emphasis added). The court did not believe that
“Congress intended to treat employees’ with
functionally similar positions differently.” Id.
(quoting Deel Motors, 475 F.2d at 1097-98). The
district court thus dismissed Respondents’ claim for
overtime under the FLSA on the ground that they
were exempt under §213(b)(10)(A).¢
6 After dismissing the FLSA claims, the district court declined
to exercise supplemental jurisdiction over Respondents’
remaining state-law claims.
13
C. The Ninth Circuit’s Initial Decision
The Ninth Circuit reversed in relevant part. In
an opinion by Judge Graber issued on March 24, 2015,
the court held that service advisors are not exempt
from the FLSA’s overtime-pay requirements under
§213(b)(10)(A). Pet.App.55-73.
The panel relied heavily on the purported canon
of construction that “{t]he FLSA is to be construed
liberally in favor of employees” and “exemptions are
narrowly construed against employers.” Pet.App.60
(quoting Haro v. City of Los Angeles, 745 F.3d 1249,
1256 (9th Cir. 2014)). Because the statute does not
define “salesman, partsman, or mechanic,” and does
not explicitly mention “service advisors,” the Ninth
Circuit could not “conclude that service advisors ... are
‘persons plainly and unmistakably within [the
FLSA’s] terms and spirit.” Pet.App.61 (quoting Solis
v. Washington, 656 F.3d 1079, 1083 (9th Cir. 2011)).
The Ninth Circuit also disagreed with the district
court’s refusal to give DOL deference. The Ninth
Circuit believed that there were two “plausible”
interpretations of the phrase “any salesman,
partsman, or mechanic primarily engaged in selling or
servicing automobiles”’—one that extends to service
advisors, and one that does not—and thus concluded
that the exemption is ambiguous under Chevron step
one. Pet.App.60-65. Turning to Chevron’s second
step, the Ninth Circuit concluded that it was
reasonable for DOL to interpret the exemption so that
salesmen are exempt if they are “engaged in selling ...
automobiles,” but not if they (like service advisors) are
“engaged in ... servicing automobiles.” Pet.App.65-73.
14
The Ninth Circuit acknowledged that its holding
“conflicts with decisions of the Fourth and Fifth
Circuits, several district courts, and the Supreme
Court of Montana.” Pet.App.65-66 (citing Walton, 370
F.3d 446; Deel Motors, 475 F.2d 1095; Thompson, 294
P.3d 397). But the court “respectfully disagree[d] with
those decisions.” Pet.App.66. The Ninth Circuit thus
held that Respondents were not exempt under 29
U.S.C. §213(b)(10)(A) and reversed the district court's
dismissal of Respondents’ claims.’
D. This Court’s Merits Decision
This Court granted certiorari in January 2016,
and—after merits briefing and oral argument—
vacated the Ninth Circuit’s decision in an opinion
issued on June 20, 2016. Pet.App.31-54. The Court
did not directly address whether service advisors were
exempt under the plain text of §213(b)(10)(A).
Instead, the Court held that the Ninth Circuit erred
by “placing controlling weight on the Department’s
2011 regulation.” Pet.App.44. As the Court explained,
even though DOL’s regulation starkly departed from
more than three decades of settled law, the agency
“said almost nothing” about why it had made that
change. Pet.App.43. In particular, the agency wholly
disregarded “decades of industry reliance on the
Department’s prior policy,” and the fact that
7 The Ninth Circuit affirmed the district court’s dismissal of
the other federal claims because Respondents failed to challenge
the alternative grounds on which those claims were dismissed.
See Pet.App.58 n.2. And because it reinstated Respondents’
federal overtime-pay claim, the Ninth Circuit vacated the district
court’s dismissal of Respondents’ state-law claims for lack of
jurisdiction. See id.
15
“[djealerships and service advisors negotiated and
structured their compensation plans against this
background understanding” of what the law means.
Pet.App.42.
The Court thus vacated the Ninth Circuit’s
decision and remanded for further consideration of the
issue “without placing controlling weight on the
Department’s 2011 regulation.” Pet.App.44. Justices
Thomas and Alito agreed that no deference was owed
to the DOL regulation but dissented from the decision
to remand. They would have held that “service
advisors are salesmen primarily engaged in the selling
of services for automobiles” and thus fall within the
plain text of the exemption in §213(b)(10)(A).
Pet.App.49.
E. The Ninth Circuit on Remand Again
Departs From Every Other Court To
Consider The Scope of §213(b)(10)(A)
On remand, the Ninth Circuit again held that
§213(b)(10)(A)’s exemption does not apply to service
advisors. Pet.App.1-30.8
The Ninth Circuit conceded that, “read literally,”
the exemption “encompasses” a category of employee
that readily describes service advisors: “Salesm[e]n
primarily engaged in servicing” cars. Pet.App.16-18.
The court nonetheless rejected that “literal” reading of
the statute. First, relying on dictionaries from the
year of the provision’s initial enactment, the court
8 The court “assume|d] without deciding that [it] must give no
weight to the agency’s interpretation and the regulation,” and
was instead required to “interpret the statute in the first
instance.” Pet.App.7 (quoting Pet.App.44-45).
16
read §213(b)(10)(A)—which exempts “any salesman,
partsman, or mechanic primarily engaged in selling or
servicing automobiles’—to exempt only those
salesmen, partsmen, and mechanics who either “are
actually and primarily occupied in selling cars” or “are
actually and primarily occupied in the repair and
maintenance of cars.” Pet.App.15. The court further
interpreted that “actually and primarily occupied in”
requirement—which does not appear in the statutory
text—to mean that a salesman, partsman, or
mechanic must personally sell cars or personally
“perform{] any repairs [Jor provide[] any maintenance”
in order to be exempt under §213(b)(10)(A).
Pet.App.12-15.
The Ninth Circuit also concluded that the “literal”
reading of the statute produced results that Congress
would not have intended. “Read literally,”
§213(b)(10)(A) encompasses six categories of
employees—({1) salesmen, (2) partsmen, and (3)
mechanics primarily engaged in selling cars; and (4)
salesmen, (5) partsmen, and (6) mechanics primarily
engaged in servicing cars—two of which (categories 2
and 3) “do not exist in the real world.” Pet.App.16-17.
The court thus concluded that Congress must have
intended for “the gerunds—selling and servicing—to
be distributed” only to those subjects the court deemed
“appropriate.” Pet.App.16-18.
The court believed that the legislative history
confirmed its reading of the exemption. According to
the Ninth Circuit, both the 1966 Congress and 1974
Congress understood the term “salesman” to refer
“only to [employees] ‘selling’ goods,” not services.
Pet.App.27 (second emphasis added); see Pet.App.23
17
n.17. The court also found no relevant “references to
service advisors” in the legislative history,
“suggest[ing] that dealerships had no concern about
overtime compensation for service advisors.”
Pet.App.25.
Finally, just as in its first opinion, the Ninth
Circuit relied on the purported “rule that the
exemptions in §213 of the FLSA ‘are to be narrowly
construed against the employers seeking to assert
them.” Pet.App.20 (quoting Arnold v. Ben Kanowsky,
Inc., 361 U.S. 388, 392 (1960)). While acknowledging
that “some members of the Supreme Court have
questioned the soundness of the rule of narrow
construction,” the court deemed itself bound to reject
Petitioner's textual interpretation in light of the
atextual narrow-interpretation canon of construction.
Pet.App.20-21.
The Ninth Circuit thus reaffirmed its initial
holding that §213(b)(10)(A) does not apply to service
advisors. The court readily admitted that its decision
“conflicts with published decisions by the Fourth and
Fifth Circuits and by the Supreme Court of Montana.”
Pet.App.30. The court brushed aside that unbroken
string of authority, however, “for the reasons stated
above and for the reasons stated in [its] earlier opinion
(except those reasons concerning deference to the
agency).” Id.
REASONS FOR GRANTING THE PETITION
Even more obviously than the last time around
(now that any issue of deference to the 2011 regulation
is off the table), this case presents an excellent vehicle
for this Court to resolve an acknowledged split of
authority over whether the tens of thousands of
18
“service advisors” who work at vehicle dealerships
across the country are exempt from the FLSA’s
overtime-pay requirements. The Court should once
again grant certiorari to resolve the exempt status of
service advisors.
I. Despite being afforded a second chance to
harmonize its law with all other published authority,
the Ninth Circuit doubled down on its outlying
conclusion that service advisors are not exempt from
the FLSA’s overtime-pay requirements. As it did in
its previous decision, the Ninth Circuit acknowledged
that its interpretation of §213(b)(10)(A) conflicts with
every other court to consider the issue, including the
Fourth and Fifth Circuits, several district courts, and
the Supreme Court of Montana. Pet.App.30, 65.
That the Ninth Circuit’s decision is an outlier
should come as no surprise, since the court below
badly misconstrued §213(b)(10)(A). As even the Ninth
Circuit acknowledged, the literal text of the exemption
applies to service advisors, who are unquestionably
“salesm[e]n ... primarily engaged in ... servicing
automobiles.” Service advisors are salesmen
primarily engaged in selling the servicing of
automobiles, and they certainly are not primarily
engaged in anything other than selling or servicing
automobiles. Having first evaded the literal text by a
misguided invocation of deference, the Ninth Circuit’s
latest effort to escape the literal text by reliance on a
mishmash of legislative history and purported canons
of narrow construction fares no better, and certainly
cries out for this Court’s review.
Il. The Ninth Circuit’s erroneous interpretation
of §213(b)(10)(A) will have far-reaching implications
19
for the nation’s 18,000 franchised car and truck
dealerships, which employ tens of thousands of service
advisors. As this Court has already recognized,
“{djealerships and service advisors negotiated and
structured their compensation plans against this
background understanding” that service advisors
were exempt from the FLSA’s overtime rules.
Pet.App.42. Yet the Ninth Circuit’s decision would
require a wholesale reworking of the service advisor
position, to the detriment of dealerships and
employees alike. Moreover, by injecting into the
statute an artificial requirement that a service advisor
personally service automobiles, the decision below
improperly calls into question the exempt status of
partsmen, many of whom do not personally service
automobiles.
Lack of uniformity is especially troubling in the
FLSA context because of the availability of nationwide
FLSA collective actions. Because plaintiffs may file
collective action claims in the most plaintiff-friendly
forum, the Ninth Circuit’s decision will likely become
the de facto nationwide rule for any dealership that
has operations within the Ninth Circuit. Certiorari is
plainly warranted to restore national uniformity to
this important area of the law.
20
I. The Ninth Circuit’s Decision Conflicts With
The Decisions Of Several Other Courts And
Is Wrong On The Merits.
A. The Ninth Circuit’s Decision Openly
Conflicts With Decisions of the Fourth
and Fifth Circuits and the Montana
Supreme Court.
Despite being granted a second chance by this
Court to eliminate an acknowledged circuit split, the
Ninth Circuit dug in and entrenched the split by again
holding that service advisors are not exempt from the
FLSA’s overtime-pay requirements. Just as in its
initial opinion, Pet.App.65, the Ninth Circuit
acknowledged in its post-remand opinion that its
interpretation of §213(b)(10)(A) “conflicts with
published decisions by the Fourth and Fifth Circuits
and by the Supreme Court of Montana.” Pet.App.30.
But unlike its first opinion, which relied on DOL’s
2011 regulation, which was not available to the Fourth
and Fifth Circuits, the Ninth Circuit’s latest decision
unambiguously parts company with the statutory
analysis of every other court to consider the issue. See
id. There is no serious dispute that the lower courts
are squarely divided over the meaning of
§213(b)(10)(A).
1. In Walton v. Greenbrier Ford, 370 F.3d 446, the
Fourth Circuit held that service advisors fall within
the plain text of the FLSA’s overtime-pay exemption.
The Walton plaintiffs job duties were identical to
Respondents’ job duties here: he would “greet
customers, listen te their concerns about their cars,
write repair orders, follow-up on repairs, ... keep
customers informed about maintenance[,] [and]
21
suggest to customers additional services that needed
to be p[er]formed.” Jd. at 449.
Under the plain text of §213(b)(10)(A), the Fourth
Circuit concluded that service advisors were
“salesmie]n ... primarily engaged in_ servicing
automobiles.” Jd. at 453. Service advisors are an
“integral part of the dealership’s servicing of
automobiles” because they are the “first line ... service
sales representative[s].” /d. at 452-53. Their role was
to figure out what services the customer needed,
prepare cost estimates, and sell both necessary repair
services and supplemental services. Id. at 452. The
court thus concluded that those employees were
salesmen “primarily engaged in __ servicing
automobiles.” Jd. at 453.
The Fourth Circuit also held that DOL’s
interpretation of the exemption in its 1970
interpretive regulation was “unreasonable” because it
is “an impermissibly restrictive construction of the
statute.” Jd. at 452. Under DOL’s view, a salesman
would be covered by the exemption only if he were
primarily engaged in selling vehicles. But, as the
Fourth Circuit explained, that interpretation
effectively ignores the second half of the disjunctive
clause “selling or servicing automobiles.” 29 U.S.C.
§213(b)(10)(A) (emphasis added). The court refused to
defer to DOL’s “restrictive regulatory definition”
because it “unreasonably implements the
congressional mandate.” 370 F.3d at 452.
Similarly, in Deel Motors, 475 F.2d 1095, in the
course of rejecting one of DOL’s early enforcement
actions, the Fifth Circuit squarely held that service
advisors were exempt from the FLSA. Under the plain
22
text of the exemption, the court concluded that service
advisors were “salesm[e]n ... engaged in selling or
servicing automobiles.” Jd. at 1098. And the court
further noted that “service salesmen are functionally
similar to the mechanics and partsmen who service
the automobiles.” /d. at 1097. All of these employees
“work as an integrated unit, performing the services
necessary for the maintenance of the customer's
automobile.” /d. And, like countless other salesmen
who are exempt from the FLSA’s overtime rules,
service advisors “are more concerned with their total
work product than with the hours performed.” Jd. The
Fifth Circuit thus had little difficulty concluding that
service advisors were exempt under §213(b)(10)(A).
Several other courts have reached the same
conclusion. In Thompson, 294 P.3d 397, the Montana
Supreme Court agreed with the Fourth and Fifth
Circuits that §213(b)(10)(A)’s exemption covers service
advisors. Jd. at 402. The court concluded that “[a]
plain, grammatical reading of 29 U.S.C. §213(b)(10)(A)
makes clear that the term ‘salesman’ encompasses a
broader category of employees than those only
engaged in selling vehicles.” Jd. The court added that
“(t]he use of the disjunctive ‘or’ between the words
‘selling or servicing’ means that the exemption applies
to any ‘salesman, partsman, or mechanic,’ who [is]
primarily engaged in either of these duties.” Id.
(emphasis added).
The federal district courts that have addressed
this issue have also uniformly concluded that the
exemption in §213(b)(10)(A) applies to service
advisors. See, e.g., Yenney v. Cass Cty. Motors, No. 76-
0-294, 1977 WL 1678 (D. Neb. Feb. 8, 1977); Brennan
23
v. N. Bros. Ford, No. 40344, 1975 WL 1074 (E.D. Mich.
Apr. 17, 1975), aff'd sub nom. Dunlop v. N. Bros. Ford,
529 F.2d 524 (6th Cir. 1976) (Table); Brennan v.
Import Volkswagen, Inc., No. W-4982, 1975 WL 1248
(D. Kan. Oct. 21, 1975). The district court here
likewise held that service advisors were exempt. See
Pet.App.76-85.
2. None of this was lost on the Ninth Circuit. It
expressly acknowledged that its decision on remand
“conflicts with” the decisions cited above. Pet.App.30.
The Ninth Circuit had no choice but to acknowledge a
split. Respondents perform the same job functions as
the service advisors in the cases cited above, yet the
Ninth Circuit (on “de novo review of congressional
intent”) found them to be non-exempt while every
other court (on the basis of actual statutory text) has
found them to be exempt. It is difficult to imagine a
clearer example of “a decision in conflict with the
decision of another United States court of appeals on
the same important matter,” and a decision that
“conflicts with a decision by a state court of last
resort.” S. Ct. R. 10(a).
Indeed, when the case was last before this Court,
Respondents’ principal argument against plenary
review was that there was no meaningful split of
authority because the Fourth and Fifth Circuit
decisions pre-dated DOL’s 2011 regulation and did not
apply the Chevron framework in analyzing the scope
of §213(b)(10)(A). See BIO.10-11. But with both the
2011 regulation and questions of deference now off the
table, there is simply no denying the existence of a
square split of authority.
24
While a circuit split over the meaning of a federal
statute would be undesirable under’ any
circumstances, the need for a uniform rule in this
context is particularly critical. The FLSA provides for
nationwide collective actions “by any one or more
employees for and in behalf of himself or themselves
and other employees similarly situated.” 29 U.S.C.
§216(b). Because of the availability of nationwide
FLSA collective actions, the most plaintiff-friendly
jurisdiction will often be able to establish the de facto
substantive law that governs many employers
throughout the entire country.
Indeed, there are hundreds of vehicle dealerships
that operate at locations both within and outside the
Ninth Circuit. As a result, even though the Ninth
Circuit is the only court to have ever found service
advisors to be non-exempt, that jurisdiction will likely
become a forum of choice for plaintiffs seeking to
challenge the exempt status of service advisors. One
way or the other, the scope of a critical federal labor
statute should not turn on the happenstance of the
state in which a company is operating. Certiorari is
warranted to restore a _ nationally uniform
interpretation of §213(b)(10)(A).
B. The Ninth Circuit Badly Misconstrued
Section 213(b)(10)(A).
That the Ninth Circuit is the only court to have
found service advisors non-exempt should be no
surprise: the decision below is unmoored from both
the text and purpose of §213(b)(10)(A).
1. The FLSA exempts from the overtime-pay
requirements “any salesman, partsman, or mechanic
primarily engaged in selling or servicing automobiles,
25
trucks, or farm implements, if he is employed by a
nonmanufacturing establishn.ent primarily engaged
in the business of selling such vehicles or implements
to ultimate purchasers.” Jd. §213(b)(10)(A). There is
no dispute that Petitioner is “a nonmanufacturing
establishment primarily engaged in the business of
selling [automobiles] ... to ultimate purchasers.” /d.
The only question is whether each Respondent is a
“salesman, partsman, or mechanic primarily engaged
in selling or servicing automobiles.” Jd. They plainly
are, and the Ninth Circuit’s reasons for holding
otherwise do not withstand scrutiny.
A service advisor is the paradigmatic “salesman ...
primarily engaged in ... servicing automobiles.”
According to Respondents’ own complaint, their job
duties included evaluating customers’ service and
repair needs; suggesting services to address specific
problems with the vehicles; preparing cost estimates;
and offering supplemental services such as
preventative maintenance. See Complaint 716 (DN 2).
In short, “service advisors are salesmen primarily
engaged in the selling of services for automobiles.”
Pet.App.49 (Thomas, J., dissenting); see also Walton,
370 F.3d at 452-53 (service advisors exempt because
they are an “integral part of the dealership’s servicing
of automobiles” and are the “first line ... service sales
representative[s]”). They are thus exempt under a
straightforward textual interpretation of
§213(b)(10)(A). Indeed, even the Ninth Circuit was
forced to concede that service advisors come within the
“literal” text of the exemption. Pet.App.16.
2. In again resisting the conclusion suggested by
the plain text, the Ninth Circuit concluded that
26
despite the statute’s disjunctive language—‘“any
salesman, partsman, or mechanic primarily engaged
in selling or servicing automobiles”’—the exemption
covers only salesmen who “are actually and primarily
occupied in selling cars,” and not salesmen “engaged
in servicing” them. Pet.App.15, 19. That
interpretation cannot be squared with the actual
language of the statute.
The Ninth Circuit’s interpretation flies in the face
of the most basic rules of grammar and statutory
construction. In interpreting a sentence with multiple
disjunctive nouns and multiple disjunctive direct-
object gerunds, each noun is linked to each gerund as
long as that noun-gerund combination has a sensible
meaning. See, e.g., Reiter v. Sonotone Corp., 442 U.S.
330, 339 (1979) (“Canons of construction ordinarily
suggest that terms connected by a disjunctive be given
separate meanings, unless the context dictates
otherwise ....”); FCC v. Pacifica Found., 438 U.S. 726,
739-40 (1978) (“The words... are written in the
disjunctive, implying that each has a separate
meaning.”). Here, there is no question that the term
“or” in the phrase “salesman ... primarily engaged in
selling or servicing” is disjunctive and that both
gerunds can sensibly be applied to the noun
“salesman.” Thus, both parts of the disjunctive phrase
“engaged in selling or servicing automobiles” can
plainly be applied to the noun “salesman.” That
interpretation is further confirmed by Congress’ use of
the word “any” before “salesman,” which suggests an
“expansive meaning.” United States v. Gonzales, 520
U.S. 1, 5 (1997).
27
The Ninth Circuit itself acknowledged that,
“[rjead literally, the exemption encompasses
[s]jalesm[e]n primarily engaged in servicing”
automobiles. Pet.App.16. Yet the court departed from
that straightforward, textual reading because, in
addition to encompassing service advisors, the
“literal” reading of §213(b)(10)(A) would also extend to
partsmen and mechanics primarily engaged in selling
cars—jobs that, according to the court, “do not exist in
the real world.” Pet.App.17.
But the theoretical possibility of such practically
non-existent combinations is no excuse for declining to
extend the exemption to all the noun-gerund
combinations that actually exist in the real world. In
implementing ar instruction to feed hungry or
barking cats or dogs, the non-existence of barking cats
is no justification for leaving a plainly famished, but
mute, dog unfed. So too in statutory construction.
Where a particular theoretical combination of
disjunctive nouns and gerunds produces a practical
null set (e.g., “partsm[e]n [or] mechanic[s] primarily
engaged in selling ... automobiles”), the null set, but
not fundamental rules of grammar and statutory
construction, can be safely ignored. Courts need not
worry about the theoretical combinations because no
case will raise the issue; partsmen and mechanics
primarily engaged in selling cars “do not exist.”
Pet.App.17. But where, as here, the combinations are
eminently sensible—e.g., where a_ statutory
combination reaches one of the tens of thousands of
“salesm[e]n ... primarily engaged in ... servicing
automobiles” currently at work in the United States—
the “literal” reading must prevail. See Pet.App.52-53
(Thomas, J., dissenting) (rejecting Respondents’
28
“distributive canon” argument that selling is done only
by salesmen and servicing is only done by mechanics).
3. Treating service advisors as non-exempt also
makes little sense in the broader scheme of the FLSA.
The FLSA contains numerous provisions (in addition
to §213(b)(10)(A)) that are designed to exclude from
the mandatory overtime rules individuals who are
engaged in sales or paid by commission. See, e.g., 29
U.S.C. §207(i) (excluding certain employees of retail or
service establishments who are paid commissions); id.
§213(a)(1) (excluding “any employee employed ... in
the capacity of outside salesman”).
Those provisions reflect the basic reality that it is
both common and reasonable for salesmen to be
compensated based on their success at selling, rather
than the sheer number of hours worked. As the Fifth
Circuit has explained, “[t]he enactment of
[§213(b)(10)(A)] was an implicit recognition by
Congress of the incentive methou of remuneration for
salesmen, partsmen, and mechanics employed by an
automobile dealership.” Deel Motors, 475 F.2d at
1098. Like countless other salesmen who are treated
as exempt under the FLSA, service advisors “are more
concerned with their total work product than with the
hours performed.” Jd. at 1097. Forcing an employer
to pay service advisors—who are quintessential
salesmen—overtime compensation on an hourly basis
would be a misguided attempt to fit a square peg into
a round hole, and would do nothing to promote the
policies underlying the FLSA. Cf. Christopher, 567
U.S. at 166 (noting that pharmaceutical sales
representatives “are hardly the kind of employees that
the FLSA was intended to protect”).
29
The Ninth Circuit’s interpretation also forces
dealerships to differentiate among their employees in
ways that are contrary to Congress’ plain intent.
Service advisors are in some sense a hybrid, since
their job is to sell, but rather than sell cars, they sell
services. If the salesforce were entirely exempt and
the service staff (such as mechanics and partsmen)
were entirely non-exempt, then the Ninth Circuit’s
rejection of the statute’s “literal” reading might be
reasonable. But here the Ninth Circuit has seized on
the fact that service advisors are a hybrid between two
fully exempt categories (“salesm[e]n” “primarily
engaged ... “servicing automobiles”) as a ground for
deeming them non-exempt. That interpretation is not
just concededly atextual; it needlessly creates fissures
among similar employees that Congress plainly did
not intend.
None of the Ninth Circuit’s various justifications
for deviating from the statute’s literal text holds
water. As already demonstrated, the Ninth Circuit's
textual analysis was flawed, and its policy concerns
misplaced. See supra at 24-28. The Ninth Circuit also
invoked legislative history to buttress its conclusion,
Pet.App.22-30, but there is ample legislative history to
the contrary, see Reply Br. for Pet’r at 16-20, Encino
Motorcars v. Navarro, No. 15-415 (Apr. 13, 2016), and
no justification for resorting to ambiguous legislative
history to evade the literal text. See Ratzlaf v. United
States, 510 U.S. 135, 147 (1994) (“[Wle do not resort to
legislative history to cloud a statutory text that is
clear.”). The Ninth Circuit’s final justification, the so-
called canon favoring narrow interpretations of FLSA
exemptions, is not only misguided, but a further
justification for plenary review, as demonstrated next.
30
C. The Ninth Circuit Erred by Holding That
FLSA Exemptions Should Be “Narrowly
Construed.”
The Ninth Circuit buttressed its untenable
textual analysis by relying heavily on the purported
canon of construction that “the exemptions in §213 of
the FLSA ‘are to be narrowly construed against the
employers seeking to assert them.” Pet.App.20
(quoting Arnold, 361 U.S. at 392). Although the court
jettisoned the bulk of its citations from its earlier
opinion, compare Pet.App.20-21, with Pet.App.60-62
& n.3, it again believed itself bound by circuit
precedent under which employees must be treated as
subject to the FLSA unless they “plainly and
unmistakably” fall within an exemption. Solis, 656
F.3d at 1083.
That purported “rule of narrow construction”
(Pet.App.20) is just an FLSA-specific variant of the
now-repudiated notion that courts should interpret
“remedial” statutes broadly. See, eg., OWCP uv.
Newport News Shipbuilding, 514 U.S. 122, 135-36
(1995) (describing broad-construction canon as “that
last redoubt of losing causes”). And applying this
misguided canon does nothing but guarantee
extravagant results in FLSA cases. The goal of a court
interpreting a statute “should be neither liberally to
expand nor strictly to constrict its meaning, but rather
to get the meaning precisely right.” Antonin Scalia,
Assorted Canards of Contemporary Legal Analysis, 40
Case W. Res. L. Rev. 581, 582 (1990). Thus, in
addition to addressing the circuit split concerning the
meaning of §213(b)(10)(A), granting plenary review
would give this Court an important opportunity to
31
clarify once and for all that the FLSA should be
construed neither narrowly nor broadly, but fairly and
correctly.
II. The Ninth Circuit’s Erroneous Decision Will
Have Far-Reaching Implications For
Dealerships And Will Inject Uncertainty
Into A Previously Settled Area Of The Law.
The scope of the FLSA exemption under
§213(b)(10)(A) is of tremendous practical significance
to the automobile industry nationwide. The nation’s
18,000 franchised car and truck dealerships employ
tens of thousands of service advisors. As this Court
has recognized, “[djealerships and service advisors
negotiated and structured their compensation plans
against this background understanding” that service
advisors were exempt from the FLSA’s overtime rules.
Pet.App.42. Yet the Ninth Circuit has now
concluded—again—that this entire arrangement has
been unlawful for the last four decades.
This Court has not looked favorably upon
attempts by plaintiffs to use novel theories of FLSA
hability to upset long-settled industry practices. As
the Court has explained, it may be “possible for an
entire industry to be in violation of the [FLSA] for a
long time” with no one noticing, but the “more
plausible hypothesis” is that the industry’s practices
simply were not unlawful. Christopher, 567 U.S. at
158. The Court has thus repeatedly rejected FLSA
claims that would have exposed settled industry
practices to potentially significant retroactive liability
(including back pay and double damages). See, e.g.,
Integrity Staffing, 135 S. Ct. at 518-19 (rejecting novel
attempt to impose FLSA liability for time spent in
32
security screenings); Christopher, 567 U.S. at 157,
161-169 (rejecting FLSA liability for pharmaceutical
sales representatives where “the pharmaceutical
industry had little reason to suspect that its
longstanding practice of treating [sales
representatives] as exempt ... transgressed the
FLSA”); see also Yi, 480 F.3d at 510-11 (rejecting
FLSA challenge to a “system of compensation [that] ...
is industry-wide, and of long standing’).
Those concerns are particularly acute given the
regulatory history here. In the immediate wake of its
1970 interpretative rule, DOL pursued enforcement
actions that produced an unbroken series of court
losses for the agency, including the Fifth Circuit's Deel
Motors decision and the Sixth Circuit’s summary
affirmance in North Brothers Ford. See supra at 8-10
& n.3. If those decisions had gone the other way,
employment relationships in this sector would have
developed very differently. But DOL not only lost
those cases across the country but acquiesced in those
decisions, thereby creating significant and well-
justified reliance interests that accumulated over the
ensuing decades.
The concerns with retroactively upsetting those
expectations are at their zenith in cases like this and
Christopher where the plaintiffs seek to have
employees who were actually paid on a commission-
basis retroactively reclassified as non-exempt
employees. Not only were workers focused on earning
commissions, rather than working a set number of
hours, but employers did not have an incentive to
strictly track the number of hours worked, which
creates both evidentiary difficulties and the prospect
33
of wholly unjustified windfalls. See Christopher, 567
U.S. at 166 (sales work was “difficult to standardize to
any time frame,” which “ma[de] compliance with the
overtime provisions difficult”). And, of course, the
Ninth Circuit’s holding would force both service
advisors and dealerships into compensation plans
other than the ones they had voluntarily negotiated,
to the detriment of employers and employees alike.
The problems with allowing Respondents to reap
such windfalls are exacerbated by the differential
treatment implicit in the Ninth Circuit’s decision.
Under the approach adopted by every other court to
consider the issue, all sales employees are treated the
same, viz., as exempt. The Ninth Circuit's decision,
however, would grant service advisors, but not other
salespeople (or others engaged in providing service,
such as partsmen or mechanics), a huge windfall,
which cannot help but prove to be divisive. Thus,
dealers would face the prospect of not only having to
pay out damages retrospectively, but also needing to
deal with anomalous divisions among their salesforces
going forward. To make matters worse, the Ninth
Circuit’s conclusion that service advisors are not
exempt because they °9 not personally service
automobiles throws the long-settled treatment of
partsmen—many, if not most, of whom do not
personally service automobiles—into disarray.
All of those concerns are magnified by the reality,
noted above, that the FLSA provides for nationwide
collective actions. See 29 U.S.C. §216(b). As a
consequence, the Ninth Circuit’s decision will likely
become the de facto nationwide rule for all dealerships
that have at least some operations within the Ninth
34
Circuit. Thus, this is not a case in which further
percolation of the relevant issues would be helpful or
desirable. The far better course is to grant certiorari
now to restore uniformity to this important area of the
law and reaffirm what numerous courts have held
since the 1970s—that service advisors are exempt
from the FLSA’s overtime rules under the plain text of
29 U.S.C. §213(b)(10)(A).
CONCLUSION
In sum, every consideration that led this Court to
grant certiorari in this case last January remains fully
applicable in light of the Ninth Circuit’s decision to
reaffirm its outlying treatment of service advisors as
non-exempt. Indeed, the statutory issue is now
presented more cleanly, and any possibility of the
Ninth Circuit aligning its view with its sister circuits
has been exhausted. This Court should once again
grant review of the important question presented by
this petition.
Respectfully submitted,
KARL R. LINDEGREN PAUL D. CLEMENT
TopDD B. SCHERWIN Counsel of Record
WENDY MCGUIRE COATS JEFFREY M. HARRIS
FISHER MATTHEW D. ROWEN
& PHILLIPS LLP KIRKLAND & ELLIS LLP
144 S. Flower Street 655 Fifteenth Street, NW
Suite 1500 Washington, DC 20005
Los Angeles, CA 90071 (202) 879-5000
paul.clement@kirkland.com
Counsel for Petitioner
May 10, 2017
APPENDIX
TABLE OF APPENDICES
Appendix A
Opinion of the United States Court of
Appeals for the Ninth Circuit, Hector
Navarro; Anthony Pinkins; Kevin Malone;
and Reuben Castro v. Encino Motorcars,
LLC, No. 13-55323 (Jan. 19, 2017)............. App-1l
Appendix B
Opinion of the Supreme Court of
the United States, Hector Navarro;
Anthony Pinkins; Kevin Malone; and
Reuben Castro v. Encino Motorcars, LLC,
No. 15-415 (June 20, 2016)..............0..00000.. App-31
Appendix C
Opinion of the United States Court of
Appeals for the Ninth Circuit, Hector
Navarro; Anthony Pinkins; Kevin Malone;
and Reuben Castro v. Encino Motorcars,
LLC, No. 13-55323 (Mar. 24, 2015) .......... App-55
Appendix D
Order of the United States Court of
Appeals for the Ninth Circuit Denying
Rehearing En Banc, Hector Navarro, et
al. v. Encino Motorcars, LLC,
No. 13-55323 (June 1, 2015)...................... App-74
Appendix E
(In Chambers) Order Re: Defendant's
Mction to Dismiss of the United States
District Court for the Central District of
California, Navarro, et al. v. Mercedes
Benz of Encino, No. 2:12-cv-08051-RGK-
I , eeteadenmaeinn
Appendix F
REESE Se eck ae eee eee
App-1
Appendix A
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
No. 13-55323
HECTOR NAVARRO; ANTHONY PINKINS; KEVIN MALONE;
AND REUBEN CASTRO,
Plaintiffs-Appellants,
Vv.
ENCINO MOTORCARS, LLC, ERRONEOUSLY SUED AS
MERCEDES BENZ OF ENCINO, A CORPORATION,
Defendant-Appellee.
On Remand from the
Supreme Court of the United States
Filed: January 9, 2017
Before: Susan P. Graber and
Kim McLane Wardlaw, Circuit Judges, and
James C. Mahan,” District Judge.
OPINION
* The Honorable James C. Mahan, United States District Judge
for the District of Nevada, sitting by designation.
App-2
GRABER, Circuit Judge:
On remand from the Supreme Court, Encino
Motorcars, LLC v. Navarro, 136 S. Ct. 2117 (2016), we
must consider anew whether the Fair Labor
Standards Act (“FLSA”), 29 U.S.C. §§ 201-219,
requires automobile dealerships to pay overtime
compensation to service advisors. The district court
held that service advisors fall within the exemption
from the overtime-compensation requirement for “any
salesman, partsman, or mechanic primarily engaged
in selling or _ servicing automobiles,” id.
§ 213(b)(10)(A), on the ground that a service advisor is
a “salesman ...primarily engaged in... servicing
automobiles.” Because we conclude that Congress did
not intend for the exemption to encompass service
advisors, we reverse and remand for further
proceedings.
FACTUAL AND PROCEDURAL HISTORY
Defendant Encino Motorcars, LLC, sells and
services new and used Mercedes-Benz automobiles. !
Defendant employed or employs Plaintiffs Hector
Navarro, Mike Shirinian, Anthony Pinkins, Kevin
Malone, and Reuben Castro as “service advisors.”
Plaintiffs greet Mercedes-Benz owners as they arrive
in the service area of the dealership; listen to
customers’ concerns about their cars; evaluate the
repair and maintenance needs of the cars; suggest
services to be performed to remedy the customers’
' Because the district court dismissed this case under Federal
Rule of Civil Procedure 12(b)(6), we take the facts alleged in the
complaint as true. Brown v. Elec. Arts, Inc., 724 F.3d 1235, 1247
(9th Cir. 2013).
App-3
concerns; suggest supplemental services beyond those
that will remedy the customers’ concerns; write up
estimates; and, often, follow up with the customer
while the repair work is underway to suggest further
repairs and maintenance.
Plaintiffs allege that Defendant has violated the
FLSA by failing to pay them overtime wages. The
district court dismissed the claim, and Plaintiffs
timely appealed.
We reversed. Navarro v. Encino Motorcars, LLC,
780 F.3d 1267 (9th Cir. 2015). We held that a
regulation promulgated by the Department of Labor
in 2011 reasonably interpreted the statutory
exemption not to encompass service advisors. Id. at
1271-77. Applying ti principles of agency deference
described in Chevron U.S.A. Inc. v. Nat. Res. Def.
Council, Inc., 467 U.S. 837 (1984), we deferred to the
agency’s interpretation. Navarro, 780 F.3d at 1277.
The Supreme Court granted certiorari and held
that we erred by applying the Chevron framework.
Encino Motorcars, 136 S. Ct. at 2124-27. The Court
concluded that
§ 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. United States
vu. Mead Corp, 533 U.S. 218, 238-39 (2001).
Id. at 2127 (citation format altered).
App-4
DISCUSSION
Congress enacted the FLSA in 1938 to “protect all
covered workers from substandard wages and
oppressive working hours.” Barrentine v. Ark.-Best
Freight Sys., Inc., 450 U.S. 728, 739 (1981). To that
end, 29 U.S.C. §206 imposes a minimum wage
requirement, and § 207 requires the payment of
overtime compensation for hours exceeding a standard
workweek. But not all workers are covered by the Act’s
provisions. Subsection 213(a) lists categories of
employees who are exempt from both the minimum-
wage and overtime-compensation requirements.
Subsection 213(b) lists categories of employees who
are exempt from the _ overtime-compensation
requirement only.
In 1961, Congress amended § 213(a) to exempt
from both the minimum-wage and _ overtime-
compensation requirements all employees of
automobile dealerships. Fair Labor Standards
Amendments of 1961, Pub. L. No. 87-30, §9, 75
Stat. 65, 71. New paragraph (a)(19) exempted “any
employee of a retail or service establishment which is
primarily engaged in the business of selling
automobiles, trucks, or farm implements.” 29 U.S.C.
§ 213(a)(19) (1961); 75 Stat. at 71.
In 1966, Congress repealed § 213(a)(19) but added
paragraph (b)(10). Fair Labor Standards Amendments
of 1966, Pub. L. No. 89-601, § 208, 80 Stat. 830, 836.
The new provision exempted only the following
employees from the overtime-compensation
requirement:
any salesman, partsman, or mechanic
primarily engaged in selling or servicing
App-5
automobiles, trailers, trucks, farm
implements, or aircraft if employed by a
nonmanufacturing establishment primarily
engaged in the business of selling such
vehicles to ultimate purchasers.
29 U.S.C. § 213(b)(10) (1966). In effect, unless a
separate exemption applied, the 1966 amendments
narrowed the 1961 exemption and_ required
dealerships to pay a minimum wage to all employees
and to pay overtime compensation to all employees
except those listed in § 213(b)(10).
In 1970, the Department of Labor issued a
regulation defining the terms of § 213(b)(10). 29 C.F.R.
§ 779.372. The agency defined “salesman” to
encompass only those salesmen who sold vehicles. /d.
§ 779.372(c)(1). Under the agency’s interpretation, the
exemption did not encompass service advisors. /d.; see
also id. § 779.372(c)(4) (1970).
In 1974, Congress amended § 213(b)(10) to its
present-day form to exclude from the overtime-
compensation requirement the following employees:
(A) any salesman, partsman, or mechanic
primarily engaged in selling or servicing
automobiles, 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; or
(B) any salesman primarily engaged in selling
tratlers, boats, or aircraft, if he is employed
by a nonmanufacturing’ establishment
primarily engaged in the business of selling
App-6
trailers, boats, or aircraft to ultimate
purchasers|.|
29 U.S.C. § 213(b)(10) (2016); Fair Labor Standards
Amendments of 1974, Pub. L. No. 93-259, § 14,
88 Stat. 55, 61. The 1974 amendments had no effect
on the text pertinent to car dealerships—the same
exemptions as in 1966 continued to apply.
In 1978, the Department of Labor issued an
opinion letter stating that, contrary to the agency's
regulation, service advisors were exempt under 29
U.S.C. § 213(b)(10)(A). Dep’t of Labor, Wage & Hour
Div., Opinion Letter No. 1520 (WH-467), 1978 WL
51403 (July 28, 1978). In 1987, the agency amended
its Field Operations Handbook along the same lines,
stating in an Insert that the agency would “no longer
deny the [overtime] exemption” for service advisors.
Dep’t of Labor, Wage & Hour Div., Field Operations
Handbook, Insert No. 1757, 24L04-4(k) (Oct. 20,
1987).
In 2008, the Department of Labor proposed to
amend its formal regulation—which had remained the
same since 1970 despite the agency’ shift in
position—to conform to its practice of allowing the
exemption for service advisors. Updating Regulations
Issued Under the Fair Labor Standards Act, 73 Fed.
Reg. 43,654-01 (July 28, 2008). After receiving public
comments, however, the agency issued a final rule in
2011 that reaffirmed the agency’s original position:
service advisors are not exempt under 29 U.S.C.
§ 213(b)(10)(A). 76 Fed. Reg. 18,832-01 (Apr. 5, 2011).?
2 The Secretary of Labor has informed us that, also in 2011, the
agency amended its Field Operations Handbook by removing the
App-7
The parties dispute whether we owe deference to
the Secretary of Labor’s interpretation that the
statute does not exempt service advisors. Plaintiffs
argue that deference under Skidmore v. Swift & Co.,
323 U.S. 134 (1944), is appropriate. Defendant urges
us to give no weight to the agency’s interpretation. We
decline to resolve this dispute because, as we explain
below, the answer does not affect the outcome.
Instead, we assume without deciding that we must
give no weight to the agency’s interpretation and the
regulation, and we “interpret the statute in the first
instance.” Encino Motorcars, 136 S. Ct. at 2127.
The FI.SA exempts from the _ overtime-
compensation requirement “any salesman, partsman,
or mechanic primarily engaged in selling or servicing
automobiles, 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.” 29
U.S.C. § 213(b)(10)(A). Defendant is an automobile
dealership within the meaning of the exemption. We
limit our discussion to the exemption’s coverage of
employees of an automobile dealership. Thus, the
1987 Insert, thus reverting to its original enforcement practice.
Brief for Sec’y of Labor as Amicus Curiae Supporting Plaintiffs-
Appellants at 5 n.1.
3 We do so out of an abundance of caution. If we have
misunderstood the Court's instructions and are permitted or
required to consider Skidmore deference, then we conclude that
such deference is appropriate. Although the agency held a
contrary position in intervening years, we find the agency's
present reasoning persuasive and thorough. Moreover, the
agency's current position is identical to the position that it took
in 1970—-shortly after enactment of the 1966 amendments.
App-8
relevant statutory passage is: “any salesman,
partsman, or mechanic primarily engaged in selling or
servicing automobiles.”
Unless defined by the FLSA, we consider the
“ordinary, contemporary, common meaning” of the
terms at the time that Congress added the relevant
clause—1966. Perrin v. United States, 444 U.S. 37, 42
(1979). To determine the common meaning, we consult
dictionaries and other sources in use in 1966.
Taniguchi v. Kan Pac. Saipan, Lid., 132 S. Ct. 1997,
2002-04 (2012). For an understanding of job
descriptions, we look to the 1966-1967 edition of the
Department of Labor, Bureau of Statistics,
Occupational Outlook Handbook (“OOH”). See, e.g.,
United States v. Charles, 722 F.3d 1319, 1324 (11th
Cir. 2013) (consulting the Occupational Outlook
Handbook).
We proceed as follows. First, we conclude that,
under the most natural reading of the statute,
Congress did not intend to exempt service advisors.
Second, even if the text were ambiguous, the
legislative history confirms that Congress intended to
exempt only salesmen selling cars, partsmen servicing
cars, and mechanics servicing cars. Congress did not
intend to exempt service advisors.
A. Statutory Text
1. “Any Salesman, Partsman, or Mechanic”
In 1966, Congress repealed the exemption for all
employees of an automobile dealership and replaced it
with a limited exemption for only three specific
vocations: salesmen, partsmen, and mechanics. Then,
as today, many different types of employees—
including service advisors—worked at automobile
App-9
dealerships. The Occupational Outlook Handbook
listed many common vocations. Among those
categories of workers that one might have expected to
find at automobile dealerships in 1966, three job
titles—emphasized below—clearly align with the
three job titles exempted by Congress:
* Automobile body repairmen
- Automobile mechanics
* Automobile painters
- Automobile parts countermen
- Automobile salesmen
- Automobile service advisors
- Automobile upholsterers
* Bookkeeping workers
* Cashiers
- Janitors
- Purchasing agents
- Shipping and receiving clerks
OOH at XIJI-XVIII (Table of Contents).
Hence, looking only at the statutory exemption’s
list of job titles, service advisors were excluded.
Congress’ choice to exempt three—not four—job titles
suggests that service advisors are not exempt. If, as
Defendant posits, Congress intended to exempt
service advisors, it could have included “service
advisors’ in the statutory list. In sum, the most
natural reading of the exemption is that Congress
exempted only three commonly understood job titles—
automobile salesmen, partsmen, and mechanics—and
Congress therefore excluded service advisors.
App-10
It is possible to read the exemption’s list of job
titles more broadly, to encompass all persons whose
functional roles meet the dictionary definitions of the
terms “salesman,” “partsman,” or “mechanic.”4 A
service advisor can be considered to sell services.
Accordingly, if we read the exemption’s list of job titles
broadly, a service advisor qualifies, in a generic sense,
as a “salesman.”5
But even assuming that Congress intended a
broad interpretation of the term “salesman,” not every
“salesman” is exempt; the statute covers only those
who are “primarily engaged in selling or servicing
automobiles.” 29 U.S.C. § 213(b)(10)(A). We therefore
4 We give the term “any” no significance. The term “any” “doles]
not broaden the ordinary meaning” of the word it modifies. BP
Am. Prod. Co. v. Burton, 549 U.S. 84, 93 (2006). That principle
applies with special force here. Both before and after the 1966
amendments to the FLSA, each of the 33 exemptions in § 213(a)
and § 213(b) began with the term “any.” See 29 U.S.C. § 213(a)(1)-
(22) (1965) (beginning with “any”); id. § 213(b)(1)-(11) (1965)
(same); id. § 213(a)(1)-(14) (1967) (same); id. § 213(b)(1)-(19)
(1967) (same). The word “any” was plainly a drafting convention,
not an expression of congressional intent that we interpret a
particular exemption expansively.
5 See Random House Dictionary of the English Language
(“Random House”) 1262 (1966) (defining “salesman” as “a man
who sells gocds, services, etc.”); Webster's Third New
International Dictionary (““Webster’s Third”) 2003 (1965) (“one
employed to sell goods or services either within a given territory
or in a store”); 9 Oxford English Dictionary (“OED”) 50 (1933) (“A
man whose business it is to sell goods or conduct sales”); see also
American Heritage Dictionary of the English Language
(“American Heritage”) 1144 (1st ed. 1969) (“A man employed to
sell merchandise in a store or in a designated territory”).
App-11
consider next whether service advisors primarily
engage in selling or servicing cars.
2. “Primarily Engaged in _ Selling or
Servicing Automobiles”
A service advisor clearly is not a
“salesman...primarily engaged in_ selling...
automobiles.” That category encompasses salesmen
selling a particular good—cars. It does not cover
salesmen selling other goods and, critically, it does not
cover salesmen selling services. Service advisors may
be salesmen of a sort, but they do not qualify as
salesmen primarily engaged in selling cars because
they do not sell cars.
We turn, then, to whether service advisors are
“primarily engaged in .. . servicing automobiles.” We
begin with the contemporary meaning, in 1966, of the
statute’s terms. “Primarily” means “essentially;
mostly; chiefly; principally.” “To be engaged in” an
activity means “to occupy oneself; become involved” in
the activity.’ In the context of an automobile
dealership, to “service” means to “supply[]
6 Random House at 1142; accord 8 OED at 1358 (“In the first
place, first of all, pre-eminently, chiefly, principally;
essentially.”); see also American Heritage at 1039 (Chiefly;
principally”).
7 Random House at 473; accord 8 OED at 174 (“to enter upon
or employ oneself in an action”); Webster's Third at 751 (‘to
employ or involve oneself’; “to take part”); see also American
Heritage at 433 (“To involve oneself or become occupied;
participate”).
App-12
maintenance and repair.”® Thus, to be “primarily
engaged in...servicing automobiles” means to
“occupy oneself principally in maintaining and
repairing cars.”
Whether we look to the contemporaneous
dictionary definitions or to the terms of the phrase
itself, the phrase most naturally encompasses only
those who are actually occupied in the repair and
maintenance of cars—the partsmen and mechanics
who, for example, repair defective brakes or flush the
transmission. A service advisor neither performs any
repairs nor provides any maintenance. Instead, a
service advisor “wait[s] on customers who bring their
automobiles in for maintenance and repairs.” OOH at
314. The service advisor “confers with the customer to
determine his service needs, and arranges for a
mechanic to do the work.” Jd. Accordingly, service
advisors are not primarily engaged in servicing
automobiles.?
Defendant suggests that we adopt a more
expansive definition, one that encompasses ll
employees who are “integral” to the customer’s overall
experience of having a car serviced. Supp. Brief for
Defendant-Appellee at 14 (filed Aug. 16, 2016). The
statutory text is arguably flexible enough to
accommodate Defendant's suggestion. Using the
8 Random House at 1304; accord Webster's Third at 2075 (“to
repair or provide maintenance for”); see also American Heritage
at 1185 (“To make fit for use; adjust; repair; maintain”).
9 Service advisors may occasionally perform simple repairs or
maintenance tasks before the mechanic takes over. But
Defendant does not contend that Plaintiffs spend a significant
amount of time on those minor tasks.
App-13
dictionary definitions most favorable to Defendant,
the exemption encompasses those principally
“involved” in “supplying maintenance and repair.” If
one interprets “supplying” to mean “the overall
process of supplying,” then service advisors can be
said, in a general sense, to be “primarily engaged
in... servicing automobiles.”
But the fact “[t]hat a definition is broad enough to
encompass one sense of a word does not establish that
the word is ordinarily understood in that sense.”
Taniguchi, 132 S. Ct. at 2003. Defendant's
interpretation represents a considerable stretch of the
ordinary meaning of the statute’s words. We usually
do not say that we primarily engage in an activity that
we do not perform personally (and that we may lack
the skills to perform). We typically say that we
primarily engage in an activity only if we actually
undertake the activity, at least in part. For example,
a receptionist-scheduler at a dental office fields calls
from patients, matching their needs (e.g., a broken
tooth or jaw pain) with the appropriate provider,
appointment time, and length of anticipated service.
That work is integral to a patient’s obtaining dental
services, but we would not say that the receptionist-
scheduler is “primarily engaged in” cleaning teeth or
installing crowns. Similarly, an automobile salesman
who sells custom-made cars is integral to a
purchaser's receiving a specialized car, but we
ordinarily would not say that the salesman is
primarily engaged in manufacturing cars.
Defendant nevertheless asserts that we must
adopt its broad definition because a narrower
interpretation would read “partsman” out of the
App-14
statute. Defendant contends that, because partsmen
do not actually perform the repairs and maintenance,
Congress must have intended to include all employees
involved in the overall process of providing repair and
maintenance services. We are unpersuaded.
The Occupational Outlook Handbook described
the position of an “automobile parts counterman” who
is employed by automobile dealers. OOH at 312-14.
Parts countermen may spend some time selling parts
to customers. Jd. at 312. But parts countermen
“employed by automobile and truck dealers... may
spend most of their time supplying parts to mechanics
employed by the dealer.” Id.; see also Brief for Int'l
Ass’n of Machinists and Aerospace Workers as Amicus
Curiae Supporting Respondents in Encino Motorcars,
2016 WL 1388060, at *28 (“A partsman generally
works at one of two counters: the back counter, which
opens to the shop where the mechanics work or the
front counter, which opens into the dealership to an
area where customers may purchase accessories or
parts that will not be installed by the dealership.”).
“By knowing how to use parts catalogs and by knowing
the layout of the stockroom, he can readily find any
one of several thousand items.” OOH at 312. A parts
counterman also uses specialized equipment to test
parts, to determine interchangeability of parts, and to
repair parts. Jd. at 312-13.
Accordingly, Defendant’s premise is wrong:
Partsmen “may repair parts, using equipment such as
brake riveting machines, brake drum lathes, valve
refacers, and engine head grinders.” OOH at 313.
Under any definition, fixing a defective part qualifies
as servicing a car. Partsmen also “may use
App-15
micrometers, calipers, fan-belt measurers, and other
devices to measure parts for interchangeability. They
may also use coil-condenser testers, spark plug
testers, and other types of testing equipment to
determine whether parts are defective.” Jd. at 312-13.
Those hands-on tasks are qualitatively
indistinguishable from—if not identical to—the work
of a mechanic. Similarly, partsmen use their expert
knowledge of parts, parts catalogs, and the stockroom
to determine an appropriate replacement part and
locate it for a mechanic—tasks that contribute directly
to the actual repair of a car. Because most of the
common tasks of a partsman easily meet the ordinary
meaning of primarily engaging in servicing, we are not
compelled to accept Defendant’s broad interpretation
of the exemption.!°
In sum, we conclude that the phrase “primarily
engaged in selling . . . automobiles” encompasses only
those who are actually and primarily occupied in
selling cars, and we conclude that the phrase
“primarily engaged in...servicing automobiles”
encompasses only those who are actually and
primarily occupied in the repair and maintenance of
cars. Because service advisors meet neither definition,
the FLSA does not exempt service advisors.
10 |t is true, of course, that partsmen may spend some time on
tasks unrelated to the servicing of an automobile: They may clean
the stockroom, or they may sell parts to the public, for example.
But that fact poses no interpretive problem because the
exemption covers only those who “primarily” service cars. If an
individual partsman spends little time servicing cars, the
exemption does not apply.
App-16
Our interpretive task could end here, with the
words of the statute as commonly understood in 1966.
But, to ensure that we have not overlooked a relevant
way of reading § 213(b)(10)(A), we will examine that
provision in light of applicable principles of statutory
construction.
3. Principles of Statutory Interpretation
Our interpretation comports with a_ holistic
reading of the statutory exemption. See, e.g., Graham
Cty. Soil & Water Conservation Dist. v. U.S. ex rel.
Wilson, 559 U.S. 280, 290 (2010) (“Courts have a duty
to construe statutes, not isolated provisions.” (internal
quotation marks omitted)); see also Sturgeon v. Frost,
136 S. Ct. 1061, 1070 (2016) (“It is a fundamental
canon of statutory construction that the words of a
statute must be read in their context...” (internal
quotation marks omitted)). Read literally, the
exemption encompasses six categories of employees:
Salesman Partsman Mechanic
primarily engaged |primarily engaged | primarily engaged
in selling in selling in selling
Salesman Partsman Mechanic
primarily engaged |primarily engaged| primarily engaged
in servicing in servicing _ in servicing
Three of the literal categories describe common
employees at a dealership: salesmen selling cars,
partsmen servicing cars, and mechanics servicing
cars. A “salesman... primarily engaged in selling .. .
automobiles” neatly describes a car salesman.!! As
'! “Automobile salesmen” were “important links between the
makers and buyers of new cars, and between used car dealers and
buyers.” OOH at 309. “The automobile salesman spends much of
his time waiting on customers,” trying to make a sale. Jd. at 310.
App-17
noted above, many parts countermen likely qualify as
“partsm[e]n... primarily engaged in... servicing
automobiles.” And it is unassailable that most (if not
all) automobile mechanics. service cars.!2 The
remaining three literal categories are: a
“salesman ...primarily engaged in... servicing
automobiles,” a “partsman... primarily engaged in
selling ... automobiles,” and a “mechanic primarily
engaged in selling...automobiles.” Reading the
exemption as a whole, we conclude that Congress did
not intend to give meaning to those categories.
A salesman is naturally understood to be someone
primarily engaged in selling. After all, he is a
salesman, defined at the relevant time as “a man who
sells.” Random House at 1262 (emphasis added). It
makes little sense, in ordinary speech, to describe a
salesman who primarily engages in work activities
other than selling.
Moreover, we know that Congress «:i not intend
for us to give effect to all six literal categories. Read
literally, the statute exempts partsmen and
mechanics primarily engaged in selling cars, but those
categories do not exist in the real world. Neither
partsmen nor mechanics occupy themselves regularly,
let alone most of the time, with selling cars. By
definition, they spend most of their time repairing
cars, maintaining cars, repairing parts, determining
interchangeability of parts, finding suitable
replacement parts in the stockroom, and so on.
12 “Automobile mechanics keep the Nation’s rising number of
automobiles . . . in good running order. They do preventative
maintenance, diagnose breakdowns, and make repairs.” OOH at
477.
App-18
Congress indisputably did not intend to connect
“partsman” and “mechanic” with “selling”
automobiles; Congress intended to connect
“partsman” and “mechanic” only with “servicing”
automobiles.
Putting it all together, the most natural reading
of the statute is that Congress intended the gerunds—
selling and servicing—to be distributed to their
appropriate subjects—salesman, partsman, and
mechanic. A salesman sells; a partsman services; and
a mechanic services.
At first blush, it may seem odd for Congress to
choose phrasing that, read literally, joins nouns with
inapplicable verbs. But Congress sometimes makes
that choice. See, e.g., 16 U.S.C. § 742c(e) (referring to
“the construction or repair of vessels lost, destroyed,
or damaged” by an earthquake); see also Brief for
Respondents in Encino Motorcars, 2016 WL 1298032,
app. D (listing scores of statutory phrases using this
distributive construction). Scholars and courts have
recognized this method of distributive phrasing:
“Where a sentence contains several antecedents and
several consequents, courts read them distributively
and apply the words to the subjects which, by context,
they seem most properly to relate.” 2A Norman Singer
et al. Sutherland Statutes and Statutory
Construction § 47:26 (7th ed. Supp. Nov. 2016); see id.
at n.1 (collecting cases); see also Antonin Scalia &
Bryan A. Garner, Reading Law: The Interpretation of
Legal Texts 214 (2012) (“Distributive phrasing applies
each expression to its appropriate referent.”); id. at
214-16 (describing cases that applied the principle).
App-19
The most natural reading of these statutes is not
that Congress wanted to give legal effect to each literal
category. Rather, Congress merely used expedient
wording to avoid tedious repetition of surrounding
text, with the expectation that courts would read the
statutes sensibly. This statute provides a good
example. Congress could have separated out the
treatment of salesmen from the treatment of
partsmen and mechanics. But that would have
required repeating the “primarily engaged in” text, the
list of vehicles— “automobiles, trailers, trucks, farm
implements, or aircraft”— and the clause concerning
employment at a dealership—‘“if employed by a
nonmanufacturing establishment primarily engaged
in the business of selling such vehicles to ultimate
purchasers.” 29 U.S.C. § 213(b)(10) (1966). Instead,
Congress trusted courts to recognize the obvious:
Congress meant to exempt salesmen selling, not
repairing, cars; and Congress meant to exempt
partsmen and mechanics repairing, not selling, cars.
Thus, the statute leaves only three categories of
exempt employees:!
Salesman Partemaen Meehanie
primarily engaged |primarily engaged |primanlyengaced
in selling treeline aH eeebbitee:
Salesman Partsman Mechanic
pomen;erneaged primarily engaged | primarily engaged
TR Serie in servicing in servicing
13 We address here only automobile dealerships. There is some
suggestion in the legislative history that partsmen employed by
farm-implement dealers were understood
to sell
farm
implements. But we have found no suggestion-~in the legislative
history or otherwise—that automobile partsmen sell cars.
App-20
4. Narrow Construction of the FLSA’s
Exemptions
We find Defendant's expansive interpretation
particularly implausible in light of the longstanding
rule that the exemptions in § 213 of the FLSA “are to
be narrowly construed against the employers seeking
to assert them.” Arnold v. Ben Kanowsky, Inc., 361
U.S. 288, 392 (1960); accord Mitchell v. Ky. Fin. Co.,
359 U.S. 290, 295 (1959) (holding that the principle of
narrow construction of the FLSA’s exemptions is “well
settled”). We must apply exemptions only to “those
[employees] plainly and unmistakably within [the
FLSA’s] terms.” A.H. Phillips, Inc. v. Walling, 324 U.S.
490, 493 (1945). In order to conclude that
§ 213(b)(10)(A) encompasses service advisors, we
would be required to do the opposite—construe the
exemption broadly. We are bound by Supreme Court
precedent to construe the exemption narrowly.
In recent years, the Supreme Court has
acknowledged the rule of narrow construction with
respect to the exemptions listed in § 213, but the Court
has held that the rule does not apply to interpretations
of other provisions of the FLSA, such as the general
definitions codified in § 203. Sandifer v. U.S. Steel
Corp., 134 S. Ct. 870, 879 n.7 (2014); Christopher v.
SmithKline Beecham Corp., 132 S. Ct. 2156, 2172 n.21
(2012). Because this case involves interpretation of
terms appearing in § 213 and not defined in § 203, the
Supreme Court's longstanding principle of narrow
construction applies here. We recognize that some
members of the Supreme Court have questioned the
soundness of the rule of narrow construction. F.g.,
Encino Motorcars, 136 S. Ct. at 2131 (Thomas, J..,
App-21
dissenting). But we may not disregard the Court’s
existing, binding precedent. See, e.g., Bosse ov.
Oklahoma, 137 S. Ct. 1, 1 (2016) (per curiam) (“It is
this Court’s prerogative alone to overrule one of its
precedents.” (internal quotation marks and brackets
omitted)); id. (“Our decisions remain binding
precedent until we see fit to reconsider them,
regardless of whether subsequent cases have raised
doubts about their continuing vitality.” (internal
quotation marks omitted)).!4
In sum, we are convinced that Congress intended
to exempt only salesmen selling cars, partsmen
servicing cars, and mechanics servicing cars. We agree
with Defendant that, under an _ expansive
interpretation of the literal category of a
“salesman ...primarily engaged in... servicing
automobiles,” the statute could be construed as
exempting service advisors. But in light of the
ordinary meaning of the exemption’s words and the
rule that we must interpret exemptions narrowly, we
find that interpretation implausible. We nevertheless
assume that Defendant’s interpretation creates an
ambiguity. Accordingly, we examine legislative
history below.
14 For the sake of judicial economy, we note that we would reach
the same ultimate holding—that the exemption does not
encompass service advisors—even if the rule of narrow
construction did not apply. Defendant's interpretation creates, at
most, an ambiguity. Because legislative history strongly suggests
that Congress did not intend to exempt service advisors, our
ultimate holding is the same, whether or not we apply the
principle of narrow construction.
App-22
B. Legislative History
As we have noted, in 1966, Congress enacted new
§ 213(b)(10), exempting from the _ overtime-
compensation requirement “any salesman, partsman,
or mechanic primarily engaged in selling or servicing
automobiles” at a dealership. During hearings before
subcommittees of the House and the Senate, the
National Automobile Dealership Association had
sought an overtime exemption for two _ specific
categories of employees: automobile salesmen and
mechanics.'5 According to the Association, automobile
salesmen and mechanics were well paid, and they
often worked unusual hours; accordingly, overtime
compensation would be both unnecessary and
challenging to calculate. 1965 House Hearings at 368-
69; 1965 Senate Hearings at 1237-38. The testimony
was not new. The Association had given similar
testimony in 1961, 1960, 1959, and 1957,!%in response
15 Minimum Wage-Hour Amendments: Hearings on H.R. 8259
Before the Gen. Subcomm. on Labor of the H. Comm. on Educ. &
Labor, 89th Cong. 366-77 (1965) (“1965 House Hearings’’) (statement
of Sam H. White, Chairman, Govt’! Relations Comm., Nat’! Auto. Dealers
Ass’n); Amendments to the Fair Labor Standards Act: Hearings
on S. 763 et al. Before the Subcomm. on Labor of the S. Comm. on
Labor & Pub. Welfare, 89th Cong. 1236-38 (1965) (“1965 Senate
Hearings”) (statement of Sam H. White, Chairman, Govt’l Relations
Comm., Nat’! Auto. Dealers Ass’n).
16 Amendments to the Fair Labor Standards Act: Hearings on S.
256 et al. Before the Subcomm. on Labor of the S. Comm. on Labor
& Pub. Welfare, 87th Cong. 175-82 (1961) (statement of S.E.
Kossman, Chairman, Nat'l Affairs Comm., Nat’] Auto. Dealers
Ass’n); Minimum Wage-Hour Legislation: Hearings Before the
Subcomm. on Labor Standards of the H. Comm. on Educ. &
Labor, 86th Cong. 1391-94 (1960) (“1960 House Hearings’)
(statement of William J. Cleveland, Director, Nat'l Auto. Dealers
App-23
to earlier proposals for the FLSA to cover dealerships’
employees. In sum, when the full Congress took up the
proposal, the automobile-dealership industry had
made clear its concerns about applying the overtime-
compensation requirement to two specific categories of
employees: automobile salesmen and mechanics.
The legislative history contains only one
probative discussion by members of Congress: a
debate in the Senate about whether to exempt
partsmen in addition to automobile salesmen and
mechanics. 112 Cong. Rec. 20,502-06 (1966). Everyone
agreed that automobile salesmen!’ and mechanics
Ass’n); To Amend the Fair Labor Standards Act: Hearings on S.
25 et al. Before the Subcomm. on Labor of the S. Comm. on Labor
& Pub. Welfare , 86th Cong. 205-14 (1959) (“1959 Senate
Hearings’) (statement of William J. Cleveland, Nat'l Auto.
Dealers Ass'n); Fair Labor Standards Act: Hearings Before a
Subcomm. of the H. Comm. on Educ. & Labor, 85th Cong. 251-77
(1957) (‘1957 House Hearings”) (statement of Frederick M.
Sutter, President, Nat'l Auto. Dealers Ass’n); Proposals to Extend
Coverage of Minimum Wage Protection: Hearings on S. 1135 et al.
Before the Subcomm. on Labor of the S. Comm. on Labor & Pub.
Welfare, 85th Cong. 113-33 (1957) (“1957 Senate Hearings”)
(statement of Frederick J. Bell, Rear Admiral USN (Ret.),
Executive Vice President, Nat'l] Auto. Dealers Ass'n); see also id.
at 1160-61 (letter dated Mar. 29, 1957, from the South Carolina
Automobile Dealers Association, expressing similar sentiments).
\7 Notably, the Senators implicitly assumed that “salesman”
referred to someone who sells cars. See 112 Cong. Rec. 20,504
(“[An amendment] would not affect the salesman. He can go out
and sell an Oldsmobile, a Pontiac, or a Buick all day long and all
night. He is not under any overtime.” (statement of Sen.
Yarborough)); id. (“The salesman tries to get people mainly after
their hours of work. In some cases a man will leave his job, get
his wife, and go to look at automobiles.” (statement of Sen.
Yarborough)); id. (“Salesmen .. . go out at unusual hours, trying
to earn commissions.” (statement of Sen. Bayh)). One
App-24
work irregular hours, sometimes away from the
dealership. See, e.g., id. at 20,504 (“Salesmen are a
little different breed of cats, because they go out at
unusual hours....” (statement of Sen. Bayh)); id.
(“My experience with automobiles has been that the
mechanic goes out and answers calls in the rural
areas.” (statement of Sen. Yarborough)). The debate
centered on whether the same was true of partsmen.
Some Senators thought that partsmen had to work
irregular hours and, accordingly, should also be
exempt. See, e.g., id. at 20,502 (“In many instances it
is essential that partsmen work longer hours or at
other than regular times, This is especially true in the
farm equipment business.... Because of these
factors, it would not be easy to place partsmen on a
time-clock basis and to compute overtime
compensation in an equitable manner.” (statement of
Sen. Bayh)); id. at 20,503 (“The partsman does occupy
a significant and unusual position in the agricultural
economy. He has to be available during the harvesting
season—and before and after, to a lesser extent—at all
hours of the day.” (statement of Sen. Mansfield)).
Other Senators thought that partsmen worked inside
commentator has interpreted a passage by Senator Javits as
implicitly mentioning service advisors as a form of salesman.
Note, Show Me the Money: On Whether Car Dealership Service
Advisors Are Entitled to or Exempt From Overtime Pay Under the
FLSA, 91 Notre Dame L. Rev. 1707, 1731 (Apr. 2016). We draw
the opposite inference from the transcript. Senator Javits noted
that “the mechanic and the salesman [are] subject to call at any
time that a fellow’s car broke down.” 112 Cong. Rec. 20,506. We
read that comment to mean simply that, when one’s car fails,
there are two options—fix it (via a mechanic) or replace it (via a
car salesman).
App-25
only and, accordingly, like all other ordinary
employees of a dealership, should not be exempt. See
id. at 20,504 (“The mechanics and the salesmen... do
not get overtime because their work is outside. . . . The
partsman works inside.” (statement of Sen.
Yarborough)); id. (“[A] partsman is an inside man. The
reason for exempting the salesmen and the mechanics
was the difficulty of their keeping regular hours.”
(statement of Sen. Yarborough)); id. at 20,505
(“[T]here is no excuse whatever for including
partsmen in the overtime exemption, because the
partsman, like the stenographer, would be working
inside.” (statement of Sen. Clark)). Nothing in the
legislative record suggests that Congress thought that
service advisors worked anything but ordinary
business hours—to the extent that Congress thought
about service advisors at all. See OOH at 314-17
(describing the work of service advisors without
anywhere suggesting that they worked unusual
hours).
The legislative history thus contains repeated,
detailed concerns about applying the overtime-
compensation requirement to automobile salesmen,
partsmen, and mechanics. By contrast, Defendant
does not direct us to any portion of the legislative
history that reveals a similar concern for applying the
overtime-compensation requirement to _ service
advisors, and we have found none. To the contrary, the
only references to service advisors that we have found
suggest that dealerships had no concern about
overtime compensation for service advisors.!®
18 See 1960 House Hearings at 1393 (testimony by a Ford dealer
from rural Louisiana, merely comparing the average pay at his
App-26
Viewed in light of the clear concerns about
overtime compensation for automobile salesmen,
partsmen, and mechanics, the legislative history’s
apparent silence on concerns about overtime pay for
service advisors strongly suggests that Congress did
not intend to exempt service advisors. If Congress
meant for the exemption to encompass service
advisors, we would expect that concern to be plain
from—or at least mentioned in—the legislative record
of the 1966 amendments.
In 1974, Congress amended paragraph (b)(10) to
its present-day form. 29 U.S.C. § 213(b)(10) (2016); 88
Stat. at 61. The law created new subparagraph
(b)(10)(A), which exempted “any salesman, partsman,
or mechanic primarily engaged in selling or servicing
automobiles, trucks, farm implements” and new
subparagraph (b)(10)(B), which exempted “any
salesman primarily engaged in selling trailers, boats,
or aircraft.”
Both the House and the Senate were provided
with written summaries of the revised exemption. In
the House, Representative Dent’s report described the
overall effect of the new § 213(b)(10)(A) & (B):
Provides an overtime exemption for any
salesmen primarily engaged in _ selling
dealership with the average pay at dealerships in New Orleans
for mechanics, painters, body repairmen, upholsterers, parts-
department men, and “service salesmen [service advisor®’”); 1959
Senate Hearings at 208 (same); 1957 House Hearings at 1188
(same); 1957 Senate Hearings at 1160-61 (letter from the South
Carolina Auto. Dealership Ass’n expressing no concern about
paying overtime to its employees other than automobile salesmen
and mechanics).
App-27
automobiles, trailers, trucks, farm
implements, boats, or aircraft if employed by
a nonmanufacturing establishment primarily
engaged in the business of selling such
vehicles to ultimate purchasers. Also provides
an overtime exemption for partsmen and
mechanics of automobile, truck, and farm
implement dealerships.
120 Cong. Rec. 8602 (1974) (emphasis added). That
summary makes clear that “salesman” applies only to
“selling” goods. There is no mention of salesmen
primarily engaged in servicing automobiles, even
though the literal terms of the exemption could
encompass that category. Instead, the summary
applied only the verb “selling” to the subject
“salesman.”
In the Senate, Senator Williams’ report described
the changes between the then-existing exemption and
the new § 213(b)(10)(A) & (B):
[A]mends_ section 13(b)(10) relating to
salesmen, partsmen, and mechanics by
repealing the overtime exemption for
partsmen and mechanics in
nonmanufacturing establishments primarily
engaged in selling trailers; by repealing the
overtime exemption for partsmen and
mechanics in nonmanufacturing
establishments engaged in selling aircraft;
and by providing an overtime exemption for
salesmen engaged in the sale of boats.
120 Cong. Rec. 8763 (1974). That summary also makes
clear that “salesman” applies only to “selling” goods.
Reviewing the words of the statute literally, as
App-28
Defendant urges us to do, the amendment also
repealed the exemption for salesmen primarily
engaged in servicing trailers and aircraft. But the
summary does not mention such an effect, strongly
suggesting that Congress did not think that
“salesman” connected to “servicing.” Thus, the
summaries of the 1974 amendments before the House
and the Senate both understood the exemption to
encompass only salesmen “selling,” not salesmen
“servicing.”
So, too, did the National Automobile Dealers
Association. During hearings before subcommittees of
the House and the Senate, the Association submitted
a prepared statement that urged Congress not to
change § 213(b)(10) as it applied to salesmen,
partsmen, and mechanics at automobile dealerships.!®
The statement explained that Congress’ 1966 creation
of the exemption in § 213(b)(1) “was a recognition of
the fact that these categories of employees work long
hours during peak periods, but receive high
commissions, and, accordingly should not be subject to
overtime requirements.” 1970 House Hearings at 109,
259. To prove the high-pay assertion, the statement
then detailed the average earnings of “all car and
truck salesmen,” “mechanics,” and “partsmen.” Id.
(emphasis added). To prove that salesmen, mechanics,
and partsmen work long hours, the statement
‘9 To Amend the Fair Labor Standards Act: Hearings on H.R.
10948 and H.R. 17596 Before the Gen. Subcomm. on Labor of the
H. Comm. on Educ. & Labor, 91st Cong. 109-11, 259-61 (1970) (“1970
House Hearings”); Fair Labor Standards Amendments of 1971:
Hearings on S. 1861 and S. 2259 Before the Subcomm. on Labor
of the Senate Comm. on Labor & Pub. Welfare, 92nd Cong. 789-
94 (1971) (“1971 Senate Hearings”).
App-29
described each position. The paragraph describing
salesmen plainly refers to persons who sell cars, not to
service advisors. Jd. The statement summarized:
The primary purpose of minimum wage and
overtime legislation is to take care of people
who receive substandard salaries. As already
noted, automobile salesmen average $10,036
per year, automobile mechanics average
$5.00 per hour and partsmen average $3.42
per hour.
Id. (emphasis added).
As with the 1966 amendments, Defendant has not
pointed us to any passage of the legislative history
suggesting that Congress intended to exempt service
advisors, and we have found none. To the contrary, the
only reference to service advisors that we have found
suggests that Congress had no concern about overtime
compensation for service advisors.”°
In sum, the legislative history of the 1966
amendments and of the 1974 amendments reveal clear
concerns with applying the overtime-compensation
requirement to exactly three categories of a
dealership’s employees: automobile salesmen,
partsmen, and mechanics. The extensive legislative
record—tens of thousands of pages spanning a decade
and a half—contains hardly a mention of service
advisors, and the few references that exist display no
20 We found only one portion of the legislative record that
mentions a “service adviser.” 1971 Senate Hearings at 780-81.
That testimony merely described what a service advisor does; it
does not suggest that the exemption applied to service advisors.
Id.
App-30
concern about overtime compensation for service
advisors. We are firmly persuaded that Congress did
not intend to exempt service advisors.
C. Conclusion
After a thorough, de novo review of congressional
intent, we hold that the exemption in § 213(b)(10)(A)
does not encompass service advisors. We acknowledge
that our holding conflicts with published decisions by
the Fourth and Fifth Circuits and by the Supreme
Court of Montana. Walton v. Greenbrier Ford, Inc., 370
F.3d 446 (4th Cir. 2004); Brennan v. Deel Motors, Inc.,
475 F.2d 1095 (5th Cir. 1973); Thompson v. J.C.
Billion, Inc., 294 P.3d 397 (Mont. 2013). We are
unpersuaded by the analysis of those decisions for the
reasons stated above and for the reasons stated in our
earlier opinion (except those reasons concerning
deference to the agency). Navarro, 780 F.3d at 1274-
77.
This opinion addresses only Plaintiffs’ federal
claim for overtime compensation. For the reasons
given in our earlier opinion, id. at 1270 n.2, we affirm
the dismissal of all other federal claims, and we
reverse the dismissal of the state-law claims.
AFFIRMED in part, REVERSED in part, and
REMANDED. Costs on appeal awarded to Plaintiffs-
Appellants.
App-31
Appendix B
SUPREME COURT OF THE UNITED STATES
No. 15-415
ENCINO MOTORCARS, LLC,
Petitioner,
Vv.
HECTOR NAVARRO, et al.,
Respondents.
On Writ of Certiorari to the United States Court of
Appeals for the Ninth Circuit
Decided: June 20, 2016
OPINION
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 “protect 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
App-32
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 position 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 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 maintenance
services; selling new accessories or replacement parts;
recording service orders; following up with customers
as the services are performed (for instance, if new
problems are discovered); and explaining the repair
and maintenance work when customers return for
their vehicles. See App. 40-41; see also Brennan v. Deel
Motors, Inc., 475 F.2d 1095, 1096 (CA5 1973); 29 CFR
App-33
§ 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). Mechanics 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 dealership employees
from the minimum wage requirement. It also limited
the exemption from the overtime compensation
requirement to cover only certain employees—in
particular, “any salesman, partsman, or mechanic
primarily engaged in selling or servicing automobiles,
trailers, trucks, farm implements, or aircraft” at a
covered dealership. 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 Department 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 Department did not issue the
regulation through the notice-and-comment
procedures of the Administrative Procedure Act. See
App-34
35 Fed. Reg. 5856; see also 5 U.S.C. § 553(b)(A)
(exempting 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 implements 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
regulation made that exclusion explicit in a later
subsection: “Employees variously described as service
manager, service 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 disagnosing [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.”
§ 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 4 33,506 (Neb. 1977);
Brennan v. North Bros. Ford, Inc., 76 CCH LC
{33,247 (ED Mich. 1975), aff'd sub nom. Dunlop v.
App-35
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 subsection 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
employees engaged in servicing automobiles, trucks,
or farm implements, but not similar employees
engaged in servicing trailers, boats, or aircraft.
In 1978, the Department issued an opinion letter
departing from its previous position. Taking a position
consistent with the cases decided by the courts, the
opinion 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 Department’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 interpretation by
amending its Field Operations Handbook to clarify
that service advisors should be treated as exempt
under § 213(b)(10)(A). It observed that some courts
App-36
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/SbGHD-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 practicable.”
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 interpreting 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 Department 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 automobiles, trucks, or
farm implements. /d., at 18859 (codified at 29 CFR
§ 779.372(c)(1)).
App-37
The Department gave little explanation for its
decision to abandon its decades-old practice of treating
service 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 regulation, 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 petitioner 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. Jd., at 40-41.
Respondents sued petitioner in the United States
District 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. /d., at 42-44. Petitioner
moved to dismiss, arguing that the FLSA overtime
provisions do not apply to respondents because service
advisors are covered by the statutory exemption in
App-38
§ 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 Council, 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 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. J/d., 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 engaged in selling or servicing
automobiles, 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)(10)¢A).
App-39
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
regulation 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 Chevron. 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 matter; for the court,
as well as the agency, must give effect to the
unambiguously expressed intent of Congress.” Jd., at
842-843. If not, then at the second step the court must
defer to the agency’s interpretation if it is
“reasonable.” Jd., 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 statutory 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 administrative procedure” is a
“very good indicator” that Congress intended the
regulation to carry the force of law, so Chevron should
apply. Mead Corp., supra, at 229-230. But Chevron
deference is not warranted where the regulation is
App-40
“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, Lid. v. Coke, 551 U.S. 158, 174-
176 (2007) (rejecting challenge to procedures by which
regulation was issued 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, eg. 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 “efective, a
court should not accord Chevron deference to the
agency interpretation. Respondents do not contest the
manner in which petitioner has challenged the agency
procedures here, and so this opinion assumes without
deciding that the challenge was proper.
One of the basic procedural requirements of
administrative rulemaking is that an agency must
give adequate reasons for its decisions. The agenc
“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 explanation is clear enough that its “path
may reasonably be discerned.” Bowman Transp., Inc.
v. Arkansas-Best Freight System, Inc., 419 U.S. 281,
App-41
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 Television
Stations, Inc., 556 U.S. 502, 515 (2009). But the
agency must at least “display awareness that it is
changing 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 long standing policies may have
“engendered serious reliance 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 justification 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 by the prior pclicy.” Fox Television
Stations, supra, at 515-516. It follows that an
“fu]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 capricious regulation
App-42
of this sort is itself unlawful and receives no Chevron
deference. See Mead Corp., supra, at 227.
B
Applying those principles here, the unavoidable
conclusion 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 reliance interests involved. In
promulgating the 2011 regulation, 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 requirements. See National
Automobile Dealers Association, Comment Letter on
Proposed Rule Updating Regulations 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
compensation 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 are not
compensated in accordance with the Department’s
App-43
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 commission 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 circumstances. Jd., 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 Department 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 appropriate approach.”
Ibid. Although an agency may justify its policy choice
by explaining why that policy “is more consistent with
statutory language” than alternative policies, Long
App-44
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). And though several
public comments supported the Department'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 reasons 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.
zxk*x*
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,
App-45
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.
App-46
JUSTICE GINSBURG with whom JUSTICE
SOTOMAYOR joins, concurring.
I agree in full that, in issuing its 2011 rule, the
Department 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 precious little,
however, about what those reasons are.!
I write separately to stress that nothing in today’s
opinion disturbs well-established law. In particular,
where an agency has departed from a prior position,
there is no “heightened standard” of arbitrary-and-
1 Unlike Justice Thomas, | 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, dissenting). 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
responsibilities drawn from occupational handbooks and training
manuals). The Court appropriately leaves the proper ranking of
service advisors to the Court of Appeals in the first instance.
App-47
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 capricious 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 reliance” 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 dealerships’
compensation arrangements,” ante, at 10, the
Department would not be disarmed from determining
that the benefits of overtime coverage outweigh those
costs.2 “If the action rests upon...an exercise of
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
App-48
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 empowered to do so.” SEC uv.
Chenery Corp., 318 U.S. 80, 94 (1943).
a separate FLSA exemption covers 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 1%
times the minimum wage. Ante, at 11 (citing § 207()); 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, |
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 antec, at 10 (citing comment from Nationa]
Automobile Dealers Association). An agency cannot be faulted for
failing to discuss at length matters only cursorily raised before it.
App-49
JUSTICE THOMAS, with whom JUSTICE
ALITO joins, dissenting.
The Court granted this case to decide whether an
exemption under the Fair Labor Standards Act
(FLSA), 29 U.S.C. § 201 et seq., “requires payment of
increased compensation 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 ‘procedurally 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 decide whether the Ninth
Circuit's reading of the statute was correct. 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 Ninth Circuit’s judgment.
Federal law requires overtime pay for certain
employees who work more than 40 hours per week.
App-50
§ 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 encompasses 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 automobiles, 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 meaning.” 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
tbid. (cataloguing sales-related duties of service
advisors).
A service advisor, however, is not “primarily
engaged in selling... automobiles.” § 213¢b)(10)(A).
App-51
On the contrary, a service advisor is a “salesman” who
sells servicing solutions. Ante, at 2. So the exemption
applies only if it covers 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 disjunctive “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
“It]he action of maintaining or repairing a motor
vehicle” and “the action of providing 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 maintaining or repairing a motor
vehicle” or “the action of providing a service” for an
automobile.
App-52
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 employee employed for the
purpose of and primarily engaged in requisitioning,
stocking, and dispensing parts”). For the provision to
exempt partsmen, then, the phrase “primarily
engaged in... servicing” must cover some employees
who do not themselves perform repair or maintenance.
So “servicing” refers not only to the physical act of
repairing 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 Statutory 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 readily
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. Perhaps respondents might have a better
argument if the statute exempted “salesman or
App-53
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 distributive
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 engaged in... servicing
automobiles.” § 213(b)(10)(A).
Respondents also resist this natural reading of
the 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 respondents 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 Beecham Corp., 567 U.S.
, n. 21 (2012) (slip op., at 19-20, n. 21); see
aleo 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).I[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
App-54
singular objective.” Brief for Chamber of Commerce of
the United States of America et al. as Amici Curiae 7.
x*x**
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.
App-55
Appendix C
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
No. 13-55323
HECTOR NAVARRO; ANTHONY PINKINS; KEVIN MALONE;
AND REUBEN CASTRO,
Plaintiffs-Appellants,
Vv.
ENCINO MOTORCARS, LLC, ERRONEOUSLY SUED AS
MERCEDES BENZ OF ENCINO, A CORPORATION,
Defendant-Appellee.
Argued: February 11, 2015
Filed: March 24, 2015
Before: Susan P. Graber and
Kim McLane Wardlaw, Circuit Judges,
and James C. Mahan,” District Judge.
OPINION
GRABER, Circuit Judge:
We consider here a question of first impression for
our circuit: Are “service advisors” who work at a car
* The Honorable James C. Mahan, United States District Judge
for the District of Nevada. sitting by designation.
App-56
dealership exempt from the overtime pay
requirements of the Fair Labor Standards Act (FLSA)
of 1938, 29 U.S.C. §§ 201-219, under 29 U.S.C.
§ 213(b)(10)(A), which exempts “any salesman,
partsman, or mechanic primarily engaged in selling or
servicing automobiles”? Reviewing de novo, Fortyune
uv. City of Lomita, 766 F.3d 1098, 1101 (9th Cir. 2014),
petition for cert. filed, _U.S.L.W._ (U.S. Jan. 26,
2015) (No. 14-920), we answer that question “no” and,
accordingly, reverse the district court’s holding to the
contrary.
FACTUAL AND PROCEDURAL HISTORY
Defendant Encino Motorcars, LLC, sells and
services new and used Mercedes-Benz automobiles.’
Defendant employed or employs Plaintiffs Hector
Navarro, Mike Shirinian, Anthony Pinkins, Kevin
Malone, and Reuben Castro as “service advisors.” The
complaint alleges:
The job duties and obligations of Service
Advisors ... are to meet and greet Mercedes
Benz owners as they enter the service area of
the dealership and then to evaluate the
service and/or repair needs of the vehicle
owner in light of complaints given them by
these vehicle owners. Upon evaluation of the
service deeds of the vehicle, the Service
Advisors ... then solicit and suggest[] that
certain service[s] be conducted on the vehicle
! Because the district court dismissed this case under Federal
Rule of Civil Procedure 12(b)(6), we take the facts alleged in the
complaint as true. Brown v. Elec. Arts, Inc., 724 F.3d 1235, 1247
(9th Cir. 2013).
App-57
to remedy the complaints of the vehicle owner
by conducting certain repairs at [Defendant’s
dealership] and through [Defendant’s] own
mechanics. The Service Advisors ... are also
duty bound and obligated by [Defendant] to
solicit and suggest that supplemental service
be performed on the vehicle above and beyond
that which is required in response to the
initial complaints of the vehicle owner. The
Service Advisors...then write up an
estimate for the repairs and services and
provide[}] that to the vehicle owner. The
vehicle is then taken to the mechanics at
[Defendant] for repair and maintenance.
As required by [Defendant] and oftentimes
while the vehicle is with [Defendant’s]
mechanics, the Service Advisors... will then
call the vehicle owner and solicit and suggest
that additional work be performed on the
vehicle at additional cost.
Defendant pays service advisors on a commission
basis only; Plaintiffs receive neither an hourly wage
nor a salary.
In 2012, Plaintiffs filed this action alleging,
among other things, that Defendant has violated the
FLSA by failing to pay overtime wages. The district
court dismissed the overtime claim because, the court
concluded, Plaintiffs fall within the FLSA’s exemption
for “any salesman, partsman, or mechanic primarily
App-58
engaged in selling or servicing automobiles.” 29 U.S.C.
§ 213(b)(10)(A). Plaintiffs timely appeal.”
DISCUSSION
Title 29 U.S.C. §207(a)(1) requires’ that
employers pay time-and-a-half for hours worked in
excess of 40 per workweek. But § 213(b)(10)(A)
provides that “[t]he provisions of section 207 of this
title shall not apply with respect to ... any salesman,
partsman, or mechanic primarily engaged in selling or
servicing automobiles, 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.”
Defendant, as a car’ dealership, is a
“nonmanufacturing establishment primarily engaged
in the business of selling... vehicles... to ultimate
purchasers.” Id. The question is whether each Plaintiff
is a “salesman, partsman, or mechanic primarily
engaged in selling or servicing automobiles.” Jd.
Plaintiffs argue that we must defer to the United
States Department of Labor’s 2011 regulatory
definitions, set out at 29 C.F.R. § 779.372(c). 76 Fed.
Reg. 18,832-01 (Apr. 5, 2011). Those regulations state,
in relevant part:
Salesman, partsman, or mechanic.
2 The court dismissed Plaintiffs’ other federal claims (claims 3,
5, and 7) on alternative grounds not challenged on appeal. For
that reason, we affirm the court’s dismissal of those claims. The
court also exercised its discretion under 28 U.S.C. § 1367(c) to
dismiss Plaintiffs’ state-law claims for lack of supplemental
jurisdiction. Because we reverse the dismissal of the overtime
claim (claim 1), we also reverse the dismissal of the state-law
claims.
App-59
(1) As used in section 13(b)(10)(A), a salesman
is 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 automobiles, trucks, or farm
implements that the establishment is
primarily engaged in selling... .
(2) As used in section 13(b)(10)(A), a
partsman is any employee employed for the
purpose of and primarily engaged in
requisitioning, stocking, and _ dispensing
parts.
(3) As used in section 13(b)(10)(A), a mechanic
is any employee primarily engaged in doing
mechanical work (such as_ get ready
mechanics, automotive, truck, or farm
implement mechanics, used car
reconditioning mechanics, and wrecker
mechanics) in the servicing of an automobile,
truck or farm implement for its use and
operation as such....
29 C.F.R. § 779.372(c). As the agency explained in
2011, the regulatory definitions “limit[} the exemption
to salesmen who sell vehicles and partsmen and
mechanics who service vehicles.” 76 Fed. Reg. at
18,838. Because Plaintiffs do not fit within any of
those definitions, they are not exempt from the FLSA’s
overtime wage provisions. Defendant concedes that
Plaintiffs do not meet the regulatory definitions, but
counters that we should not defer to the regulation.
We conduct the familiar two-step inquiry to
determine whether to defer to the agency’s
interpretation. McMaster v. United States, 731 F.3d
App-60
881, 889 (9th Cir. 2013), cert. denied, 135 S. Ct. 160
(2014). “At step one, we ask ‘whether Congress has
directly spoken to the precise question at issue.” Id.
(quoting Chevron, U.S.A, Inc. v. Natural Res. Def.
Council, Inc., 467 U.S. 837, 842 (1984)). If so, then the
inquiry is over, and we must give effect to the
“unambiguously expressed intent of Congress.”
Chevron, 467 U.S. at 845. But if the statute is silent or
ambiguous, then we must determine, before step two,
what level of deference applies. McMaster, 731 F.3d at
889. “If we determine that Chevron deference applies,
then we move to step two, where we will defer to the
agency’s interpretation if it is ‘based on permissible
construction of the statute”. Jd. (quoting Chevron, 467
U.S. at 848).
A. At Chevron Step One, the Statute is
Ambiguous.
When construing a congressional enactment, “our
inquiry begins with the statutory text.” BedRoc Lid. v.
United States, 541. U.S. 176, 183 (2004). In addition,
in the present context we must apply the background
rule that “[t]he FLSA is to be construed liberally in
favor of employees; exemptions are narrowly
construed against employers.” Haro v. City of Los
Angeles, 745 F.3d 1249, 1256 (9th Cir.), cert. denied,
135 S. Ct. 138 (2014). “FLSA exemptions... are to be
withheld except as to persons plainly and
unmistakably within their terms and spirit.”3 Solis v.
3 The rule that courts should construe the FLSA’s exemptions
narrowly originated in Arnold v. Ben Kanowsky, Inc., 361 U.S.
388, 392 (1960). In recent years, the Supreme Court has clarified
that the presumption applies only to the exemptions in § 213 and
not more generally. Sandifer v. U.S. Steel Corp., 134 S. Ct. 870,
App-61
Washington, 656 F.3d 1079, 1083 (9th Cir. 2011)
(internal quotation marks omitted). “An employer who
claims an exemption from the FLSA bears the burden
of demonstrating that such an exemption applies.” Jd.
(internal quotation marks omitted).
As noted, the statute exempts “any salesman,
partsman, or mechanic primarily engaged in selling or
servicing automobiles.” 29 U.S.C. § 213(b)(10)(A). The
statute does not define the terms “salesman,
partsman, or mechanic.” Examining the statutory text
and applying canons of statutory interpretation, we
cannot conclude that service advisors such as
Plaintiffs are “persons plainly and unmistakably
within [the FLSA’s] terms and spirit,” Solis, 656 F.3d
at 1083 (internal quotation marks omitted).
It is plausible to read the term “salesman” broadly
and to connect the term to “servicing automobiles”;
that is, one could consider a service advisor to be a
“salesman ... primarily engaged in ... servicing
automobiles.” But, as explained in more detail below,
in Part C, it is at least as plausible to read the nouns
in a more cabined way: a salesman is an employee who
sells cars; a partsman is an employee who
requisitions, stocks, and dispenses parts; and a
mechanic is an employee who performs mechanical
work on cars. Service advisors do none of those things;
they sell services for cars. They do not sell cars; they
do not stock parts; and they do not perform mechanical
work on cars.
879 n.7 (2014); Christopher v. SmithKline Beecham Corp., 132
S. Ct. 2156, 2172 n.21 (2012).
App-62
It is not clear from the text of the statute whether
Congress intended broadly to exempt any salesman
who is involved in the servicing of cars or, more
narrowly, only those salesmen who are selling the cars
themselves. Certainly Congress did not exempt ail
employees of a car dealership; for example, a
bookkeeper who tracks invoices for car sales and
servicing is plainly not exempt, nor is a secretarial
employee who routes calls to the salesmen, partsmen,
and mechanics. Nor do canons of _ statutory
interpretation aid Defendant. To the contrary, the
§ 213 “exemptions
This text is long and has been trimmed here. Open the source document for the complete record.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.