Encino Motorcars, LLC v. Navarro, No. 16–1362.

• Court: United States Supreme Court
• Writing for the Court: Justice THOMAS delivered the opinion of the Court.
• Citation: 138 S.Ct. 1134,200 L.Ed.2d 433
• Parties: ENCINO MOTORCARS, LLC, Petitioner v. Hector NAVARRO, et al.
• Docket Number: No. 16–1362.
• Decision Date: 02 April 2018

138 S.Ct. 1134
200 L.Ed.2d 433

ENCINO MOTORCARS, LLC, Petitioner
v.
Hector NAVARRO, et al.

No. 16–1362.

Supreme Court of the United States

Argued Jan. 17, 2018.
Decided April 2, 2018.

Paul D. Clement, Washington, DC, for Petitioner.

James A. Feldman, Philadelphia, PA, for Respondents.

Karl R. Lindegren, Todd B. Scherwin, Wendy McGuire Coats, Fisher & Phillips LLP, Los Angeles, CA, Paul D. Clement, George W. Hicks, Jr., Matthew D. Rowen, Kirkland & Ellis LLP, Washington, DC, for Petitioner.

Keven Steinberg, Steinberg Law, Sherman Oaks, CA, James A. Feldman, Nancy Bregstein Gordon, University of Pennsylvania, Law School, Supreme Court Clinic, Philadelphia, PA, for Respondents.

138 S.Ct. 1138

Justice THOMAS delivered the opinion of the Court.

The Fair Labor Standards Act (FLSA), 52 Stat. 1060, as amended, 29 U.S.C. § 201 et seq., requires employers to pay overtime compensation to covered employees. The FLSA exempts from the overtime-pay requirement "any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles" at a covered dealership. § 213(b)(10)(A). We granted certiorari to decide whether this exemption applies to service advisors—employees at car dealerships who consult with customers about their servicing needs and sell them servicing solutions. We conclude that service advisors are exempt.

I

A

Enacted in 1938, the FLSA requires employers to pay overtime to covered employees who work more than 40 hours in a week. 29 U.S.C. § 207(a). But the FLSA exempts many categories of employees from this requirement. See § 213. Employees at car dealerships have long been among those exempted.

Congress initially exempted all employees at car dealerships from the overtime-pay requirement. See Fair Labor Standards Amendments of 1961, § 9, 75 Stat. 73. Congress then narrowed that exemption to cover "any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles, trailers, trucks, farm implements, or aircraft." Fair Labor Standards Amendments of 1966, § 209, 80 Stat. 836. In 1974, Congress enacted the version of the exemption at issue here. It provides that the FLSA's overtime-pay requirement does 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).

This language has long been understood to cover service advisors. Although the Department of Labor initially interpreted it to exclude them, 35 Fed.Reg. 5896 (1970) (codified at 29 C.F.R. § 779.372(c)(4) (1971) ), the federal courts rejected that view, see Brennan v. Deel Motors, Inc., 475 F.2d 1095 (C.A.5 1973) ; Brennan v. North Bros. Ford, Inc., 76 CCH LC ¶ 33, 247 (E.D.Mich.1975), aff'd sub nom. Dunlop v. North Bros. Ford, Inc., 529 F.2d 524 (C.A.6 1976) (table). After these decisions, the Department issued an opinion letter in 1978, explaining that service advisors are exempt in most cases. See Dept. of Labor, Wage & Hour Div., Opinion Letter No. 1520 (WH–467) (1978), [1978–1981 Transfer Binder] CCH Wages–Hours Administrative Rulings ¶ 31,207. From 1978 to 2011, Congress made no changes to the exemption, despite amending § 213 nearly a dozen times. The Department also continued to acquiesce in the view that service advisors are exempt. See Dept. of Labor, Wage & Hour Div., Field Operations Handbook, Insert No. 1757, 24L04(k) (Oct. 20, 1987), online at https://perma.cc/5GHD–KCJJ (as last visited Mar. 28, 2018).

In 2011, however, the Department reversed course. It issued a rule that interpreted "salesman" to exclude service advisors. 76 Fed.Reg. 18832, 18859 (2011) (codified at 29 C.F.R. § 779.372(c) ). That regulation prompted this litigation.

B

Petitioner Encino Motorcars, LLC, is a Mercedes–Benz dealership in California. Respondents are current and former service advisors for petitioner. Service advisors "interact with customers and sell them services for their vehicles." Encino Motorcars,

138 S.Ct. 1139

LLC v. Navarro, 579 U.S. ––––, ––––, 136 S.Ct. 2117, 2121, 195 L.Ed.2d 382 (2016) (Encino I ). They "mee[t] customers; liste[n] to their concerns about their cars; sugges [t] repair and maintenance services; sel[l] new accessories or replacement parts; recor[d] service orders; follo[w] up with customers as the services are performed (for instance, if new problems are discovered); and explai[n] the repair and maintenance work when customers return for their vehicles." Ibid.

In 2012, respondents sued petitioner for backpay. Relying on the Department's 2011 regulation, respondents alleged that petitioner had violated the FLSA by failing to pay them overtime. Petitioner moved to dismiss, arguing that service advisors are exempt under § 213(b)(10)(A). The District Court agreed with petitioner and dismissed the complaint, but the Court of Appeals for the Ninth Circuit reversed. Finding the text ambiguous and the legislative history "inconclusive," the Ninth Circuit deferred to the Department's 2011 rule under Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). Encino, 780 F.3d 1267, 1275 (2015).

We granted certiorari and vacated the Ninth Circuit's judgment. We explained that courts cannot defer to the 2011 rule because it is procedurally defective. See Encino I, 579 U.S., at –––– – ––––, 136 S.Ct., at 2125–2127. Specifically, the regulation undermined significant reliance interests in the automobile industry by changing the treatment of service advisors without a sufficiently reasoned explanation. Id., at ––––, 136 S.Ct., at 2126. But we did not decide whether, without administrative deference, the exemption covers service advisors. Id., at ––––, 136 S.Ct., at 2127. We remanded that issue for the Ninth Circuit to address in the first instance. Ibid.

C

On remand, the Ninth Circuit again held that the exemption does not include service advisors. The Court of Appeals agreed that a service advisor is a " ‘salesman’ " in a "generic sense," 845 F.3d 925, 930 (2017), and is " ‘primarily engaged in ... servicing automobiles' " in a "general sense," id., at 931. Nonetheless, it concluded that "Congress did not intend to exempt service advisors." Id., at 929.

The Ninth Circuit began by noting that the Department's 1966–1967 Occupational Outlook Handbook listed 12 job titles in the table of contents that could be found at a car dealership, including "automobile mechanics," "automobile parts countermen," "automobile salesmen," and "automobile service advisors." Id., at 930. Because the FLSA exemption listed three of these positions, but not service advisors, the Ninth Circuit concluded that service advisors are not exempt. Ibid. The Ninth Circuit also determined that service advisors are not primarily engaged in "servicing" automobiles, which it defined to mean "only those who are actually occupied in the repair and maintenance of cars." Id., at 931. And the Ninth Circuit further concluded that the exemption does not cover salesmen who are primarily engaged in servicing. Id., at 933. In reaching this conclusion, the Ninth Circuit invoked the distributive canon. See A. Scalia & B. Garner, Reading Law 214 (2012) ("Distributive phrasing applies each expression to its appropriate referent"). It reasoned 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." Id., at 934. Finally, the Court of Appeals noted that its interpretation was supported by the principle that

138 S.Ct. 1140

exemptions to the FLSA should be construed narrowly, id., at 935, and the lack of any "mention of service advisors" in the legislative history, id., at 939.

We granted certiorari, 582 U.S. ––––, 136 S.Ct. 890, 193 L.Ed.2d 783 (2017), and now reverse.

II

The FLSA exempts from its overtime-pay 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." § 213(b)(10)(A). The parties agree that petitioner is a "nonmanufacturing establishment primarily engaged in the business of selling [automobiles] to ultimate purchasers." The parties also agree that a service advisor is not a "partsman" or "mechanic," and that a service advisor is not "primarily engaged ... in selling automobiles." The question, then, is whether service advisors are "salesm[e]n ... primarily engaged in ... servicing automobiles." We conclude that they are. Under the best reading of the text, service advisors are "salesm[e]n," and they are "primarily engaged in ... servicing automobiles." The distributive canon, the practice of construing FLSA exemptions narrowly, and the legislative history do not persuade us otherwise.

A

A service advisor is obviously a "salesman." The term "salesman" is not defined in the statute, so "we give the term its ordinary meaning." Taniguchi v. Kan...