Justices: Labor Dept. must explain change in overtime pay rules

Justices: Labor Dept. must explain change in overtime pay rules
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The Supreme Court said Monday it could not rely on the Labor Department's interpretation of a law without an explanation. 

In the 6-2 ruling, the Supreme Court said the Labor Department had to explain why it decided to change a longstanding policy on which employees at autodealerships are exempt from overtime pay. 

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“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 the law and so the regulations does not receive Chevron deference,” Justice Antony Kennedy said in delivering the opinion of the court.

Chevron deference is a principal of administrative law that requires courts to rely on an agency’s interpretation of a statute.

The case — Encino Motorcars LLC v Navarro — stems from a legal challenge service advisers brought against a Mercedes-Benz dealership in Encino, Calif.

The current and former employees argued that they were entitled to receive overtime pay under a new 2011 interpretation of a 1996 law that made “any salesman, partsman or mechanic primarily engaged in selling or servicing automobiles” exempt from the overtime compensation requirement of the Fair Labor Standards Act.

In its final rule, the department changed its interpretation of the statutory term “salesman” to mean only an employee who sells vehicles but gave little explanation why it decided to abandon its decades-old practice of treating service advisers, who greet car owners, evaluate complaints and suggest repairs and services, as exempt.

The justices sent the case back to the lower courts to interpret which employees the 1996 Fair Labor Standards Act meant to exempt.