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Encino Motorcars, LLC v. Navarro

United States Supreme Court

April 2, 2018

ENCINO MOTORCARS, LLC, PETITIONER
v.
HECTOR NAVARRO, ET AL.

          Argued January 17, 2018

          CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

Respondents, current and former service advisors for petitioner Encino Motorcars, LLC, sued petitioner for backpay, alleging that petitioner violated the Fair Labor Standards Act (FLSA) by failing to pay them overtime. Petitioner moved to dismiss, arguing that service advisors are exempt from the FLSAs overtime-pay requirement under 29 U.S.C. §213(b)(10)(A), which applies to "any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles, trucks, or farm implements." The District Court agreed and dismissed the suit. The Court of Appeals for the Ninth Circuit reversed. It found the statute ambiguous and the legislative history inconclusive, and it deferred to a 2011 Department of Labor rule that interpreted "salesman" to exclude service advisors. This Court vacated the Ninth Circuit's judgment, holding that courts could not defer to the procedurally defective 2011 rule, Encino Motorcars, LLC v. Navarro, 579 U.S__, __ -__ (Encino I), but not deciding whether the exemption covers service advisors, id., at__. On remand, the Ninth Circuit again held that the exemption does not include service advisors.

         Held:

Because service advisors are "salesm[e]n . . . primarily engaged in . . . servicing automobiles, " they are exempt from the FLSAs overtime-pay requirement. Pp. 5-11.
(a) A service advisor is obviously a "salesman." The ordinary meaning of "salesman" is someone who sells goods or services, and service advisors "sell [customers] services for their vehicles, " Encino I, supra, at. P. 6.
(b) Service advisors are also "primarily engaged in . . . servicing automobiles." "Servicing" can mean either "the action of maintaining or repairing a motor vehicle" or "[t]he action of providing a service." 15 Oxford English Dictionary 39. Service advisors satisfy both definitions because they are integral to the servicing process. They "mee[t] customers; liste[n] to their concerns about their cars; sugges[t] repair and maintenance services; sel[i] 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." Encino I, supra, at. While service advisors do not spend most of their time physically repairing automobiles, neither do partsmen, who the parties agree are "primarily engaged in . . . servicing automobiles." Pp. 6-7.
(c) The Ninth Circuit invoked the distributive canon-matching "salesman" with "selling" and "partsman [and] mechanic" with "[servicing]"-to conclude that the exemption simply does not apply to "salesm[e]n . . . primarily engaged in . . . servicing automobiles." But the word "or, " which connects all of the exemption's nouns and gerunds, is "almost always disjunctive." United States v. Woods, 571 U.S. 31, 45. Using "or" to join "selling" and "servicing" thus suggests that the exemption covers a salesman primarily engaged in either activity.
Statutory context supports this reading. First, the distributive canon has the most force when one-to-one matching is present, but here, the statute would require matching some of three nouns with one of two gerunds. Second, the distributive canon has the most force when an ordinary, disjunctive reading is linguistically impossible. But here, "salesman . . . primarily engaged in . . . servicing automobiles" is an apt description of a service advisor. Third, a narrow distributive phrasing is an unnatural fit here because the entire exemption bespeaks breadth, starting with "any" and using the disjunctive "or" three times. Pp. 7-9.
(d) The Ninth Circuit also invoked the principle that exemptions to the FLSA should be construed narrowly. But the Court rejects this principle as a guide to interpreting the FLSA. Because the FLSA gives no textual indication that its exemptions should be construed narrowly, they should be given a fair reading. P. 9.
(e) Finally, the Ninth Circuit's reliance on two extraneous sources to support its interpretation-the 1966-1967 Occupational Outlook Handbook and the FLSA's legislative history-is unavailing. Pp. 9- 11.

845 F.3d 925, reversed and remanded.

          THOMAS, J., delivered the opinion of the Court, in which ROBERTS, C. J., and KENNEDY, Alito, and GORSUCH, JJ., joined. Ginsburg, J., filed a dissenting opinion, in which BREYER, SOTOMAYOR, and KAGAN, JJ., joined.

          OPINION

          Thomas Justice

         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 dealer- ships 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 CFR §779.372(c)(4) (1971)), the federal courts rejected that view, see Brennan v. Deel Motors, Inc., 475 F.2d 1095 (CA5 1973); Brennan v. North Bros. Ford, Inc., 76 CCH LC ¶33, 247 (ED Mich. 1975), aff'd sub nom. Dunlop v. North Bros. Ford, Inc., 529 F.2d 524 (CA6 1976) (table). 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 CFR §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, LLC v. Navarro, 579 U.S.__, __ (2016) (Encino I) (slip op., at 2). 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 ex-plai[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 (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__ -__ (slip op., at 8-12). 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__ (slip op., at 10). But we did not decide whether, without administrative deference, the ...


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