The U.S. Supreme Court ruled Monday that the federal government must better explain why officials felt overtime regulations needed to be updated in 2011.
The Department of Labor (DOL) expanded overtime privileges in 2011 to more occupations within the car dealership industry. This prompted Encino Motorcars service advisers to file a lawsuit claiming they were owed overtime under these new regulations. The Supreme Court ruled the department must do a better job explaining why the rule needed to change in the first place.
“One basic procedural requirement of administrative rulemaking is that an agency must give adequate reasons for its decisions,” the decision detailed. “Where the agency has failed to provide even a minimal level of analysis, its action is arbitrary and capricious and so cannot carry the force of law.”
The Fair Labor Standards Act (FLSA) exempts car salesmen or mechanics from receiving overtime under a 1978 regulation. The department changed the rule in 2011 so that a person must be directly involved in selling a car for the exemption to apply, reports The Associated Press. Encino Motorcars disputed the lawsuit by claiming its service advisers are equivalent to salesmen.
“The industry had relied since 1978 on the Department’s position that service advisors are exempt from the FLSA’s overtime pay requirements, and had negotiated and structured compensation plans against this background understanding,” the decision continued. “In light of this back- ground, the Department needed a more reasoned explanation for its decision.”
A federal district court sided with the dealer, but its decision was dismissed in 2015 by the federal court of appeals. The Supreme Court instructed the lower courts to rehear the case but added they must ignore the 2011 updated rule. The lower courts must instead look only at the law itself when making its decision.
FLSA was updated again May 18 with the aim of expanding overtime to millions of more workers in executive and manager type positions. The new rule increased the salary exemption threshold so an executive or manager has to make at least $47,476 annually to lose overtime privileges. The new rule is unlikely to be a factor in the Encino case because it applies to a different type of position.
The DOL deferred comment to the Department of Justice (DOJ) when asked by The Daily Caller News Foundation. The DOJ has been the main agency arguing the case for the administration.
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