Justices rap Labor Dept. over change in overtime pay rules

The Supreme Court of the United States ruled Monday that the Labor Department must do a better job of explaining why it is changing a longstanding policy on whether certain workers deserve overtime pay.

The justices asked a lower court to take another look at whether federal law allows the agency to require overtime for people working as service advisers at auto dealerships.

The 6-2 ruling came in a case involving Encino Motorcars, a California auto dealership that claims its service advisers are similar to car salesmen or mechanics who are exempt from overtime requirements under the Fair Labor Standards Act.

A federal District Court sided with the dealer. But the federal appeals court in San Francisco deferred to a 2011 Labor Department rule stating that service advisers are not exempt from overtime.

Writing for the court, Justice Anthony Kennedy noted that the 2011 rule was a reversal of a longstanding Labor Department policy to exempt service advisers from overtime pay. He said the retail auto and truck dealership industry had relied on the old position since 1978, when the agency announced it in an opinion letter.

Kennedy said that while courts generally defer to a government agency's reasonable interpretation of law, no deference is warranted if a regulation is "procedurally defective." The Labor Department in this case changed existing policy with "barely any explanation," Kennedy said.

He instructed lower courts to decide the question by looking only at the law itself, without deferring to the agency's rule.

In dissent, Justice Clarence Thomas agreed with the majority that the Labor Department regulation is defective, but disagreed "with its ultimate decision to punt on the issue before it."

Thomas said he would have reversed the appeals court and ruled for the auto dealer. His dissent was joined by Justice Samuel Alito.