Supreme Court Rules That Labor Department Regulation Is Not Entitled to Deference Where Agency Fails To Provide Adequate Justification

In a case with implications far beyond the subject matter addressed, the U.S. Supreme Court has ruled that a Department of Labor (DOL) regulation issued under the Fair Labor Standards Act (FLSA) is not entitled to judicial deference when the agency fails to give adequate reasons for the rule.

Although the particular rule in question — a 2011 regulation involving the eligibility of car dealership employees for overtime pay — impacts only a small number of employers, the ruling in Encino Motorcars, LLC v. Navarro, No. 15-415 (June 20, 2016), is important because it sends a message that courts should not blindly defer to an agency’s rule or guidance where it has failed to provide an adequate explanation, especially when it reflects a drastic shift from a prior agency position.

A copy of the Supreme Court’s decision in Encino Motorcars is available here.

Members of the Equal Employment Advisory Council (EEAC) can read more here.