U.S. solicitor general's office at Main Justice. Credit: Mike Scarcella/ ALM

During U.S. Supreme Court arguments Wednesday over a federal issue important to the auto industry, Justice Elena Kagan questioned the absence of the U.S. solicitor general “in a case in which one would expect the government to be here.” Kagan wanted to know what's up at the U.S. Labor Department.

The answer is that the Labor Department is reconsidering a 2011 Obama administration rule that said service advisers at car dealerships are not exempt from overtime pay under the federal Fair Labor Standards Act. In a Jan. 5 bulletin, Wage and Hour Acting Administrator Bryan Jarrett said the department would not enforce that rule until the Supreme Court resolves the issue.

The statutory issue, which would affect roughly 100,000 service advisers, is raised in the case Encino Motorcars v. Navarro. The dispute is on its second trip to the high court.

Government lawyers had defended the Labor Department's interpretation twice in the U.S. Court of Appeals for the Ninth Circuit and in the company's first round in the Supreme Court in 2016. The absence of the Justice Department, on behalf of labor regulators, left the high court in the dark.

Former Labor Department Solicitor M. Patricia Smith, now senior counsel at the National Employment Law Project, said, “To me, they clearly did not want to defend their position now.”

The Justice Department declined to comment on why it was not participating in Encino Motorcars' latest trip to the Supreme Court. A spokesperson pointed to the Jan. 5 bulletin by the Labor Department.

The Justice Department's solicitor general, Smith said, often files in cases where it is concerned that a decision will have wider implications beyond the facts of the case in front of the court.

The original Encino case involving the service advisers also asked what Chevron required in order to give deference to an agency's changed position, she said. The answer would have affected “a whole swath of executive agencies,” Smith said.

But after the justices, ruling 6-2, sent Encino back to the Ninth Circuit with instructions to consider the statutory question without deference to the agency, the case became more narrowly focused, she said. The Ninth Circuit, based on the statute's text and legislative history, concluded again that service advisers are not exempt from overtime pay and set the stage for Encino's return to the Supreme Court.

The government, Smith said, could have told the high court what it had argued several times before: Under the statute, these service advisers are not exempt, or the government could have said it had changed its position.

“But the solicitor general's office does not like to change positions, although this solicitor general has done it on more than one occasion,” Smith said. “It's very possible for such a narrow issue, they didn't want to change positions in the Supreme Court but didn't want to defend the rule, so they just said nothing.”

The Justice Department's solicitor general's office, under the leadership of Noel Francisco, has adopted new litigation positions in several cases, including in an unrelated labor dispute about the lawfulness of arbitration agreements in employment contracts that bar class actions. The department's switch in a voter-registration case drew questions last week from Justice Sonia Sotomayor.

 

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