NFIB Cheers SCOTUS Decision against Arbitrary Regulations

Date: June 20, 2016

Contact: Kelly Klass at (609) 713-4243

SCOTUS rules that federal agencies must provide adequate justification when changing an interpretation of a law that affects the regulated community

Washington, DC (June 20, 2016)The National Federation of Independent Business (NFIB) this morning applauded the United States Supreme Court for reining in overreaching federal agencies by forcing them to justify new interpretations of old rules. 

“Federal agencies cannot whimsically flip-flop when interpreting federal law,” said Karen Harned, Executive Director of the NFIB Small Business Legal Center. “Small businesses build their businesses on the expectation that they can rely on longstanding regulatory practices. So if an agency is going to all of the sudden pull the rug out from underneath the regulated community, and change a longstanding interpretation of what the law requires, they need to have a very good justification.”

The Supreme Court this morning ruled in Encino Motor Cars, LLC v. Navarro, which NFIB filed a brief.  At issue was whether “service advisors” employed at a car dealership were exempt from overtime compensation under the Fair Labor Standards Act.  The Department of Labor has been exempting service advisors from overtime pay since the 1970’s but recently decided to promulgate a new regulation interpreting the FLSA differently. 

The Court held that the DOL needed a well-reasoned explanation for its decision to depart from the existing enforcement policy. Instead, it gave almost no reasoning.

“Had the Supreme Court approved the DOL’s bait-and-switch, a terrible precedent would have been set,” said Harned.  “The regulatory state is already more powerful than it has ever been because the courts tend to give it the benefit of the doubt.  We are happy that the Supreme Court has put at least a modest burden on agencies to justify their reasoning here. While we would eventually like to see the court reevaluate whether it’s appropriate to defer to agency interpretations at all, today’s decision is a step in the right direction.”  

For more information about NFIB, please visit www.nfib.com.

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