Encino Motorcars v. Navarro – Oral Argument – April 20, 2016

Media for Encino Motorcars v. Navarro

Audio Transcription for Opinion Announcement – June 20, 2016 in Encino Motorcars v. Navarro

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John G. Roberts, Jr.:

We’ll hear argument next in Case 15-415, Encino Motorcars v. Navarro. Mr. Clement.

Paul D. Clement:

Mr. Chief Justice, and may it please the Court: Service advisors are salespeople principally engaged in the servicing of automobiles.

I do not think there is any realistic dispute here that service advisors are, in fact, salespeople.

And it seems clear to me that service advisors, as their name suggests, are principally engaged in the servicing of automobiles. Thus, under the plain and literal terms, of — of the statutory overtime exemption, these individuals are exempt because the statute exempts any salesperson, mechanic, or partsman who are primarily engaged in selling or servicing an automobile, a truck, or a farm implement. Now, my friends on the other side will essentially concede that those last three statutory nouns — automobiles, trucks, and farm implements — apply to every other noun-verb combination in the statute.

So they don’t take the position, for example, that trucks and farm implements only go with servicing and automobiles only goes with selling. But they do take the position that, with respect to the gerund “selling,” that it goes uniquely with salesmen, and therefore, even if you accept for a minute that there is a class of people who exist who are salesmen primarily engaged in the servicing of automobiles, my friends would say they’re not covered by the statute. Now, I would submit that the statute has multiple textual indicators of breadth that suggests that’s not the right way to interpret the statute. There are not —

Ruth Bader Ginsburg:

Mr. Clement, may I ask you, what is the significance of the position you are taking? Does it have any real consequences, given the separate exemption for people who are working on commission?

Paul D. Clement:

It — it does — it does have real-world consequences, Justice Ginsburg, principally for those service advisors who right now are not compensated on a commission basis.

Ruth Bader Ginsburg:

And what — in — in this field, what percentage of service advisors are not commissioned rather than salaried employees?

Paul D. Clement:

Justice Ginsburg, I don’t have a specific statistical breakdown, but I’m reliably informed that it’s a significant number.

So it’s not that almost everybody is on a commissions basis and there’s a couple of outliers who are primarily salaried. I do think the — the archetypical service advisor is paid on a commission basis, and therefore — what I take to be the import of your question — might also qualify under the 207(i) exemption that’s generally applicable across industries to commissioned individuals. But there are significant numbers of individuals who are primarily compensated for salary, and they like it that way.

And of course, as I think the Court is aware, these Fair Labor Standard Act rules are not waivable.

So if you have a service advisor who’s been paid primarily by salary and likes the stability that comes with that, they’ve had that —

Sonia Sotomayor:

That’s every employee.

Paul D. Clement:

What’s that?

Sonia Sotomayor:

That’s every employee who’s salaried.

They — if they want a job, it’s a job, and unless the law protected them, no employer would pay overtime.

Paul D. Clement:

Well, I understand that, Justice Sotomayor.

I was —

Sonia Sotomayor:

I don’t know how I can take from the fact that service advisors accept what’s given to them because they have no choice, why they prefer not to have overtime.

Paul D. Clement:

I don’t know that I was making that strong claim; I was just trying to be responsive that this case does have real-world implications notwithstanding the 7(i) exemption.

Stephen G. Breyer:

So what example — what — if we’re only talking about those of the — the people who sell service who are not on commission, what basis is there for giving them an exception? Do they work regular hours? I take it if they work regular hours and if they aren’t paid on commission, why wouldn’t they be treated like secretaries or others? I mean, apparently Congress thought that the mechanics themselves were special because they go out into agricultural areas or something in the middle of the night and fix a tractor.

So — so they work irregular hours.

But these people don’t work irregular hours and they’re not paid on commission.

So why wouldn’t they be treated like a secretary or a — you see, you’ve got my question.

Paul D. Clement:

I get your question.

I think I would try to rephrase it slightly by saying why should they be treated differently from partsmen or mechanics if they’re also paid on a more salaried basis? And so they don’t qualify —

Stephen G. Breyer:

Well, the answer would be because the partsmen and mechanics, so Congress thought, in agricultural areas, would have to go at 3:00 in the morning to fix the tractor, and that’s why they get within this special treatment.

And — and whether that’s still true or not, I don’t know.

But that’s why they’re there in the statute, and that isn’t true of the service salesmen.

Paul D. Clement:

Here, Justice Breyer —

Stephen G. Breyer:

Now, what about that?

Paul D. Clement:

Yeah, no, I do want to be very responsive to that because I do think whatever, you know, Senator Bayh was thinking about farm implements back in the day.

Stephen G. Breyer:

Right.

Paul D. Clement:

I think today there’s a very good reason to treat the service advisors the same way as the partsmen and mechanics for purposes of the overtime exception.

So the first thing to focus on here is that we are talking about an exemption under the FLSA only to the overtime provisions.

So however you decide this case, minimum-wage provisions are going to apply. But here’s the reason that all the people on the service team, the partsmen, the mechanic and the service advisors, really need this exemption.

Because most customers of auto — automobile dealerships who need service themselves work pretty regular hours, sort of 9:00 to 5:00, Monday through Friday.

So the busy times at a dealership are what they call the morning rush and the afternoon discharge for the day.

And then also on Saturday, over 90 percent of automobile dealerships’ service departments are open on Saturdays. So with respect to the partsmen, and with respect to the mechanics, they end up working a little more than 40 hours a week, because they’re there a little bit earlier than most people, they leave a little bit later, and then they’re there on Saturday. Now, most of them in fact are paid at least partially on commission, and the way most of this works is that everybody, the partsmen, the mechanics and the sales advisors, all kind of share in the commission.

So if they bring in a certain amount of sales, they all share in that. So as a practical matter, it makes an awful lot of sense to exempt all of these people from the overtime rules.

They’re all paid well.

They’re all paid above the minimum wage, which is — the exemption doesn’t apply to anyways — and they all have a reason to work, like, about 50, 46 hours a week instead of 40 hours a week.

And it would be very, very disruptive to all of a sudden take the service advisors, who are an integral part of the team, and also happen to be the best paid on average of the three, and say we’re going to pluck you out and you alone are not going to be exempt from the overtime rules. I think that would be very disruptive.

And the industry has understandably come upon these arrangements during the three-plus decades when my friends at the Labor Department acquiesced to this arrangement because they had an interpretive regulation. They went out and brought some enforcement actions, and even though it was the Wage and Hour Division themselves that were litigating these cases, they could not convince a single Federal judge that they were right about their interpretation of the statute. Now, I think those Federal —

Sonia Sotomayor:

But, Mr. Clement, those courts were before Chevron.

Paul D. Clement:

Oh, they were, Justice Sotomayor, but —

Sonia Sotomayor:

So you know, I take less value in what the courts said because every one of them said the provision was ambiguous.

Paul D. Clement:

Well —

Sonia Sotomayor:

They just thought that the better argument — this was before Chevron — favored your interpretation.

So I’m — I’m not quite sure that — that it’s accurate to point to those older cases as supporting your position unequivocally.

Paul D. Clement:

So Justice Sotomayor, I think it’s fair to take the older cases with one grain of salt, but I wouldn’t take it with two or three.

And the reason is that Chevron, with all due respect, didn’t invent deference to agencies.

And that’s why I think it’s important to recognize that all those early cases, those were cases that were enforcement actions brought by the Wage and Hour Division.

And they weren’t just cases where a private party was coming in. So I don’t think the judges in that case — those cases, when they were sitting there listening to the Wage and Hour Division lawyers, didn’t have some deference in mind —

Sonia Sotomayor:

I have a very practical question.

Are these sales advisors specially trained in some way? Do they go to mechanic — mechanic school? Do they — how are they trained?

Paul D. Clement:

I — I’m — so I’m going a little bit out of the record here, and I haven’t read anything that’s directly on point.

My strong suspicion, though, is that there are these kind of academies that are put together, including by the National Automobile Dealers Association.

And they would get some training that included both sales training but also some training in some diagnostic.

But I’m — I want to be candid that that’s — that’s —

Sonia Sotomayor:

Because, to be candid with you, it scares me to think that every time I take my car to a dealer, that a non-mechanic is telling me what’s wrong with it.

Paul D. Clement:

Well — and I understand that, but I think that’s actually why these people may be nonmechanics, but they’re not outside the servicing lane.

Sonia Sotomayor:

Well —

Paul D. Clement:

And there are costs for — you know, for the dealers.

This is something that, you know, I’m more familiar with.

There are real costs to the dealership if the original diagnostic is wrong and they end up ordering the wrong part.

All of that is stuff that they do try to minimize. And I do think — to get back to the Chevron point, though — it’s also worth recognizing that two of the cases that have rejected the Labor Department’s position were post-Chevron cases, both the Fourth Circuit decision in Walton —

Ruth Bader Ginsburg:

But now the Labor Department had a chance to rethink.

Originally they said that these people, these salespeople are not exempt.

And then there were these — the letter, the opinion letter and the handbook.

And then in — was it 2011 or 2012?

They said now we’re going to rethink this, and our decision is that we were right the first time, that these people are not exempt.

And that decision is made in the Chevron era when we defer to the expert, and this Department of Labor is certainly expert in this area.

Paul D. Clement:

Well, Justice Ginsburg, I don’t think what the agency did in 2011 merits Chevron deference.

And the Labor Department of course asked for deference, but they’re — they’re studiously vague about what they’d like you to defer to. And if you look at what they did in 2011, I don’t think there’s anything you can really defer to there.

Because up until 2011, the interpretive rights that date back to 1970 had a specific provision, (c)(4), that addressed service advisors, and it explained the rationale why service advisors weren’t exempt.

I don’t think it was particularly persuasive to any of the courts, but at least there was something that addressed service advisors specifically. Now, in 2011 in the process of this notice-and-comment rulemaking, they actually removed that entirely.

So the interpretive regs no longer have anything that addresses the service advisors specifically.

So they’re now relying only on the language in (c)(1) that addresses salesmen and says salesman is somebody who sells a car, which we think is an incomplete recognition of what the statute actually says. But what I’m making is really two points.

I don’t think they’re really entitled to, in 2011, take something out of the regs and then all of a sudden say, well, because we took them out of the regs for notice-and-comment rulemaking, we now get Chevron deference where previously we might not have.

Elena Kagan:

I guess I don’t understand that.

I mean, it’s kind of the case for Chevron deference and notice-and-comment rulemaking.

They clearly considered exactly this question.

They made a judgment on it.

They have effected that judgment within a notice-and-comments setting.

I mean, if that’s not Chevron, what is?

Paul D. Clement:

Well, two things, Your Honor, and then I want to remind you that if this statute is clear, you don’t get to Chevron.

Elena Kagan:

Of course.

Paul D. Clement:

But two things cause Chevron. Here is the first, which is, I would agree with you if what they did is at the end of the notice-and-comment rulemaking, they came up with, say, a new definition of “servicing,” and that informed why they came up with the decision that they did, but that’s not what they did. They came up with a decision that took out the provision that specifically addressed service advisors, and then a single paragraph of the preamble to the notice — to the rules, because there’s nothing in the rules that really addresses it anymore. So the only thing you can look to is the preamble.

It’s on pages C5 and C6 of the Appendix of the red brief.

Paul D. Clement:

There is one paragraph there that is the sum total of their explanation.

I think it’s worth a read, Your Honor, because what it principally says is, we’re doing this because we don’t think the statute covers it, which is not really the kind of explanation that I think ought to get them something other than what the statute means. And then this is my second point —

Elena Kagan:

Yeah.

Because the first one is not so good.

The first — I mean, agencies do this all the time.

They say, this is the way we read the statute.

This is the way we want to read the statute. And this Court has never been in the business of saying, oh, when you think that the statute says something, you don’t get deference.

Whereas when you think the statute is ambiguous but you give other reasons, you do get deference.

I mean, that would be a — a completely unadministrable line to use.

Paul D. Clement:

Well, I don’t — I don’t want to quibble too long with you on that.

I don’t think that would be unadministrable at all.

This Court has recognized the exact same principal in the hour context, which is to say that if all you do is parrot the statute, then that doesn’t really gain you any extra deference, and I think all —

Elena Kagan:

This is not parroting the statute.

This is saying we read this statute in a way which we think is better than another way.

Paul D. Clement:

And so I want to get to my second one.

I would just say, though, I do think it’s worth reading that paragraph on C5 and C6, because particularly in the unique circumstance, and this is the segue to my second point, in this is a unique circumstance where every Court that has looked at the statute, since you first took the position that it meant X, has said, no, it means not X.

To then, just because you had a rule — a notice-and-comment rulemaking, which, by the way, started with the proposal to codify the rule that all the courts had adopted, just because in that process you say, well, we still think we have the better view, I don’t think that’s enough to get you deference.

But even if you disagree with me so far, I mean, I do think Fox, and State Farm before it, say that when an agency is changing its position, it has to account for the reliance interests that have been engendered.

And you’ll see nothing in that paragraph about the fact that, well, for 33 years, we, the Labor Department, agree that this was clear the other way —

Elena Kagan:

So, I mean, the question is on the reliance interests, if you think people have been relying and will be punished for that reliance.

And I guess the question to you is, well, why would that be so? Because this rule applies not retroactively but only prospectively, and there is a particular provision in the Portal-to-Portal Act, which essentially says if you relied on an old interpretation, don’t worry.

You won’t be subject to any damages with respect to that interpretation.

Paul D. Clement:

So two points on that, Your Honor.

The first is, just to be clear, the complaint in this case was filed in September 2012.

It didn’t say and we hereby seek damages only after the May 2011 effective date of the regulation.

So in terms of what we’re facing with here, I mean, you’d at least have to trim it back based on the Portal-to-Portal Act provision. But here’s the reason I think even that’s nonresponsive to what the dynamic here is.

And it’s a pretty unique dynamic, I’ll grant you.

With this acquiescently circuit cases.

I mean, my — my clients are in the Ninth Circuit, but I think this is even clearer. Think about a dealership in the Fourth and the Fifth Circuits, okay? They already have circuit precedent that says that the service advisors are exempt.

Now, if all the agency does in a rulemaking is says, gosh, darn it, we still think we have the better view, what are they supposed to do? Are they really supposed to change their operations overnight and conform to this, even though they have an extant circuit precedent that says they’re right and the Labor Department’s wrong? And that is what, at least in this narrow circumstance, makes this different.

Paul D. Clement:

I mean, if they had come in and say, boy, we are going to come up with a whole new C4, and we are going to have a new explanation for why these guys are exempt, then maybe the auto dealers in the Fourth and Fifth Circuit would think, well, this is a whole new day.

Maybe we better change our practices. But I would have a hard time advising a client in the Fourth or Fifth Circuit that you ought to change your practices, notwithstanding that Walton is still on the books, notwithstanding that the Fifth Circuit decision is still on the books.

Elena Kagan:

Well, I suspect, Mr. Clement, you would say to your clients, you know, you are taking a risk because now the agency has changed their minds.

And so going forward, don’t worry.

You’re off the hook with respect to everything you’ve done in the past.

But going forward, given this doctrine called Chevron Deference, the agency is going to get a thumb on the scales, and it’s very possible that you’re going to, you know, be subject to damages if you keep doing what you’re doing.

Paul D. Clement:

Well, Justice Kagan, I try to be a careful lawyer.

So I probably would tell my clients there is now some additional risk than there was before.

But, boy, if you have a lot of workers who really like the fact that they are compensated mostly by salary and they’re service advisors, I’m not sure I’d go through all of the trouble of reorienting all of them and putting them on a commission basis so we can get on to 7(i) and get the benefit of that exemption just because the Labor Department has told us that after 33 years of acquiescence, that when they had an NPR that told us they were going to codify their acquiescence, that they changed their mind on no better analysis than to simply say, you know, we like our position back from 1970.

I would probably tell them if you want to be really, really careful, you should change your policy. But I like our chances in the courts. And I would tell them as well, that don’t worry too much about Chevron, because I really don’t think the statute is ambiguous at all.

I think the literal reading of the statute makes it crystal clear that if you are a salesman primarily engaged in servicing automobiles, you come within the plain terms of the statute.

“Or” means “or” in that context.

And even if in — in the course of advising them, I would have come across the Reddendo canon last used by this Court in 1918, I would have said, well, don’t worry about that either because what the Reddendo canon, all it does is it says, when you’re reading a statute and it has a bunch of nouns separated by “or” and a bunch of verbs separated by “or” and you apply them all as you should, if you get to something that just is a barking cat, there is just no such thing, then all the Reddendo canon says is, don’t lose a lot of sleep over it.

Go on to the next noun/verb combination and continue to interpret the statute.

Don’t like completely reorder the way you’re thinking about the statute and say now because I came across a barking cat, I could put the first noun with the first verb and the second noun with the second verb and, well, if I had two — three nouns and two verbs, I — I don’t know what I’d do — throw up my hands —

Ruth Bader Ginsburg:

If I may, given the grammar for a moment, just on a fact question: You said there weren’t — the parts and the partsmen and the mechanics, they — they were — they all work no more than a 40-hour work week, and you mentioned 46. There was something in the submissions here that said the service advisors are working a 6:00-a.m.-to-7:00-p.m. shift, and so it would come, on average, to 15 hours more.

Paul D. Clement:

Yeah.

Justice —

Ruth Bader Ginsburg:

Is that incorrect?

Paul D. Clement:

Well, I think what I recall from the complaint is it was — is that it was 7:00 to 6:00, and so that would still get you — if you don’t rotate them around, that might get you a 55-hour workday.

What I was doing on the 46 hours is I think that’s in the National Automobile Dealers Association amicus brief as the average kind of system-wide.

Sonia Sotomayor:

Were — in 1966, were there service advisors in existence?

Paul D. Clement:

Yes, there were.

Sonia Sotomayor:

And were they paid the same way as now? Were they salaried, or commissioned?

Paul D. Clement:

I think there was a mix back then, as there is now.

Sonia Sotomayor:

I went to the Dictionary of Occupations, which was in existence in 1966, and it appears to have different entries for salesmen, service advisors, partsmen, mechanic.

Do I read something from the fact that — or should I read something, or why can’t I read something — from the fact that Congress knew that these different positions existed, they were defined in the Dictionary of Occupations differently, and it decided to use only “salesmen,” which under the dictionary meant a salesperson of cars; a “partsmen,” which was defined the way one would think; and a “mechanic,” but it didn’t include sales advisors.

Paul D. Clement:

Well, here’s what I would say that you should read into that, Justice Sotomayor, which is you should read into the fact that Congress used the term “any” and “any salesmen,” and then modified it not just by selling vehicles, but also by servicing vehicles, to think that Congress didn’t need to separately add the service advisors in, because they were already covered by the language of the statute. I would also —

Sonia Sotomayor:

But they thought it important.

The partsmen could arguably service automobiles because they provide the parts for the automobile, yet Congress found the need to be explicit and to add partsmen.

Sonia Sotomayor:

Why wouldn’t it have — if it’s intended to include service advisors as opposed to mechanics and partsmen, why didn’t it use that occupational term? It’s a term of art.

Paul D. Clement:

Well, Justice Sotomayor, I don’t think if they had omitted the partsmen, I think it would be an awfully hard argument to say that the partsmen are mechanics.

I mean, you could make it, and, you know, I’m not so sure I wouldn’t try, but I think it would be a much harder argument than to say that the service advisors are covered by the term —

Sonia Sotomayor:

Except the dictionary doesn’t use the words — the functions as functions of selling a car.

And — and it doesn’t use the word “service” in a traditional sense.

It says it’s going to evaluate cars, it’s going to give the work to mechanics, but it doesn’t use the word “servicing” a car.

Paul D. Clement:

Which doesn’t, the —

Sonia Sotomayor:

The occupational handbook.

Paul D. Clement:

Well, I mean, I guess I would still say, though, the question — I’d make two points, one I’ve already made, which is I do think, since they used any salesman, I think they thought that they already had it covered. The second thing I would say is I think if they were going to include service advisors into the statute, I think what the statute would say is exactly what it says now, which is it would say “any salesman, service advisor, partsman, or mechanic engaged” — “primarily engaged in” — “in selling or servicing automobiles,” trucks, or farm implements. And what I think that shows is that there’s nothing at all unnatural to say that the service advisors are primarily engaged in servicing automobiles. That is what they do.

They’re part of the servicing process. The way I would think about this is if you imagine a very small automobile dealership and they have one person in the service department.

That person is going to come out.

They’re going to greet the customer. They’re going to work with the customer to diagnose what the problem is. Once they figure out what the problem is, they’ll give them an estimate.

Then if they have to fix a part, they’ll go in the back, they’ll grab the part, then they’ll take the part, and then they’ll put it in the car and they’ll fix the part.

And then they’ll go back and talk to the customer and tell them what they did. Now, in a modern automobile dealership, all of that is done by three different people working as a team.

And it seems to me quite clear that the service advisors are part of that servicing process. Indeed, my friends on the other side I think almost give us that, which is to say — they seem to come close to saying that if the statute said “salesman… primarily engaged in” the servicing process, they would grant us that the — that the sales advisors are covered. I mean, they can quibble if they want, but that’s the way I read the position.

They simply say, but the statute doesn’t say “process.” And so what they have in mind is the statute must mean something very narrow by servicing.

This is that you have to be under the hood or grease under your nails or something like that. And the big problem with that is the partsmen.

The partsmen are no more in the main, under the hood, or getting their nails dirty by actually servicing the automobile, but they are an integral part of the servicing process.

And because they’re covered, I think we know that Congress used the term “servicing” in a more capacious sense and not in some narrow sense that you have to do the servicing personally. If I could reserve the balance in my time.

John G. Roberts, Jr.:

Thank you, counsel. Mr. Bibas.

Stephanos Bibas:

Mr. Chief Justice, and may it please the Court: The FLSA exempts salesmen who sell cars and partsmen and mechanics who service cars.

Service advisors don’t sell cars.

Nor do they service cars, which requires automotive manual labor.

They merely write up paperwork. Petitioner’s argument fails for three reasons: First, selling services is not the same thing as servicing.

Petitioner’s argument is an end-run around the statute’s three direct objects of selling: Cars, trucks, and farm implements.

Selling services is not listed. Second —

Samuel A. Alito, Jr.:

Could you pick up where Mr. Clement left off? What would be the — what is the basis for covering partsmen?

Stephanos Bibas:

Yes, Your Honor.

Several.

The first one is, unlike service advisors, they’re expressly named in the statute. Secondly, they’re working as mechanics’ right-hand men or women.

Stephanos Bibas:

Some partsmen grind down parts or build them up.

Some use calipers and measure how they fit on cars.

Some of them remanufacture parts. They use brake drum lathes and engine head grinders and valve refacers. Even those who are not are involved with — with mechanics in requisitioning and dispensing parts.

Samuel A. Alito, Jr.:

Well, as to those who are not, as to those who obtain parts, don’t change the parts, supply the correct part to the mechanic, they would still be engaged in servicing automobiles, you would say?

Stephanos Bibas:

If they are physically dispensing the parts, handing them over, and doing so in sync with the mechanic’s work.

So take a transmission job.

If an automatic transmission is being redone, the partsman has to know that the mechanic first needs to build the clutch units.

So he first dispenses the clutch disks and plates and the clutch drum bushings. The mechanic is working on them.

The partsman goes back, gets the remainder of the automatic transmission assembly, and goes and hands them to the mechanic.

This is a back and forth.

It’s a mechanic-facing role, not a customer-facing role.

Samuel A. Alito, Jr.:

Yes.

They are — they are more closely connected with the actual repairs of the car.

There’s no question about that.

But they are not engaged in manual labor.

That type of partsman is not engaged in actually doing anything physically with the car. So if they are covered, if that’s — if servicing automobiles includes that, then you have to explain why the line is drawn between that activity and the activity of the — of the employees who are at issue here.

Stephanos Bibas:

I have a couple of responses. The first one is if there’s a line to be drawn, that of course is for the agency. Secondly, I would say that they are engaged in the dictionary definition, repairing or maintaining automobiles.

And in the reply belief, at page 11, Petitioner comes very close to conceding, well, they’re not repairing in the way that repairing — servicing is used in several other statutes that we cite.

But our theory is they are part of this general process, or integral on core sales and service, which they’re adding to the statute. The only way that Petitioner manages to add that to the statute is saying that the phrase “engaged in” somehow broadens the ordinary meaning of servicing. But it doesn’t, for three reasons. The dictionary definitions cited by the government engaged in means employed in or taking part. So then Petitioner falls back and says, well, the FLSA, when it uses “engaged in” means something broader.

They cite a definition provision, 203(j) in the reply brief. And they say that the definition means that “engaged in” includes any closely-related process. So we pulled the actual subsection which says precisely the opposite of that.

It does not provide separate definitions of “produced” and “engaged in producing,” as Petitioner’s quotation suggests.

It defines “produced” equal as “engaged in the production of goods” if the subject is engaged in doing the action. Now, what that section says that actually broadens it is language Petitioner doesn’t quote.

It says, “An employee shall” —

John G. Roberts, Jr.:

I’m sorry.

Can you tell us where you’re reading from, if this is available to us?

Stephanos Bibas:

Okay.

This is 29 U.S.C. 203(j). It’s the Petitioner’s reply brief at page 11.

John G. Roberts, Jr.:

Thank you.

Stephanos Bibas:

But the — they don’t quote the section of full.

If you look at 29 U.S.C. 203(j), it says “An employee shall be deemed to have been engaged in production if employed in a related process.” It is the deeming that sweeps in closely related processes. It’s not the language of “engaged.” And then we look at this Court’s case law interpreting that very provision.

Stephanos Bibas:

So this Court has interpreted that provision as contrasting the narrower phrase, “actually engaged in production,” with the broader phrase, “every process or occupation affecting production.” That’s this Court’s case, Farmers Reservoir, 337 U.S. at 759 to 60. So far from proving that “engaged in” opens the door to the ill-defined “process of servicing,” Section 203(j) and this Court’s precedent confirm that it does not broaden the verb “servicing.” And “servicing” means repairs, maintenance, and similar automotive manual labor. Now —

John G. Roberts, Jr.:

Well, is it just — I suspect it differs from place to place and how many people they have and all that, but why is it — I mean, are these the people that when you go in, and you know, you go and say the car’s making a funny noise or something, do they go out and look at the car, listen to the noise? What’s it — I mean, that seems to me to be more like a process.

And then they go to the mechanic and say, well, you need to do this, or you want to look at this or whatever.

Stephanos Bibas:

So my understanding is —

John G. Roberts, Jr.:

No.

I’m just trying to — you earlier said they’re just doing paperwork, and I’m trying to put a finger on exactly how much they do with that and how much they do the other.

Stephanos Bibas:

Right.

So my understanding is that the important difference between service advisors and partsmen, to answer both questions together, the service advisor is a customer-facing role.

He’s advising the customer, not advising the mechanic.

Goes up to the customer, has a clipboard, records whatever symptoms the customer says; it’s making a squealing noise, or it’s not driving well. Now, only in that sense is he recording something with the automobile.

He’s not going under the hood.

He’s not taking parts apart.

He’s not rendering a final diagnosis on which the work will be based.

He relays that information back.

It’s the mechanic who hooks the car up to the —

Anthony M. Kennedy:

No, no.

You’ve missed —

Ruth Bader Ginsburg:

If —

Anthony M. Kennedy:

You’ve missed a process. And some of us up here are experts in having to go to auto agencies and coming back. (Laughter.)

Stephanos Bibas:

Yes.

Anthony M. Kennedy:

The first thing he does is give you an estimate.

Stephanos Bibas:

Yes.

Anthony M. Kennedy:

And — both in cost and in time, and make recommendations for, well, maybe you should replace it, and it would cost you X dollars. So — so just to say that he puts something and then it’s up to the mechanic, that’s incorrect.

Stephanos Bibas:

You are correct, Your Honor. The — he’s giving a preliminary estimate based on we think the squealing noise means you need a new timing belt.

That’s how much it would cost.

Have you had your brakes done, et cetera? But it goes back to the mechanic.

And the mechanic may come back and say, no, actually, you need an overhaul or something else, after going under the hood.

John G. Roberts, Jr.:

I don’t mean to be too particular, but if there’s a squealing sound and it might be the fan belt, you’re saying he’s not going to open the hood and look at the fan belt?

Stephanos Bibas:

Well, he’s not — he’s not going to be measuring the tension on the fan belt, touching the fan belt, doing any of that.

That’s back in the shop bay.

Stephanos Bibas:

For liability reasons, they can’t do the work in the front.

The insurance requires all of that be done in the back, is my understanding.

Ruth Bader Ginsburg:

What —

Stephanos Bibas:

The question —

Ruth Bader Ginsburg:

But how would you describe what this employee is engaged in? You say he’s not engaged in selling cars and he’s not engaged in servicing cars.

So what is it, what other category is there other than selling and servicing?

Stephanos Bibas:

There are people in auto dealership who do lots of things that might be part of a general process.

The Petitioner leaves the impression that there are three or four kinds of employees and you’re just carving one out from an otherwise exempt unit.

There are at least 20 categories of employees in the service department, as the Machinists’ brief explains.

There are dozens of kinds of employees in the sales Department, in parts, in used cars, in leasing. And so they may be engaged in this selling of services, but even if they are, selling services is not the same as servicing.

Stephen G. Breyer:

Suppose you say — you phone them up and you say, I’d like the servicing Department, please.

Stephanos Bibas:

Yes.

Stephen G. Breyer:

Someone answers the phone, hello.

Who are you? I’m — I’m — I’m the service — what do you call those persons?

Stephanos Bibas:

Service advisor.

Stephen G. Breyer:

Yeah, service advisor.

Are you engaged in servicing? Why would I be here if I wasn’t engaged in servicing? I’d be over in the selling Department. I think you read this either way, frankly. I mean, I — I don’t really — I can’t get too far with language, which is why I have a question which isn’t related to language.

Stephanos Bibas:

I would say if — if you don’t think it’s clear, of course Chevron deference —

Stephen G. Breyer:

Yeah, well, that’s the question.

And I don’t hold you responsible for knowing every word I’ve written in every case, but still, I did in Fox make a point of an administrative rule that I think is important, an administrative law rule, that when an agency changes its mind, it should explain it. And I probably in Fox thought that more than many of my colleagues.

All right? Given my position there, and here we have the agency going along and issuing a manual where they say the opposite of what you’re saying now.

And then we see what happened when after 30 years they changed their mind.

And I — I thought Mr. Clement was right, and if you read their reason, their reason happens to be this: The Fourth Circuit says the opposite, but we think not. Now, I know they didn’t use those words, but I wouldn’t call that or the equivalent a reason.

And — and so is there somewhere in this document, C1 through, you know, 5, is there somewhere a reason why they changed their mind other than, oh, we think this is a better interpretation? Because that doesn’t address the problem that I thought was at issue in Fox.

And if I were to use one word to describe that problem, it is the word they’ve used.

It’s called reliance.

I’m not saying it predominates, but doesn’t the agency at least have to address it?

Stephanos Bibas:

Your Honor, there are about four questions in there, if I might take them in turn. You asked about your own writing and your own position on reliance.

I’d point to your own opinion in Long Island Care, where first of all you took the position that intermediate agency enforcement changes its set of rules, and it’s — Smiley, the Court said the same thing — don’t count as changes of position in the first place.

Stephen G. Breyer:

I — that’s a good point, and I don’t know how absolute we ought to be there. And — and the reason this is now facing me with that problem.

Stephen G. Breyer:

Of course they can’t do everything for every employee in the agency, and they get all kinds of informal advice.

It’s a practical problem. But here we have a kind of extreme, 30 years, manuals, noting explicitly that it’s a change of position.

I mean, it’s not just one part of the agency can’t always be consistent with every other part, so that’s exactly what you put your finger on that I — why I asked the question.

Stephanos Bibas:

Okay.

Stephen G. Breyer:

And the fact that I said it that way that time at most is going to show I’m not always perfectly consistent, which is — I’ll admit.

Stephanos Bibas:

I think Your Honor was also correct in saying in Long Island Care that the notice-and-comment rulemaking process makes any — the potential for any unfair surprise unlikely. It’s also quite noteworthy in the reliance area that, as the professor’s brief pointed out, in the several days after the April 2011 rule was promulgated, even before its effective date, counsel below for Petitioners and a number of other law firms and Petitioners’ amicus in that were all publicizing to the members: This new rule came out.

It’s becoming effective in a month.

You need to take account of that. You also had a component in your question that was about the basis for the rulemaking and for the changes in position.

It’s not just the paragraph at page C5 to C6 of our brief.

The two pages before that, from C3 to C5, have the comments, there were seven comments that addressed this issue; five of them favored the position that the agency —

Sonia Sotomayor:

Could you give me the pages where it’s in your brief?

Stephanos Bibas:

The back of the red brief.

The pages C3 to C6 is the reasoning.

So at the bottom of C5, the agency says “and as commentators point out,” so it’s incorporating by reference the two pages of comments discussion that preceded it.

And on the previous pages, such as page C4, several of the amici — sorry, no, the commenters point out there are line drawing problems here: These are not classic mechanics or servicers.

They are just coordinating.

They have this administrative function.

They’re not — just because they’re integrated doesn’t make them in fact selling or servicing.

In essence —

Stephen G. Breyer:

Why did they change? As the commentators point out, then they go on to say what it is in that sentence that the commentators point out. So I agree, other people agreed with them, sure, that’s true.

But the question is, why the change? And I do get this.

We changed it because we think that we’re more consistent than the statute than we used to think that was consistent with the statute. I’ll go that far.

And now I have to figure out, is that a good enough reason.

Stephanos Bibas:

There’s —

Stephen G. Breyer:

We didn’t think it then, but we think it now.

Stephanos Bibas:

There’s more —

Stephen G. Breyer:

And that’s — is there anything else?

Stephanos Bibas:

There’s more, Your Honor.

On page C5 NELA points out some line drawing problems.

The 1978 opinion letter had some — it had drawn a line between warranty work versus non-warranty work because presumably the warranty work was sold previously and you’re not selling it now.

Stephanos Bibas:

And there are administrative problems with drawing these kinds of lines.

It’s cleaner and simpler for the agency to revisit the issue for the first time with notice-and-comment rulemaking and say, let’s just treat these people as a class and not require bookkeeping of what’s warranty versus nonwarranty work. So when NELA makes the line drawing reference in there, I think that’s what it’s referring to, and the agency is saying, just as a class, they’re not selling vehicles; they’re not servicing vehicles. They’re selling the servicing of vehicles.

Elena Kagan:

If I might: Mr. Clement suggested that you might be seeking damages for pre-2011 conduct.

Are you?

Stephanos Bibas:

Our complaint was filed in September 2012.

The two-year limitations period goes back to September 2010.

We have noted that as for anything before the effective date of this new regulation, May 5, 2011, the Portal-to-Portal Act could be pled and it could perhaps be proven.

That’s an issue for remand; it’s not in this case at this stage.

But Congress has dealt with this issue, and there’s nothing retroactive about applying a 2011 regulation.

Anthony M. Kennedy:

Is that the good-faith reliance provision?

Stephanos Bibas:

Yes, that’s 29 U.S.C. 259.

Anthony M. Kennedy:

And is that applicable — is that an open issue on remand?

Stephanos Bibas:

That’s an issue — it hasn’t been pled; it’s an open issue on remand.

Anthony M. Kennedy:

And that’s both as to pre-2011 and post — post-2011 damages?

Stephanos Bibas:

It’s not — not as to post May 5, 2011, because the opinion letter has no force past the effective date of the new regulation.

John G. Roberts, Jr.:

I’m sorry.

You were about to say there’s nothing retroactive about —

Stephanos Bibas:

About applying a 2011 regulation to post-2011 conduct.

The only — the government’s brief deals with this.

Well, that the kinds of serious reliance interest that count for these purposes are criminal penalties or civil penalties on actions that were already done before the regulation.

And that’s —

John G. Roberts, Jr.:

What about the damages you’re seeking before 2011?

Stephanos Bibas:

The Portal-to-Portal Act may well be a defense in that situation if they can plead and prove reliance.

Ruth Bader Ginsburg:

May I ask —

Anthony M. Kennedy:

But you are seeking damages?

Stephanos Bibas:

We have a damages claim, but they have a defense.

John G. Roberts, Jr.:

Well, but even though the regulation took — the regulation had changed the interpretation that took effect 2011?

Stephanos Bibas:

The notice-and-comment regulation took effect May 5th, 2011.

John G. Roberts, Jr.:

And that changed the Department understanding of the statute.

Stephanos Bibas:

It maintained the former regulation; it rescinded the enforcement materials that said they would not enforce during that period of time.

Ruth Bader Ginsburg:

You —

John G. Roberts, Jr.:

So the Department said — I just want to get — the Department said they would not enforce prior to 2011?

Stephanos Bibas:

Yes.

John G. Roberts, Jr.:

And yet you still think they should be liable for damages?

Stephanos Bibas:

No, there’s the Portal-to-Portal Act —

John G. Roberts, Jr.:

Well, putting aside — that’s a defense.

You’re saying, well, you might win on that or you might not.

Right?

Stephanos Bibas:

Right.

John G. Roberts, Jr.:

But you still think they should be liable for damages when the Department said they were not going to enforce the position that you’re articulating.

Stephanos Bibas:

Our position is that the defense may indeed preclude that.

John G. Roberts, Jr.:

Well, I know, but I’m asking — so in other words, they may not succeed in their Portal-to-Portal Act defense, but you nonetheless think when the Department says, we’re not going to enforce the view, that they’re liable for damages because they didn’t take the opposite view.

Stephanos Bibas:

We are willing to concede the pre-2011 damages.

Anthony M. Kennedy:

Is that at this point or is that clear from your — has that been your position all along?

Stephanos Bibas:

It’s never been pleaded or proved.

Ruth Bader Ginsburg:

This hasn’t been litigated at all.

Stephanos Bibas:

It hasn’t been litigated.

Ruth Bader Ginsburg:

We’re dealing with the threshold issue of how do we categorize these people.

Stephanos Bibas:

Yes.

Ruth Bader Ginsburg:

And on that, do you know — I had asked Mr. Clement — what is the universe of employees we’re talking about? How many of these people would not come out under the — what is it, 701(i) because they are commissioned employees?

Stephanos Bibas:

Well, there’s a wide range of compensation methods; however, the — most of the — the range of salaries we’re talking about is a broad dispersion.

The bottom 10 percent of service advisors, based on the figures I’ve seen, make less than one-and-a-half times the minimum wage.

There are entry-level jobs at 22,000 a year.

Those are the people who are going to be affected by this ruling.

Those are the only ones who would not qualify for a 207(i) if it were restructured for commissions. So we’re not talking about the highly paid ones who the dealerships could exempt under 207(i) by structuring it.

We’re talking about people who are — who are just above the minimum wage, less than one-and-a-half times above. If I might deal with a few questions this Court raised earlier, one of — the partsmen issue, I’d like to offer an analogy on partsmen.

Petitioner’s position is as if you have a statute that speaks of someone, a doctor engaged in operating, that makes sense.

If the statute says, doctor or nurse engaged in operating, you’d understand you don’t normally think a nurse operates, but the O.R. nurse is close enough. What Petitioner is saying, if you exempt the O.R. nurse, you also have to exempt the hospital intake clerk who does paperwork, maybe even the hospital intake nurse who takes vital signs.

There is no reason you have to expand beyond the operating room, the person who is right there handing the utensils and scalpels over to go all the way out to the front office —

Samuel A. Alito, Jr.:

I’d feel more comfortable about this if I understood the criteria that Congress applied in choosing the employees who are covered by this provision.

Samuel A. Alito, Jr.:

So take the case of the — the salesperson who is not working on commission.

Why did Congress include that employee within this category? And what is different about employees of that nature from service advisors who are not working on commission?

Stephanos Bibas:

The understanding of Congress, as discussed in our brief, was that salesmen are selling anywhere they go.

Back in the ’60s, they would be selling off-hours.

They’d be going to people’s homes and when they met people at church or clubs or wherever. And that mechanics and partsmen, just as Justice Breyer alluded to, were going out and had to work in the field, at least in some context, and it was hard to track overtime with their regular hours and off-site work. In response to a few other Court problems —

Sonia Sotomayor:

The salesman —

Samuel A. Alito, Jr.:

All of that was true —

John G. Roberts, Jr.:

I’m sorry.

Justice Alito is talking.

Samuel A. Alito, Jr.:

All of that was true in 1966.

That really isn’t — maybe it was.

It’s not consistent with my — what I would have imagined car salesmen are doing or partsmen are doing.

Stephanos Bibas:

May I answer?

John G. Roberts, Jr.:

Yes, and then Justice Sotomayor has a question.

Stephanos Bibas:

Yes. If the universe of employees who meet the exemption now has shrunk so it’s narrower than the original purposes, that is a reason for Congress to repeal or restrict it.

It is certainly not a reason for the courts to expand it.

Sonia Sotomayor:

It was more of Justice Alito’s.

When did automobile salesmen travel? When did mechanics and partsmen for automobile leave the — the job —

Stephanos Bibas:

Congress, the Senate discussed that expressly in the ’60s.

I don’t know when that changed.

John G. Roberts, Jr.:

Thank you, counsel. Mr. Yang.

Anthony A. Yang:

Mr. Chief Justice, and may it please the Court: I’d like to address three points, as well as answer some additional questions.

The first is, I’d like to discuss the text of the statute as it was enacted in 1974.

Congress enacted the statute in 1974 and separated salesmen from partsmen and mechanics in subsection or clause B. Second, I’d like to discuss Petitioner’s argument that selling services is being primarily engaged in servicing automobiles.

As a textual matter, we think that’s just plain wrong. And, finally, I’d like to discuss really what’s at issue here.

Petitioner has made a lot of policy arguments about high-paid commission, people who are salesmen, they’re incentivized to sell.

Petitioner has essentially conceded in his argument that what we’re really talking is people who aren’t paid on commission. Those people are who Congress was concerned about, people who fall outside of 207(i), and there’s no reason to expand 213(b)(1)(A) to cover them. So first, when Congress enacted the statute in 1974, and this — you can see this on page 2A of the government’s appendix, you can see the difference of what Congress did. Prior to 1974, there was a single exemption, salesmen, partsmen and mechanics.

And that applied to several different types of vehicles.

It included applying to trailers and aircraft, as well as automobiles. In 1974, Congress decided to eliminate the exemption for partsmen and mechanics for trailers and aircraft.

The legislative history is quite clear on this.

Anthony A. Yang:

When they did that, they created subsection B. So they preserved the exemption for salesmen. But look at subsection B, this is on top of page 3A, it says “Any salesman primarily engaged in selling trailers, boats, or aircraft.” That shows you that Congress was — linked salesmen to selling and, by implication, partsmen and mechanics to servicing.

Because when you look at (A), the only time servicing comes in is when partsmen and mechanics were there. So I think as a textual matter, that shows you what Congress was trying to do. Second, “selling” is not servicing. Petitioner says that you’re engaged in the selling process or the — and the servicing process because you’re selling servicing.

If you are selling plastic surgery, you’re not ever thought to be engaging in plastic surgery.

You’re selling it. Maybe you might be seen to be part of the process of servicing, but it’s not natural to say that you’re engaged in servicing. And I think it’s telling that Petitioner has to rely on Section 203(j), as my brother suggested, 203(j) is a definitional section.

The only way Petitioner gets to the suggestion that doing things that are essential to the production is production is because the statute says, “For the purposes of this chapter, it shall be deemed production.” And as my brother explained, “Farmers Reservoir,” and this is a quote, “explains that production in the normal sense is quite different rather than production in the special sense defined here.” What we’re talking about is the normal sense of being engaged in servicing.

That means you are actually taking part in the repairing or the providing maintenance for automobiles.

Service advisors do not do that. Moreover, Petitioner’s reading, if we really do expand servicing to extend to people who are engaged in the process, why wouldn’t you cover salesmen who only sell warranties, salesmen who only sell the antirust coating under the car, salesmen at the counter that sell the key fobs and other things that are branded with the dealership’s logo? They’re all engaged in selling automobiles in the sense that you got to advertise, you got to sell.

This promotes the sale of automobiles. That’s wrong. The mechanic that simply fixes the HVAC system or fixes the guts, were they engaged in servicing automobiles? Everybody at a dealership, under Petitioner’s view, is essentially engaged in selling or servicing because they’re engaged in the process of selling or servicing automobiles.

That’s just wrong. Line drawing is necessary.

Now, we depart a little bit from Respondents in that we think the statute is ambiguous, right? I mean, if the statute had just said, salesmen engaged in selling or servicing, you’d be forced to say, well, Congress must have meant “salesmen” instead of — intended a distributive meaning when they included “salesmen and partsmen and mechanics.” But the line drawing that has to be done here — if you acknowledge that line drawing has to be done, salesmen, the service advisors are way down the line. They rely on partsmen, but partsmen, as we explained, are working hand-in-hand with mechanics.

So they’re logically understood to be servicing, but a salesman is not logically understood to be servicing. So what’s key about the canon of Reddendo and the recognition of distributive phrasing is not that you have to read the statute that way, but what it does suggest is that there is no such basic rule of grammar that requires the use of “or” to link every antecedent noun with all antecedent gerunds.

The question is whether it’s ambiguous. So if we get into ambiguity, the agency has construed this statute in notice-and-comment rulemaking. That is entitled to deference. Now, before —

Elena Kagan:

Mr. Yang, why was it — I mean, for the most part this explanation seems like not the world’s best explanation to me but perfectly adequate.

But Mr. Clement does have a point that somehow the agency took out this more specific explanation and I — I guess if I were just looking at the explanation itself I would say, you know, not an A-plus job, but fine.

But it is a little bit perplexing as to why they took this out.

Why was that?

Anthony A. Yang:

Well, we don’t have this in the record, but I have been informed that there was an inadvertent mistake in drafting.

All of these are in Subsection C of the statute.

Elena Kagan:

Wow.

I really did not expect expect you to say that.

Anthony A. Yang:

It was inadvertent, but it doesn’t make a difference, and I’ll explain why. The prior (c)4 — they — they redid (c)1, 2, and 3, and they just didn’t reprint 4 because it hadn’t changed at all.

So — but it — the reason it doesn’t matter is what (c)4 said before —

Elena Kagan:

Not an A-plus explanation. (Laughter.)

Anthony A. Yang:

It’s a passing grade. But what I would say is in (c)4, before — this is reproduced on page 6a of the appendix to our brief.

It says sales advisors aren’t included unless they’re primarily engaged in the work of a salesman, partsman, or mechanic as defined. So what really does the work is the definition of “salesman.” And the definition of salesman is what they reenacted as notice-and-comment rulemaking with some modifications to take care of changes since the 1974 amendments. The definition of salesmen covered — and they say “as used in Section 13(b)10,” so they’re construing the term “salesman” as used in this statutory provision.

It means “someone who is engaged in making sales or obtaining orders for the sales of vehicles.” Service advisors don’t fall under that category.

So they’re not salesmen within the meaning of the statute as it has been construed.

They’re salesmen, sure, in kind of a general sense.

But they’re not salesmen as construed in this provision, because they’re not engaged in selling automobiles. Not the perfect, but a passing grade for — for the agency.

Stephen G. Breyer:

Now, that’s — maybe this problem in my mind will go away, but I — I’m with you up to a large point.

Stephen G. Breyer:

I think it is ambiguous.

I think there is no longer any reason at all for having the mechanics exempt, but they’re there.

And so then, with the service people, an agency could reason, well, let’s not make a bad situation worse, which is what you say. Or they could reason the opposite: These are virtually identical, why not treat them the same. Now, problem.

30 years?

Anthony A. Yang:

Right.

Stephen G. Breyer:

And so the real question is don’t they have to address this?

Anthony A. Yang:

Well, they do have —

Stephen G. Breyer:

Well, do they? I mean, you know, I guess I could — I’ll read that again and — and try to see do they really address it, and — but that’s where I’m having a problem. And it isn’t just — he’s quite right, your colleague, where he says this isn’t just a simple reversal of a regulation.

It isn’t that.

They never really had the regulation acquiescing.

And they’ve had to find things in handbooks and so forth.

But the practical fact is everybody thought the law was what the Court said.

And so now suddenly, in the — in —

Anthony A. Yang:

Well, not —

Stephen G. Breyer:

This is the problem, because after all, different administrations have different policies.

And there’s some protection in the ABA from preventing too big a shift too quickly, the protection being, address it.

Address it.

Think about it.

Anthony A. Yang:

I think what’s necessary is for the agency to recognize that it had a prior position, which it did here.

It also has to explain what it’s doing, which it did here.

It explained how it understood the statute to be most appropriately read. Now, to the extent you also have to — you’re suggesting that the agency has to explain why its prior interpretation was wrong —

Stephen G. Breyer:

No.

No.

Anthony A. Yang:

I don’t think —

Stephen G. Breyer:

Because I don’t think either would be wrong.

But they have to explain why are we, despite 30 years of —

Anthony A. Yang:

Right.

Stephen G. Breyer:

— going long with the other, why now do we think that was a mistake?

Anthony A. Yang:

I think you can — you can — if that were a requirement, we don’t think it’s necessary. But if it were, you could easily see the answer by reading the — the 1978 opinion letter in conjunction — if I can follow — finish.

Thank you. The 1978 opinion letter was based on the theory that service advisors are selling, they’re doing selling.

Anthony A. Yang:

And so as a result, they said, well, when you’re working on service under warranty.

You’re no longer selling, so you don’t count for the exemption. Only when you’re selling nonwarranty services —

John G. Roberts, Jr.:

Thank you, counsel.

Anthony A. Yang:

Thank you.

John G. Roberts, Jr.:

Mr. Clement, four minutes.

Paul D. Clement:

Mr. Chief Justice, and may it please the Court: Just a few points in rebuttal, starting right where Justice Breyer and my friend from the SG’s office left off.

Which is to say, I think, you know, if you look at what they did in the preamble, they did what agencies do every day, which is first they say, we have some comments that say this; we have some comments that say that.

They simply relate what the comments were. Then there’s the money paragraph that explains what they actually did, what justifies their decision, and there’s nothing in there about reliance interests at all.

So if there’s anything to your Fox position, then I think this does not get a passing grade; it gets a flunking grade. And what I’d like to just offer as a potential comparison: As you may know, the agency has also revisited the issue you addressed in Long Island Care, and they did that through notice-and-comment rulemaking.

And it’s worth a quick look to show what night looks like and what day looks like, because that is all about the reliance interests of the fact that they treated this one way for many, many years, and there are sections of that preamble explaining when they change it how this is going to impose costs and why those costs are justified.

It’s — it’s — it is a stark example of how the agency should behave when they’re changing the position. And here’s the last thing to add about this: It also — if they give that kind of analysis, it gives some reason for people, especially in the Fourth and the Fifth Circuit, who already have a binding circuit precedent that say that service advisors are not — are exempt, it gives them a reason to maybe think about changing. But when they do nothing to address the reliance interests and they just say, gosh, we really think we were right all along, why is anybody, especially in the Fourth and Fifth Circuit, supposed to change the way they’re doing things, and that’s the only way that they say that they can even possibly get within the protection against massive, retroactive damage liability. So I think, in a sense, the State Farm principles or the Fox principles would work hand-in-hand with this concern about retroactivity.

Sonia Sotomayor:

So is it okay if we just send it back?

Paul D. Clement:

Sure.

As long as it means that there is no retroactive liability.

I mean, I —

Sonia Sotomayor:

They’ve already conceded there’s not.

So they’re — they’re not going to claim any.

Paul D. Clement:

No, no.

What — no, no.

What they won’t concede — we’re not talking about retroactive liability.

I’m talking about liability that predates when they clearly explained why they changed their position, which would be sometime in late 2016 as opposed to in 2011.

So — so in that sense, it does make a big difference. Just a couple of other textual points, because I do think you actually don’t even need to get to any kind of deference issue. My friend on the other side — I think we have a better reading of 203(j), if you want to look at it, because Congress specifically — it’s a definition session.

Everything in there is what they deem things to mean.

And then they deem “production” to mean one thing, and then they mean “engaged in production” to mean something broader. But in all events, my friends concede that “engaged in” means taking part.

Well, the service advisors take part in servicing, just like the partsmen take part in servicing. Mr. Chief Justice, if you have any questions about what the service advisors do, a good place to look is the complaint.

JA40, they tell you what they are — they evaluate the service and/or repair needs of the vehicle, and they write up an estimate for the repair and services.

That, to me, seems to be taking part in the servicing process.

I’m not so sure that’s not more integral to the servicing process than what the partsmen do. The last point I’d like to make here is that there is a practical anomaly that will be created with siding with the other side, is that the best-paid people in the servicing departments will now be the only ones that are not exempt. On average, the service advisors make about $66,000 and — a year.

The average partsman makes $51,000 a year.

The average mechanic makes $59,000 a year. Now, I’d hate to be the person that has to go explain to the partsmen and the mechanics why it is that their better-paid service advisor colleagues are the only ones that aren’t exempt from the FLSA overtime provisions and are going to get a windfall in litigation like this.

Paul D. Clement:

That would be —

Ruth Bader Ginsburg:

Because they would be exempt to the extent they paid on commission which, as I understand it, most of them —

Paul D. Clement:

Yes, Justice Ginsburg.

But to repeat my answer to you, there are people right now who are service advisors who are not paid principally on a commission, and they like it that way.

And the consequences of ruling in the other side’s favor is that automobile dealerships are going to have to go to these people because FLSA provisions are not waivable.

And they’re going to have to say, look, I know you like it this way, but we’ve got the Supreme Court decision.

We have to rejigger things.

You get into this different 7(i) exemption position, so you can no longer be paid the way you’ve been paid for the 30-plus years the way the Labor Department has been acquiescing in this, save the Ninth Circuit below, and find that service advisors are salesmen principally involved in servicing automobiles. Thank you.

John G. Roberts, Jr.:

Thank you, counsel. The case is submitted.