Respondents are "service advisors" at Mercedes-Benz of Encino (California).^[4] Their primary job responsibilities involve identifying service needs and selling service solutions to the dealership's customers. Respondents brought suit against the dealership under the Fair Labor Standards Act (FLSA), seeking time-and-a-half overtime pay for working more than 40 hours per week.^[5]

The FLSA exempts from its overtime requirements "any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles." The district court denied the claims, concluding that a service advisor is a "salesman . . . engaged in ... servicing automobiles" and therefore exempt from the FLSA's overtime requirements. The Ninth Circuit reversed, citing a 2011 Department of Labor interpretive regulation stating that service advisors are not exempt under §213(b)(10)(A) because they do not personally service automobiles. This finding was contrary for findings from the Fourth and Fifth Circuits, several district courts, and the Supreme Court of Montana," all of which held that service advisors are exempt employees.

Encino petitioned to the Supreme Court, who granted certiorari, and heard the case on April 20, 2016. The Court ruled on June 20, 2016, giving a 6-2 decision to vacate the Ninth Circuit's decision and remanded the case back to that court. The majority decision was provided by Justice Anthony Kennedy, joined by Justices Roberts, Ginsburg, Breyer, Sotomayor, and Kagan. Kennedy's opinion focused on whether the 2011 DOL regulation qualified for the "Chevron deference", defined by Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. and which states that courts must defer to regulations made by the appropriate administrative agency granted powers by Congress on some matters. Kennedy stated that past cases related to the Chevron deference, such as FCC v. Fox (2009) and National Cable & Telecommunications Ass'n v. Brand X Internet Services (2005), determined that this deference is only allowable when agencies make these regulations with "good reasons for the new policy"; the 2011 DOL policy change, the Court determined, was a complete change from a 1978 DOL policy, and the DOL did not provide adequete rationale for its change. As such, the Court ruled that the Ninth could not consider the 2011 DOL ruling as part of its decision. Kennedy's decision otherwise did not rule on the other merits of the case.

Justice Clarence Thomas wrote a dissenting opinion, joined by Justice Alito. In the dissent, Thomas agreed that the 2011 DOL ruling did not enjoy Chevron deference, but believed that the Supreme Court should evaluate the other merits of the case at that time, and in his opinion, the FLSA should be read to have service advisers as exempt from overtime as they are "primarily engaged in ... servicing automobiles", and suggested reversal of the Ninth Circuit's decision on this basis.^[2][6]

The Ninth Circuit still found against Encino during the rehearing, ruling that the service advisors were not exempt, basing their decision primarily on the legislative history of FLSA.^[7]

Encino again appealed to the Supreme Court, which agreed to hear the case in September 2017.^[8] The case provides the unusual example of the same case being heard a second time, allowing a view into the new court's attitude toward federal rulemaking.^[9]

The Court heard oral arguments January 17, 2018. The court issued its ruling on April 2, 2018, in a 5–4 decision that reversed the Ninth Circuit and affirmed that service advisors are to be considered exempt under FLSA.^[3] The majority opinion was written by Justice Clarence Thomas joined by Justices Roberts, Alito, Kennedy, and Gorsuch, while Justice Ruth Bader Ginsburg wrote the dissenting opinion joined by Justices Breyer, Sotomayor, and Kagan.

• Text of Encino Motorcars v. Navarro, 579 U.S. ___ (2016) is available from: CourtListener  Google Scholar  Justia  Oyez (oral argument audio) 
• Text of Encino Motorcars v. Navarro, 584 U.S. ___ (2018) is available from: CourtListener  Justia  Oyez (oral argument audio)  Supreme Court (slip opinion)