Auer v. Robbins

Background

A statute under the Fair Labor Standards Act of 1938 exempted "bona fide executive, administrative, or professional" employees from overtime pay requirements. In determining whether an employee was exempt under the FLSA, the US Department of Labor and the Secretary of Labor applied a "salary-basis" test in 1940 that was not applicable to state and local employees. In 1974, Congress extended the Fair Labor Standards Act of 1938 to cover all public-sector employees. In order for an employee to be exempt under the salary-basis test, the employee must earn a specified minimum amount on a salary basis. Employees would be considered paid on a salary basis if the employee routinely received a weekly pre-determined payment that was not subject to reduction because of any variations in the "quality or quantity of the work performed".

Petitioners in this case were sergeants and a lieutenant employed by the St. Louis Police Department in Missouri. Petitioners sued the respondents, members of the St. Louis Board of Police Commissioners and sought overtime pay they believed were owed to them under the Fair Labor Standards Act. Petitioners argued they did not meet the requirements of the Secretary's salary-basis test because the St. Louis Metropolitan Police Department Manual stated that petitioners' salary could be reduced for a variety of disciplinary infractions, including the quality or quantity of the work performed. Petitioners also argued their duties were not of an executive, administrative or professional nature as required under the salary-basis test.

The District Court found for the respondents, ruling that petitioners were paid on a salary basis. On appeal, the Eighth Circuit Court of Appeals affirmed in part and reversed in part. While petitioners had argued the police department manual made it a possibility for employees to be deducted pay for disciplinary infractions, all employees are subject to such deductions and nonexempt under the FLSA. Specifically, the petitioners highlighted the fact that one sergeant was actually subjected to a disciplinary deduction. The Court of Appeals rejected the petitioners' argument. The Court held that a "one-time incident" in which disciplinary deductions were executed against one sergeant was a unique circumstance that did not defeat the salaried status of an employee. The Court of Appeals held both the salary-basis test and the duties test were satisfied to all petitioners. The Supreme Court granted certiorari.

Issue

There are two distinct issues in this case.

First, the court asks whether the Fair Labor Standards Act's rule regarding overtime pay for private-sector employees applies equally to public-sector employees.

Second, assuming that the first question is answered in the affirmative, which it is, the court asks whether the Secretary of the Department of Labor has reasonably interpreted the salary-basis test to deny a public-sector employee salaried status (and thus grant him overtime pay) when their compensation may "as a practical matter" be adjusted in ways ostensibly inconsistent with the letter of the test. Given that the police manual provides for disciplinary deductions in pay for the police officers, generally sufficient to preclude exempt status under the FLSA, the question is whether such possible, but unlikely, disciplinary deductions in pay (as provided for by the police manual) is enough to render petitioners' pay "subject to" disciplinary deductions specifically within the meaning of the salary-basis test.

Decision

The Supreme Court agreed with the Court of Appeals in holding that both the salary-basis test and the duties test were satisfied as to all petitioners. The Supreme Court dismissed the petitioners argument that the regulations concerning "disciplinary actions" should not apply to public sector employees and instead deferred to the Secretary of Labor's regulations by citing Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. (1984) because it was "based on a permissible construction of the statute." The Court denies the petitioners argument that public sector employee pay is distinguished from private sector employee pay because in the public sector enforcing compliance with work rules is a necessary component of effective government. Thus reinforcing the 1974 extension of the FLSA to cover virtually all public sector employees.

While Chevron refers to the interpretation of an agency's enabling statute, here the court is giving deference to the agency in interpreting its own rules and regulatory schemes. The Court reasoned that, "because the salary-basis test is a creature of the Secretary's own regulations, his interpretation of it is, under our jurisprudence, controlling unless, 'plainly erroneous or inconsistent with the regulation.'" Further, the fact that the Secretary's interpretation came in the form of a legal brief did not make it unworthy of deference; because the Secretary's position was "in no way a post hoc rationalization...to defend past agency action against attack." Under the Secretary's view, it is not enough that the police policy manual includes some specified penalties that involve disciplinary deductions in pay. This is because the manual lists 58 possible rule violations and a range of penalties, therefore, not effectively communicating that pay deductions are or should be an anticipated form of punishment. Therefore, the court states that "no clear inference can be drawn as to the likelihood of a sanction being applied to employees such as petitioners."

Additionally, the Supreme Court states that the even if the petitioners had been correct in their arguments, the petitioners did not follow the proper procedures. Under the APA, petitioners should have gone through the regulatory appeals process instead of directly appealing to the courts.

Legacy

Auer deference gives agencies the highest level of deference when interpreting their own regulations. However, deference is warranted only when the language of the regulation is ambiguous, unless it is plainly erroneous or inconsistent with the regulation. The Auer case expands Chevron deference by giving the agency the highest deference.

In Chevron, there is a two-step standard of review. The Chevron standard dealt with “a formal rationale for judicial deference to an agency's interpretation of a statute.” Auer did not adopt the two-step process for review in Chevron, but rather, a single level standard of deference “to an agency's permissible interpretation of its regulation.” Auer deals with the agency’s interpretation of its own regulation, as opposed to the agency’s interpretation of the statute as in Chevron.

In Auer, the claim is not that the regulation is substantively unlawful, or even that it violates a clear procedural prerequisite, but rather that it was arbitrary and capricious not to conduct amendatory rulemaking (which might have resulted in no change). There was no basis for the court to set aside the agency’s action prior to any application for relief addressed to the agency itself. The proper procedure for pursuit of Respondent’s grievance was set forth explicitly in the APA: A petition to the agency for rulemaking.

The impact of “Auer deference” has continued to grow with the expansion of the administrative state.