I was recently listening to an oral argument of a Federal Circuit case that was argued in August where one of the parties brought up ENCINO MOTORCARS, LLC v. Navarro, No. 15-415 (U.S. June 20, 2016). The case was mentioned with reference to an obviousness decision by the PTO and why the PTO, as an administrative agency, must provide an explanation of its decisions — if the PTO fails to provide any analysis, then its action should be deemed arbitrary and capricious under 5 U.S.C. §706(2)(A). I think the most pertinent part of Encino that would be of interest to patent practitioners would be:
One of the basic procedural requirements of administrative rulemaking is that an agency must give adequate reasons for its decisions. The agency “must examine the relevant data and articulate a satisfactory explanation for its action including a rational connection between the facts found and the choice made.” Motor Vehicle Mfrs. Assn. of United States, Inc. v. State Farm Mut. Automobile Ins. Co., 463 U. S. 29, 43 (1983) (internal quotation marks omitted). That requirement is satisfied when the agency’s explanation is clear enough that its “path may reasonably be discerned.” Bowman Transp., Inc. v. Arkansas-Best Freight System, Inc., 419 U. S. 281, 286 (1974). But where the agency has failed to provide even that minimal level of analysis, its action is arbitrary and capricious and so cannot carry the force of law. See 5 U. S. C. §706(2)(A); State Farm, supra, at 42–43.
Agencies are free to change their existing policies as long as they provide a reasoned explanation for the change. See, e.g., National Cable & Telecommunications Assn. v. Brand X Internet Services, 545 U. S. 967, 981–982 (2005); Chevron, 467 U. S., at 863–864. When an agency changes its existing position, it “need not always provide a more detailed justification than what would suffice for a new policy created on a blank slate.” FCC v. Fox Television Stations, Inc., 556 U. S. 502, 515 (2009). But the agency must at least “display awareness that it is changing position” and “show that there are good reasons for the new policy.” Ibid. (emphasis deleted). In explaining its changed position, an agency must also be cognizant that longstanding policies may have “engendered serious reliance interests that must be taken into account.” Ibid.; see also Smiley v. Citibank (South Dakota), N. A., 517 U. S. 735, 742 (1996). “In such cases it is not that further justification is demanded by the mere fact of policy change; but that a reasoned explanation is needed for disregarding facts and circumstances that underlay or were engendered by the prior policy.” Fox Television Stations, supra, at 515–516. It follows that an “[u]nexplained inconsistency” in agency policy is “a reason for holding an interpretation to be an arbitrary and capricious change from agency practice.” Brand X, supra, at 981. An arbitrary and capricious regulation of this sort is itself unlawful and receives no Chevron deference. See Mead Corp., supra, at 227.
ENCINO MOTORCARS, LLC v. Navarro, No. 15-415 (U.S. June 20, 2016)(slip opinion at pages 9-10)
The entire decision of ENCINO MOTORCARS, LLC v. Navarro, No. 15-415 (U.S. June 20, 2016) is shown below.
ENCINO MOTORCARS, LLC, Petitioner,
HECTOR NAVARRO, et al.
No. 15-415.Supreme Court of the United States.
Argued April 20, 2016.Decided June 20, 2016.KENNEDY, J., delivered the opinion of the Court, in which ROBERTS, C. J., and GINSBURG, BREYER, SOTOMAYOR, and KAGAN, JJ., joined. GINSBURG, J., filed a concurring opinion, in which SOTOMAYOR, J., joined. THOMAS, J., filed a dissenting opinion, in which ALITO, J., joined.
JUSTICE KENNEDY, delivered the opinion of the Court.
This case addresses whether a federal statute requires payment of increased compensation to certain automobile dealership employees for overtime work. The federal statute in question is the Fair Labor Standards Act (FLSA), 29 U. S. C. § 201 et seq., enacted in 1938 to “protect all covered workers from substandard wages and oppressive working hours.” Barrentine v. Arkansas-Best Freight System, Inc., 450 U. S. 728, 739 (1981). Among its other provisions, the FLSA requires employers to pay overtime compensation to covered employees who work more than 40 hours in a given week. The rate of overtime pay must be “not less than one and one-half times the regular rate” of the employee’s pay. § 207(a).
Five current and former service advisors brought this suit alleging that the automobile dealership where they were employed was required by the FLSA to pay them overtime wages. The dealership contends that the position and duties of a service advisor bring these employees within § 213(b)(10)(A), which establishes an exemption from the FLSA overtime provisions for certain employees engaged in selling or servicing automobiles. The case turns on the interpretation of this exemption. (more…)