The Supreme Court ordered the Department of Labor to clarify its overtime regulations on Monday.
Six justices on the high court asked a lower California court to revisit the validity of Labor Department rules that classified service consultants as employees deserving of overtime pay. A California auto dealership had challenged the interpretation of the rule before federal courts after advisers sought overtime pay. Associate Justice Anthony Kennedy said in the majority opinion that the department’s actions were not necessarily protected by judicial deference because they may have been "procedurally defective."
"One of the basic procedural requirements of administrative rulemaking is that an agency must give adequate reasons for its decisions," the opinion said. "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."
The Court overturned the California-based 9th Circuit Court of Appeals ruling upholding the inclusion of the service advisers in overtime regulations. The Department of Labor declined comment.
The justices said that the department failed to provide an adequate justification for why it sought a major change in traditional interpretations of the law. A Texas-based federal Appeals Court, for example, upheld the Obama administration’s changes to union election law out of deference to the executive branch. The court ruled that labor regulators at the National Labor Relations Board, a labor arbiter that oversees union voting, acted appropriately when it changed election rules to speed up the process and expand the amount of personal information provided to labor organizers.
The Supreme Court said that the Department of Labor failed to show that it had a pressing reason to change overtime rules to include the advisers in the California case.
"Agencies are free to change their existing policies as long as they provide a reasoned explanation for the change," the court ruled.
Associate Justice Clarence Thomas authored the dissent, joined by Associate Justice Samuel Alito. They agreed with the majority that the department failed to offer a reasonable defense for its new rule, but objected to Kennedy’s decision to remand the case to lower courts.
"I disagree with [the majority’s] ultimate decision to punt on the issue before it," Thomas wrote.
This is not the first setback that the Obama administration has suffered at the hands of the court; in 2013, it unanimously ruled that President Obama had unconstitutionally used his recess powers to appoint judges to the NLRB.
Heather Greenaway, spokesman for the Workforce Fairness Institute (WFI), said that the court has been a necessary check on regulators.
"The U.S. Supreme Court has served as the largest check on an out-of-control executive branch hell bent on paying back labor bosses for campaign support and contributions," Greenaway said in a release. "This is more proof that the White House and its allies have long turned their back on workers and small businesses, while using their immense powers to advance policies that benefit a special interest to the detriment of our economy and jobs."
The case will return to the local level, which will revisit the interpretation of the agency’s regulations.