Today the Supreme Court decidedChristopher v. SmithKline Beecham Corp., which concerned whether pharmaceutical sales representatives are subject to the “outside sales” exemption from the Fair Labor Standards Act’s overtime requirements. The Department of Labor had claimed pharma reps are not exempt, but how its regulations applied to pharma reps was unclear and the Department’s position and jusitifcation had changed over time. As a consequence, one issue for the Court was whether the government’s interpretation of its own regulation qualified for Auer deference, which grants agencies Chevron-like deference for their regulatory interpretations.
The Court in Christopher sided with the petitioners, 5-4, rejecting the government’s interpretation. in reaching the holding the majority explained that the agency’s interpretation of its own regulation would not qualify for Auer deference, assuming arguendo that Auer should remain good law. This is significant because the opinion could be read as narrowing the application of Auer (much as Mead arguably narrowed the application of Chevron), and may further signal a reconsideration of Auer is in the offing. Here’s an excerpt:
Although Auer ordinarily calls for deference to an agency’s interpretation of its own ambiguous regulation, evenwhen that interpretation is advanced in a legal brief, . . . this general rule does not apply in all cases. Deference is undoubtedly inappropriate, for example, when the agency’s interpretation is “‘plainly erroneous or inconsistent with the regulation.’” . . . And deference is likewise unwarranted when there is reason to suspect that the agency’s interpretation “does not reflectthe agency’s fair and considered judgment on the matter in question.” . . . This might occur when the agency’s interpretation conflicts with a prior interpretation, . . . or when it appears that theinterpretation is nothing more than a “convenient litigating position,” . . . or a “ ‘post hoc rationalizatio[n]’advanced by an agency seeking to defend past agency action against attack.”
In this case, there are strong reasons for withholding the deference that Auer generally requires. Petitioners invoke the DOL’s interpretation of ambiguous regulations to impose potentially massive liability on respondent for conduct that occurred well before that interpretation wasannounced. To defer to the agency’s interpretation in thiscircumstance would seriously undermine the principlethat agencies should provide regulated parties “fair warning of the conduct [a regulation] prohibits or requires.” . . . Indeed, it would result in precisely the kind of “unfair surprise” against which our cases have long warned. . . .
Our practice of deferring to an agency’s interpretation of its own ambiguous regulations undoubtedly has important advantages, but this practice also creates a risk that agencies will promulgate vague and open-ended regulations that they can later interpret as they see fit, thereby “frustrat[ing] the notice and predictability purposes of rulemaking.” Talk America, Inc. v. Michigan Bell Telephone Co., 564 U. S. ___, ___ (2011) (SCALIA, J., concurring) (slip op., at 3); . . . It is one thing to expect regulated parties to conform their conduct to an agency’s interpretations once the agency announces them; it is quite another to require regulated parties to divine the agency’s interpretations in advance or else be held liable when the agency announces its interpretations for the first time in an enforcement proceeding and demands deference. Accordingly, whatever the general merits of Auer deference, it is unwarranted here. We instead accord the Department’s interpretation a measure of deference proportional to the “‘thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlierand later pronouncements, and all those factors which give it power to persuade.’”
The Court’s citation to Justice Scalia’s Talk America concurrence questioning Auer is interesting. Also notable is that the dissent would have affirmed the government’s interpretation without relying on Auer deference at all. Indeed, the dissent never mentions Auer at all (nor its antecedent, Seminole Rock). So while Christopher leaves Auer standing, it does not offer the embattled doctrine any support.