## Facts

- Sergeants and a lieutenant in the St. Louis Police Department sued members of the St. Louis Board of Police Commissioners seeking overtime pay under the Fair Labor Standards Act (FLSA).
- The officers argued they were not exempt under the FLSA’s “bona fide executive, administrative, or professional” exemption because they were not paid on a “salary basis.”
- Department of Labor regulations define “salary basis” to require a predetermined amount each pay period not subject to reduction due to variations in work quality or quantity.
- The officers relied on a police manual authorizing disciplinary suspensions without pay for specified infractions, asserting this made their pay “subject to” impermissible deductions.
- The record did not show a general practice of imposing pay deductions on employees in the officers’ positions.
- The district court held most officers were exempt; the Eighth Circuit held all were exempt under both the salary-basis and duties components.
- The Supreme Court granted review to address the validity and application of the salary-basis regulation to public employees and the proper weight to give the agency’s interpretation.

## Issues

1. Whether the Department of Labor’s salary-basis regulation, including its disciplinary-deduction component, is a permissible interpretation of the FLSA exemption for executive, administrative, and professional employees as applied to public-sector workers.
2. Whether pay is “subject to” improper deductions when a policy authorizes unpaid disciplinary suspensions, even absent an actual practice of docking pay.
3. Whether courts should give controlling weight to the agency’s interpretation of its own regulation when the regulation is ambiguous and the interpretation is not plainly erroneous or inconsistent with the text.

## Decision

- The Supreme Court unanimously affirmed the judgment that the officers were exempt from the FLSA’s overtime requirement.
- The Court held the salary-basis regulation, including the disciplinary-deduction component, was a permissible construction of the statutory exemption given Congress’s delegation to the Secretary of Labor to “define and delimit” the exemption’s scope.
- The Court accepted the Secretary of Labor’s interpretation that the salary-basis test is violated only where there is (1) an actual practice of making improper deductions or (2) a policy creating a significant likelihood of such deductions.
- Applying that interpretation, the Court concluded the officers’ compensation was not, in practice, adjustable in a manner inconsistent with salaried status; thus they satisfied the salary-basis test and were exempt.
- The Court rejected a collateral attack premised on the agency’s failure to revise the rule for public employers, stating that such objections must be pursued through a petition for rulemaking under the Administrative Procedure Act.

## Legal Principles

- An agency regulation implementing a statutory exemption is valid if it is a reasonable construction within the scope of the agency’s delegated authority to define the exemption’s terms.
- Under the FLSA salary-basis regulation, pay is not disqualified by theoretical or remote possibilities of disciplinary deductions; the test turns on whether improper deductions occur in practice or are significantly likely under the employer’s policy.
- A court gives controlling weight to an agency’s interpretation of its own ambiguous regulation unless the interpretation is plainly erroneous or inconsistent with the regulation’s text.
- Challenges seeking revision of an existing agency rule generally must be directed first to the agency through administrative procedures rather than raised initially as a collateral challenge in private litigation.

## Conclusion

The Court upheld the Department of Labor’s salary-basis test for the FLSA’s executive, administrative, and professional exemption as applied to public employees, deferred to the Secretary’s reading of “subject to” disciplinary deductions, and held the St. Louis police supervisors were salaried and therefore not entitled to overtime.


Auer v. Robbins, 519 U.S. 452 (1997)