SCOTUS: Notice-and-comment unnecessary for DOL change in interpretive rule

Huge power shift to administrative agencies.Mortgage-loan officers do not qualify for FLSA administrative exemption.

Unanimous decision: Perez v. Mortgage Bankers Assoc. (US Supreme Court 03/09/2015.

The Administrative Procedure Act (APA) establishes the procedures federal administrative agencies use for “rule making,” defined as the process of “formulating, amending, or repealing a rule.” The APA distinguishes between two types of rules: So-called “legislative rules” are issued through notice-and-comment rulemaking, and have the “force and effect of law.” “Interpretive rules,” by contrast, are “issued . . . to advise the public of the agency’s construction of the statutes and rules which it administers,” do not require notice-and-comment rulemaking, and “do not have the force and effect of law.”

In 1999 and 2001, the Department of Labor’s Wage and Hour Division issued letters opining that mortgage-loan officers do not qualify for the administrative exemption to overtime pay requirements under the Fair Labor Standards Act. In 2004, the Department issued new regulations regarding the exemption.

Mortgage Bankers Association (MBA) requested a new interpretation of the revised regulations as they applied to mortgage-loan officers, and in 2006, the Wage and Hour Division issued an opinion letter finding that mortgage-loan officers fell within the administrative exemption under the 2004 regulations.

In 2010, the Department again altered its interpretation of the administrative exemption. Without notice or an opportunity for comment, the Department withdrew the 2006 opinion letter and issued an Administrator’s Interpretation concluding that mortgage-loan officers do not qualify for the administrative exemption.

MBA filed suit contending that the Administrator’s Interpretation was procedurally invalid under the D.C. Circuit’s decision in Paralyzed Veterans of Am. v. D.C. Arena L. P., 117 F. 3d 579. The Paralyzed Veterans doctrine holds that an agency must use the APA’s notice-and-comment procedures when it wishes to issue a new interpretation of a regulation that deviates significantly from a previously adopted interpretation.

The District Court granted summary judgment to the Department, but the D.C. Circuit applied Paralyzed Veterans and reversed.

The US Supreme Court unanimously reversed and held that the Paralyzed Veterans doctrine is contrary to the clear text of the APA’s rulemaking provisions and improperly imposes on agencies an obligation beyond the APA’s maximum procedural requirements.

Oh. Yes. We're supposed to read and follow the statute. Who would have guessed?