The United States Supreme Court recently unanimously held that the Administrative Procedure Act (APA) expressly exempts federal agencies, like the Department of Labor (DOL), from formal notice-and-comment rulemaking requirements when they make changes to interpretative rules.
In Perez v. Mortg. Bankers Ass’n, U.S. No. 13-1041, Mar. 9, 2015, the Court examined whether the DOL properly altered its interpretation of the administrative exemption to overtime pay under the Fair Labor Standards Act (FLSA) as applied to mortgage-loan officers. In 1999 and 2001, the DOL’s Wage and Hour Division issued letters opining that mortgage-loan officers did not qualify for the administrative exemption. After issuing new regulations regarding the exemption, the DOL issued an opinion letter in 2006 finding that the officers did fall within the exemption under the new regulations. However, in 2010, the Department altered its interpretation of the administrative exemption and once again concluded that mortgage-loan officers do not qualify for the administrative exemption. The DOL consequently withdrew the 2006 opinion letter without notice or an opportunity for comment.
Without discussing the merits of the underlying interpretation, the U.S. Supreme Court held that the DOL’s process of revising its 2006 interpretation without applying notice-and-comment procedures was proper. The Court explained that the APA specifically exempts interpretative rules from notice-and-comment requirements. As a result, an agency is not required to use notice-and-comment procedures to issue an interpretative rule, and is likewise not required to use those procedures to amend or repeal that rule.
The Court held that such a “straightforward reading” of the APA harmonizes with longstanding principles of administrative law jurisprudence that recognizes that a court lacks authority to impose upon an agency its own notion of which procedures are “best” or most likely to further public good. Rather, the responsibility to impose a notice-and-comment obligation on a federal agency when its changes its interpretation of one of the regulations it enforces, rests with Congress or the administrative agencies. Here, Congress adopted standards that permit agencies to promulgate freely such interpretative rules without such rulemaking requirements.
The Supreme Court further rejected any suggestion of procedural “unfairness” that could arise from an agency opting to issue an interpretative rule, rather than a legislative rule, in order to skirt notice-and-comment provisions. It noted that the APA contains constraints on agency decision-making. Moreover, the Court pointed out that, unlike legislative rules that are subject to the rulemaking procedures, interpretative rules do not have the force and effect of law.