SupremeCourt

By Zoe Vermeulen

On Monday, March 9, 2015, the U.S. Supreme Court ruled that federal agencies do not have to follow notice-and-comment rulemaking procedures when changing interpretations of rules. This decision gives federal agencies, including the Equal Employment Opportunity Commission and the National Labor Relations Board, wide latitude to change interpretive rules without first notifying the public of the proposed change and providing an opportunity to comment on the new rule.

The suit, Perez v. Mortgage Bankers Association, stemmed from the Labor Department’s change to its longstanding interpretation of a rule regarding whether mortgage-loan officers qualify for the administrative exemption to overtime pay requirements under the Fair Labor Standards Act (“FLSA”).

In 2006, the Labor Department issued an opinion letter finding that mortgage-loan officers fell within FLSA’s the administrative exemption. In 2010, without public notice or providing an opportunity for comment, the Department withdrew the 2006 opinion letter and issued a new interpretation finding that mortgage-loan officers do not qualify for the administrative exemption.

The Mortgage Bankers Association argued that the Labor Department’s change of position violated the Administrative Procedures Act (“APA”) and the D.C. Circuit’s Paralyzed Veterans doctrine because it did not follow the notice-and-comment rulemaking process. The Paralyzed Veterans doctrine held that an agency must use notice-and-comment rulemaking when it wishes to issue a new interpretation of a regulation that deviates significantly from a previously adopted interpretation.

The Supreme Court overruled the Paralyzed Veterans doctrine and held that the plain language of the APA specifically exempts interpretive rules from notice-and-comment requirements. The Supreme Court held that because an agency is not required to use notice-and-comment rulemaking to issue an initial interpretive rule, it cannot be required to use this process to amend or repeal an interpretive rule.

This ruling endorses the ability of federal agencies to freely reinterpret their statutes and regulations, even if such interpretations are contrary to prior agency positions.