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Supreme Court Okays DOL’s FLSA Interpretative Rule Change

The Supreme Court has confirmed that federal agencies, including the Department of Labor (DOL), are exempted from the Administrative Procedure Act’s formal notice-and-comment rulemaking requirements when changing interpretative rules, as explained in its unanimous decision Perez v. Mortgage Bankers Ass’n, No. 13-1041, (U.S. March 9, 2015).  With this decision, the Supreme Court overruled the long established doctrine from Paralyzed Veterans of American v. D.C. Arena, 117 F.3d 579 (D.C. Cir. 1997), which states that an agency cannot significantly modify a previously issued definitive interpretation of a rule without public notice and comment.

In Perez, the Supreme Court wrote such holding is “contrary to the clear text of the APA’s rulemaking provisions.” Specifically, the APA’s “categorical exemption of interpretative rules from the notice-and-comment process is fatal to the Paralyzed Veterans doctrine . . .[which] . . . improperly imposes on agencies an obligation beyond the APA’s maximum procedural requirements.”  The Supreme Court did recognize that sometimes an agency’s decision to issue an interpretative rule may be motivated by a desire to skirt the notice-and-comment process.  The majority did confirm that deference to an agency position is not completely inflexible; if a regulation conflicts with a prior interpretation, such regulation will get less deference than a consistently held agency position.

This case arose from the DOL’s opinion letter issued in 2006 writing that mortgage loan officers were administratively exempt (which actually reversed two earlier opinion letters on the same subject saying such loan officers were nonexempt).  In 2010, the DOL issued an administrator interpretation which withdrew the 2006 opinion letter, and said such mortgage loan officers were not administratively exempt.  The 2010 interpretation was then challenged by the Mortgage Bankers Association through the court channels.

 

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