Perez v. Mortgage Bankers Ass’n

Justia Summary

The Administrative Procedure Act (APA) establishes procedures federal administrative agencies use for “formulating, amending, or repealing a rule,” 5 U.S.C. 551(5), and distinguishes between “legislative rules,” issued through notice-and-comment rulemaking and having the “force and effect of law,” and “interpretive rules.” Interpretive rules “advise the public of the agency’s construction of the statutes and rules which it administers,” do not require notice-and-comment, and do not have the force and effect of law. In 1999 and 2001, the DOL Wage and Hour Division issued opinions that mortgage-loan officers do not qualify for the administrative exemption to Fair Labor Standard Act overtime pay requirements. In 2004, DOL issued new regulations regarding the exemption. MBA requested a new interpretation. In 2006, the Division opined that mortgage-loan officers fell within the exemption under the 2004 regulations. In 2010, DOL again altered its interpretation of the exemption. Without notice or an opportunity for comment, it withdrew the 2006 opinion and issued an Administrator’s Interpretation concluding that mortgage-loan officers do not qualify for the exemption. MBA sued. The D.C. Circuit applied the “Paralyzed Veterans doctrine,” which required an agency to use notice-and-comment procedures to issue a new interpretation of a regulation that deviates significantly from a previous interpretation. The Supreme Court reversed. The doctrine is contrary to the text of the APA and improperly imposes on agencies an obligation beyond the APA’s maximum requirements. Because an agency is not required to use notice-and-comment procedures to issue an initial interpretive rule, it is not required to use those procedures to amend that rule. Regulated entities may be protected by the arbitrary and capricious standard or by safe-harbor provisions in legislation that shelter regulated entities from liability when they rely on previous agency interpretations. MBA has waived its argument that the 2010 Interpretation was a legislative rule.

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