On March 9, the US Supreme Court issued a decision in Perez v. Mortgage Bankers Association, 575 U.S. ___ (2015) that significantly relaxes the requirements for federal agencies making changes to rules interpreting the regulations they enforce. The case stems from a 2010 Department of Labor “Administrator Interpretation” that reversed the Department’s position (articulated in a 2006 opinion letter) on the overtime exempt status of mortgage loan officers. After long viewing loan officers as exempt administrative employees, in 2010, the Department of Labor withdrew the opinion letter and issued an Administrator’s Interpretation concluding that most mortgage loan officers did not qualify for the administrative exemption to the overtime requirement and would henceforth be deemed non-exempt. A class of loan officers filed suit under the Fair Labor Standards Act, claiming that they had been misclassified and thus were entitled to unpaid overtime.

The Mortgage Bankers Association, a real estate finance industry group, challenged the interpretation as failing to comply with formal rule-making requirements set forth in the federal Administrative Procedure Act, as the Department of Labor did not hold a notice-and-comment period during which interested parties could weigh in prior to the Department altering its interpretation as to the exempt status of mortgage loan officers. The D.C. Circuit Court of Appeals agreed with the Mortgage Bankers Association and vacated the administrator interpretation.

The loan officers appealed. The DOL argued in an amicus brief that the D.C. Circuit’s stance—that notice-and-comment rulemaking is required before any significant change to a rule that interprets a regulation—is inconsistent with the flexibility that Congress wants agencies to have with respect to interpretive rules related to the regulations they enforce. In the Perez decision, the Supreme Court agreed with the Department of Labor, ruling that federal agencies do not need to undergo formal rulemaking before making changes—even substantial changes—to rules interpreting regulations.

The decision means that not only can the mortgage loan officers’ class action proceed, but that federal agencies can make significant revisions without notice to longstanding, seemingly definitive interpretative rules, general statements of policy, and rules of agency organization, procedure, and practice. Employers relying on federal agency guidance, including, without limitation, interpretive guidance issued by the Department of Labor, the EEOC, and the National Labor Relations Board, must therefore be vigilant for formal and informal rule changes lest they continue to rely on outdated authority that no longer reflects the respective agencies’ positions.