The Supreme Court ruled that agencies can make substantial changes to interpretations of regulations without a period of public comment. The case Perez v. Mortgage Bankers Association (MBA) involves competing interpretations from the Department of Labor during the Bush and Obama administrations of the Fair Labor Standards Act regarding minimum wage and overtime pay for loan officers. President Bush’s administration reinterpreted the act in 2006, while President Obama’s administration restored the original interpretation in 2010. The case arose when the MBA sued the Obama administration for its interpretation of the act.
The District Court held in favor of the administration’s position, but was reversed by the Court of Appeals, which determined that government agencies must follow the notice and comment requirements of the Administrative Procedures Act when making significant changes to rules. Since the Department of Labor did not do so in 2010, the ruling effectively reinstated the 2006 interpretation that loan officers were exempt from overtime pay. The Supreme Court sided with the Department of Labor when it determined that government agencies can make significant changes to rules without a period of formal public hearing and comment.
The case will have important consequences for all government agencies whenever there is a move to reverse or significantly alter policies established under a predecessor administration absent a formal rulemaking process. While many agree this is not a change in existing policy, as agencies become more active, it nevertheless raises concerns for regulated industries.
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