The Supreme Court has held that the U.S. Department of Labor’s Wage and Hour Division (WHD) did not need to undergo Administrative Procedure Act (APA)-mandated notice-and-comment rulemaking when it issued interpretations of its regulations that conflicted significantly with interpretations WHD adopted earlier. Perez v. Mortgage Bankers Association, et al., No. 13-1041, 2015 U.S. LEXIS 1740 (Mar. 9, 2015).

Perez overturns a 1997 decision by the U.S. Court of Appeals for the D.C. Circuit that agencies subject to APA were required to follow the statute’s procedural safeguards when issuing interpretations of their regulations that ran counter to their earlier interpretations.

Although the Supreme Court’s decision is significant, it arguably is inapplicable to federal agencies, including the Mine Safety and Health Administration, that are subject to rulemaking provisions in their own governing statutes.

In the Supreme Court case, WHD issued interpretive guidance in 1999 and 2001 indicating that mortgage loan officers were not covered by an overtime pay exemption in the Fair Labor Standards Act. In 2004, the agency issued regulations through notice-and-comment rulemaking that supported its earlier interpretations.

At the behest of the Mortgage Bankers Association (MBA), WHD issued an opinion letter in 2006 stating that mortgage loan officers in fact fell within the administrative exemption under its 2004 regulation. In other words, loan officers were exempt from overtime pay. However, in 2010, WHD withdrew its 2006 opinion and issued an interpretation that said the officers do not qualify for the exemption. MBA, a national trade association representing real estate finance companies, filed suit. A district court backed the WHD, but the D.C. Circuit, relying on its 1997 decision, reversed the lower court.

In an opinion written by Associate Justice Sonia Sotomayor, the justices cited the language of the APA, which provides that, unless another statute states otherwise, the notice-and- comment requirement “‘does not apply’ˮ to “‘interpretative rules, general statements of policy, or rules of agency organization, procedure, or practice.’” This concession to the agency flexibility comes at a price to them, however; for the justices also said that —agency interpretations do not carry the force and effect of law.

While all nine justices concurred in the judgment, several of them clearly were concerned about agency overreach. Justice Antonin Scalia, in particular, objected to an earlier Supreme Court decision that granted agencies wide deference in interpreting their regulations. Such deference has had the effect of undermining the APA’s intent that interpretive rules not be binding on regulated entities, he contended.

“Interpretive rules that command deference do have the force of law,” he said [emphasis in original]. Justice Scalia continued, “By deferring to interpretive rules, we have allowed agencies to make binding rules unhampered by notice-and-comment procedures. … [T]he agency need only write substantive rules more broadly and vaguely, leaving plenty of gaps to be filled in later, using interpretive rules unchecked by notice and comment. The APA does not remotely contemplate this regime.”

Perez appears to give many federal agencies license to write interpretive opinions free of requirements first, to provide notice of such intent to the public, and then to solicit and consider stakeholder input. If this is the new normal, interpretive statements would be especially confusing and troublesome to regulated entities who have expended resources to adhere to previous interpretations that now conflict with the most “official” recent guidance.