In 2006 the Department of Labor (DOL) stated in an opinion letter that mortgage loan officers were eligible for overtime but then changed its mind in 2010 in an “Administrator’s Interpretation.”
In Perez v. Mortgage Bankers Association the Supreme Court held unanimously that federal agencies do not have to engage in notice-and-comment rulemaking pursuant to the Administrative Procedure Act (APA) before changing an interpretive rule, like the 2006 opinion letter in this case. The Court overturned a nearly 20 year-old precedent from the D.C. Circuit, Paralyzed Veterans of America v. D.C. Arena, which the State and Local Legal Center (SLLC) argued in an amicus brief that the Court should affirm. Paralyzed Veterans held that an agency must use APA notice-and-comment when significantly altering an interpretive rule that interprets a legislative rule.
The APA requires that “legislative rules” be issued through a notice-and-comment process. But the APA states that notice-and-comment does not apply to “interpretive rules.” According to the Court, “[t]his exemption of interpretive rules from the notice-and-comment process is categorical, and it is fatal to the rule announced in Paralyzed Veterans.” The Court rejected Mortgage Bankers Association’s (MBA) argument that when an agency alters an interpretive rule it is effectively amending the underlying legislative rule. The Court reasoned that interpreting a legislative rule does not amount to “amending” it. And if it did, why shouldn’t notice-and-comment apply to an agency’s first set of interpretive rules?
In arguing in favor of the Paralyzed Veterans doctrine, the SLLC’s brief discussed a number of examples where federal agencies have changed positions in interpretive rules and state and local governments would have liked to have provided comments. For example, in 1993, DOL issued a series of opinion letters concluding that career firefighters who volunteered their services to private organizations had to be paid extra by whatever public entity employed them. DOL then changed its mind in 2001. The Court was not persuaded by MBA’s similar argument that the Paralyzed Veterans doctrine “reinforces the APA’s goal of ‘procedural fairness’ by preventing agencies from unilaterally and unexpectedly altering their interpretation of important regulations.”
The SLLC’s amicus brief also argued that Paralyzed Veterans provides a needed check on agency authority because recently the Court has deferred to interpretative rules, which aren’t supposed to have the force of law. Justice Scalia agreed in a concurring opinion but suggested, as did the SLLC, that the Court should abandon deference to interpretative rules.
James Ho, Ashley Johnson, Kirsten Galler, and Lauren Blas of Gibson, Dunn & Crutcher wrote the SLLC’s brief which was joined by the National League of Cities, the National Association of Counties, the International City/County Management Association, the United States Conference of Mayors, the International Municipal Lawyers Association, Government Finance Officers Association, National School Boards Association, National Public Employer Labor Relations Association, and the International Public Management Association for Human Resources.