09 March 2015

Law in Plain English: Perez v. Mortgage Bankers Association

This is one in a series of posts designed to describe court decisions in plain English. For more detail and background on the legal issues, see the link to the case below. For similar posts, click here.

SCOTUSblogPerez v. Mortgage Bankers Association; consolidated with Nickols v. Mortgage Bankers Association

Argument: Dec 1 2014 (Aud.)

Background: In 2006, the Department of Labor issued an opinion letter interpreting the Fair Labor Standards Act (FLSA) to exempt mortgage loan officers from FLSA's overtime requirements under the "administrative exemption." In 2010, the Department (without notice or comment) withdrew the 2006 opinion letter and issued a new interpretation that mortgage loan officers did not qualify for the administration exemption. The Mortgage Bankers Association (MBA) challenged the 2010 interpretation as violating the Administrative Procedure Act (APA) because the Department significantly altered the rule without first undergoing notice­-and-comment rulemaking. The district court rejected the argument, finding that MBA had not demonstrated substantial and justifiable reliance on a well­-established agency interpretation. The D.C. Circuit reversed, finding that reliance is but one factor courts must consider in assessing whether an agency interpretation qualifies as definitive.

Issue: The question before the Court is whether a federal agency must engage in notice-and-comment rulemaking pursuant to the Administrative Procedure Act before it can significantly alter an interpretive rule that articulates an interpretation of an agency regulation.

Holding: In a 9-0 decision, the Supreme Court ruled that the Paralyzed Veterans doctrine is contrary to the clear text of the APA’s rulemaking provisions and improperly imposes on agencies an obligation beyond the APA’s maximum procedural requirements. When a federal administrative agency first issues a rule interpreting one of its regulations, it is generally not required to follow the notice-and-comment rulemaking procedures of the APA, and the D.C. Circuit's ruling's createt a judge-made procedural right that was inconsistent with Congress’ standards. The practical impact of this decision is that the Department of Labor's interpretation of the FLSA is not required to undergo notice-and-comment rulemaking.
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