Perez v. Mortgage Bankers Assn., No. 13 1041: On Monday, March 9, 2015, the Court ruled that a longstanding decision from the DC Circuit under the Administrative Procedure Act (“APA”) was incorrectly decided in contravention to the APA. Paralyzed Veterans of Am. v. D.C. Arena L.P., 117 F.3d 579 (D.C. Cir. 1997) held that an agency must use the APA's notice-and-comment procedures when it wishes to issue a new interpretation of a regulation that deviates significantly from one the agency has previously adopted, even if the initial interpretation was not issued via notice-and-comment procedures.

Perez involved the Mortgage Bankers Association (“MBA”) challenge to the Department of Labor’s Wage and Hour Division’s interpretation of its 2004 regulations concerning the administrative exemption to overtime pay requirements under the Fair Labor Standards Act; specifically, the MBA objected to the DOL's 2010 rescission of its 2006 opinion letter that stated that mortgage-loan officers fell within the exemption under the 2004 regulations. The MBA filed suit, contending in relevant part that the Administrator’s 2010 Interpretation was procedurally invalid under Paralyzed Veterans because the 2006 opinion letter was withdrawn without an opportunity for notice-and-comment.

The District Court sided with the DOL but the DC Circuit reversed, agreeing that Paralyzed Veterans required the DOL to change a longstanding interpretation through notice-and-comment. The Court reversed, holding that the rule in Paralyzed Veterans is inconsistent with the APA, whereby a federal administrative agency is generally not required to follow notice-and-comment rulemaking procedures when issuing a rule interpreting one of its regulations.

Noteworthy for Wage and Hour practitioners: Monday's holding essentially validates the 2010 Interpretation that mortgage officers are not considered to be exempt from the FLSA under the administrative exemption. With regard to Wage & Hour Opinion Letters generally, however, proceed carefully. As Justice Sotomayor's summary of the difference between interpretive and notice-and-comment rules emphasizes: what the agency gets for not following notice-and-comment is a tradeoff -- the ease of issuing interpretations without the force of law to allow those rules to withstand court challenges.

Supreme Court devotees will appreciate the concurrences by Justices Alito, Scalia, and Thomas. All 9 justices concurred in the judgment but these three took the opportunity to criticize the precedent of deference afforded agency interpretation of its own regulations under Bowles v. Seminole Rock & Sand Co., 325 U. S. 410 (1945). If you have any questions, please contact Rebecca Bernhard, Melissa Raphan, Ryan Mick, Sarah Herman, or any other attorney in our Labor & Employment group.