U.S. Supreme Court Upholds U.S. DOL's "Administrator Interpretations"

In 2010, the U.S. Department of Labor began issuing "Administrator Interpretations."  These are analyses of regulations that are broader and more comprehensive than the traditional opinion letters that DOL used to issue. The opinion letters generally were targeted to respond to requests made by individual stakeholders, often employers.  The Administrator Interpretations contain the DOL's view on how its regulations apply generally, not in response to a particular set of facts.

The DOL issued three of these in 2010, of which two remain published on its website. (Here)  These two address the definition of "clothes" under part of the Portal-to-Portal Act and whether mortgage loan officers qualify as "exempt" under the Fair Labor Standards Act.  In 2014, the DOL issued two more interpretations concerning home health care workers.

On the issue of mortgage loans officers, the DOL has changed its views several times in opinion letters over the years.  The 2010 Administrator Interpretation opines that mortgage loan officers are non-exempt.  Here.  That is because they primarily sell, and salespersons are not exempt under the "administrative test."

It has been argued that the Administrator Interpretations are actually in the nature of regulations, rather than opinion letters.  As such, the argument goes, they cannot be issued without going through the formalities of the federal Administrative Procedure Act.  That Act requires the agency to issue proposed regulations, followed by notice and comment by the public.  

There has also been a dispute as to whether an agency's "flip-flopping" or reversal of a prior interpretation is akin to a regulation, requiring APA procedures.  The Court of Appeals for the District of Columbia Circuit had held that when the DOL issues an interpretation that contradicts prior interpretations it is making what is in effect a new or amended regulation.

The U.S. Supreme Court in Perez v. Mortgage Bankers Association upheld the right of the DOL to issue these Administrator Interpretations without going through the APA requirements.   The Court disapproved the DC Circuit's approach and held that the Administrative Procedure Act does not require "notice and comment" procedures when the agency interprets its own regulations.

First, the APA does not require procedural safeguards with respect to agency interpretations generally.  But what is the difference between an interpretation and new rule?  Here is what the Court said:

the critical feature of interpretive rules is that they are “issued by an agency to advise the public of the agency’s construction of the statutes and rules which it administers.” Shalala v. Guernsey Memorial Hospital, 514 U. S. 87, 99 (1995) (internal quotation marks omitted). The absence of a notice-and-comment obligation makes the process of issuing interpretive rules comparatively easier for agencies than issuing legislative rules. But that convenience comes at a price: Interpretive rules “do not have the force and effect of law and are not accorded that weight in the adjudicatory process.” Ibid.

The Supreme Court rejected the Mortgage Bankers Association's argument that the DOL's decision to reverse course is analogous to amending the regulation.   The Court also refused to address the argument that the Administrator Interpretation was in fact a "legislative rule" or regulation rather than an interpretation of an existing rule.  That is because, the Court wrote, the parties had not litigated the case under that theory.

All nine justices rejected the D.C. Circuit's approach. But three justices pointed out in concurrences and partial dissents that the majority's decision allowed too much discretion in the administrative agencies' power to interpret their own regulations.  These justices based their objections not on the Administrative Procedure Act, but on the constitution's separation of powers.  Those arguments did not carry the day in this case.  However, the three justices signaled a willingness to walk back some older precedents on the power of administrative agencies.

What does this all mean?
- the DOL will continue to be allowed to issue Administrator Interpretations
- Administrator Interpretations may be attacked as inconsistent with the underlying regulation, but under a very deferential standard of review by the courts.
- The courts do not have to give deference to an Administrator Interpretation the same way that it must give deference to a regulation, particularly when the interpretation is inconsistent over time.
- Mortgage loan officers are probably non-exempt under the FLSA for now and the reasonably foreseeable future.

This case is Perez v. Mortgage Bankers Association and the opinion is here. 

P.S. I wrote about the first three Administrative Interpretations here.  The Supreme Court issued its ruling on the definition of clothes in Sandifer v. U.S. Steel, which I wrote about here.