Supreme Court Upholds DOL Interpretation of Non-exempt Status of Mortgage Loan Officers from APA Procedural Objection

This morning, a unanimous Supreme Court upheld a 2010 administrative interpretation from the Department of Labor explaining that the white collar FLSA administrative exemption regulation excluded most mortgage loan officers and found that administrative interpretations – which are not binding on courts – do not need to satisfy the notice and comment provisions applicable to regulations, or rules, under the Administrative Procedures Act.  Perez v. Mortgage Bankers Ass’n., No.13-1041 (U.S. 3-9-15). Contradictory administrative interpretations had been issued by the DOL in 1999, 2001, 2006 and 2010.  When 2010 interpretative opinion was released, litigation ensued and the appellate court concluded that the interpretative rule could not be changed without prior notice and comment.  The Supreme Court reversed.  “Because an agency is not required to use notice-and-comment proce­dures to issue an initial interpretive rule, it is also not required to use those procedures when it amends or re­peals that interpretive rule.”

According to the Court’s opinion, in 1999, 2011 and 2010, the DOL issued administrative opinion letters that mortgage loan officers did not satisfy the FLSA regulation for the administrative employee exemption.    In 2004, the administrative employee exemption regulation was updated and specifically noted that “an employee whose primary duty is selling financial products does not qualify for the administrative exemption.” However, in 2006, the DOL issued an administrative opinion letter that mortgage loan officers would generally satisfy the regulatory exemption.  That letter was withdrawn in 2010 in favor of a W&H Administrator’s Interpretation which concluded that mortgage loan officers were non-exempt. This litigation ensued.  Without analyzing the substance of the 2010 W&H interpretation, the D.C. Court of Appeals ultimately found that the DOL could not change its administrative interpretation of its own regulation without going through the APA’s notice and comment procedures.  The Supreme Court reversed on the grounds that the notice-and-comment procedures do not apply to administrative interpretations of its own regulations.

The APA define rules broadly to include “statement[s] of general or particular applicability and future effect” that are designed to “implement, interpret, or prescribe law or policy.” Certain rules must go through a notice and comment procedure before being adopted by a government agency.  “Section 4(b)(A) of the APA provides that, unless another statute states otherwise, the notice­ and-comment requirement “does not apply” to “interpreta­tive rules, general statements of policy, or rules of agency organization, procedure, or practice.”  Without defining precisely what constitutes an interpretative rule (vs. a legislative rule), the Court noted that 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.”  While “the absence of a notice-and-comment obligation makes the process of issuing interpretive rules comparatively easier for agencies than issuing legislative rules, . . . interpretive rules “do not have the force and effect of law and are not accorded that weight in the adjudicatory process.”  Accordingly, the appellate court erred in not applying the exception in §4(b) of the APA to the W&H Administrator’s Interpretation of the FLSA administrative employee exemption issue.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.