Perez v. Mortg. Bankers Ass'n

Decision Date09 March 2015
Docket NumberNos. 13–1041,13–1052.,s. 13–1041
Citation575 U.S. 92,135 S.Ct. 1199,191 L.Ed.2d 186
Parties Thomas E. PEREZ, Secretary of Labor, et al., Petitioners v. MORTGAGE BANKERS ASSOCIATION et al. Jerome Nickols, et al., Petitioners v. Mortgage Bankers Association.
CourtU.S. Supreme Court

Edwin S. Kneedler, Washington, DC, for Petitioners.

Allyson N. Ho, Dallas, TX, for Respondents.

Donald B. Verrilli, Jr., Solicitor General, Counsel of Record, Department of Justice, Washington, DC, for Petitioners.

Sam S. Shaulson, Morgan, Lewis & Bockius LLP, New York, NY, Michael W. Steinberg, Morgan, Lewis & Bockius LLP, Washington, DC, Allyson N. Ho, Counsel of Record, John C. Sullivan, Morgan, Lewis & Bockius LLP, Dallas, TX, for Respondent Mortgage Bankers Association.

M. Patricia Smith, Solicitor of Labor, Jennifer S. Brand, Associate Solicitor, Paul L. Frieden, Counsel for Appellate Litigation, Rachel Goldberg, Senior Attorney, U.S. Department of Labor, Washington, DC, Donald B. Verrilli, Jr., Solicitor General, Counsel of Record, Stuart F. Delery, Assistant Attorney General, Edwin S. Kneedler, Deputy Solicitor General, Anthony A. Yang, Assistant to the Solicitor General, Douglas N. Letter, Anthony J. Steinmeyer, Attorneys, Department of Justice, Washington, DC, for Federal Petitioners.

Adam W. Hansen, Counsel of Record, Nichols Kaster, LLP, San Francisco, CA, Paul J. Lukas, Rachhana T. Srey, Nichols Kaster, PLLP, Minneapolis, MN, Sundeep Hora, Alderman, Devorsetz & Hora PLLC, Washington, DC, for Petitioners.

Justice SOTOMAYOR delivered the opinion of the Court.

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 Administrative Procedure Act (APA or Act). See 5 U.S.C. § 553(b)(A). The United States Court of Appeals for the District of Columbia Circuit has nevertheless held, in a line of cases beginning with Paralyzed Veterans of Am. v. D.C. Arena L.P., 117 F.3d 579 (1997), 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. The question in these cases is whether the rule announced in Paralyzed Veterans is consistent with the APA. We hold that it is not.


The APA establishes the procedures federal administrative agencies use for "rule making," defined as the process of "formulating, amending, or repealing a rule." § 551(5). "Rule," in turn, is defined broadly to include "statement [s] of general or particular applicability and future effect" that are designed to "implement, interpret, or prescribe law or policy." § 551(4).

Section 4 of the APA, 5 U.S.C. § 553, prescribes a three-step procedure for so-called "notice-and-comment rulemaking." First, the agency must issue a "[g]eneral notice of proposed rule making," ordinarily by publication in the Federal Register. § 553(b). Second, if "notice [is] required," the agency must "give interested persons an opportunity to participate in the rule making through submission of written data, views, or arguments." § 553(c). An agency must consider and respond to significant comments received during the period for public comment. See Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971) ; Thompson v. Clark, 741 F.2d 401, 408 (C.A.D.C.1984). Third, when the agency promulgates the final rule, it must include in the rule's text "a concise general statement of [its] basis and purpose." § 553(c). Rules issued through the notice-and-comment process are often referred to as "legislative rules" because they have the "force and effect of law." Chrysler Corp. v. Brown, 441 U.S. 281, 302–303, 99 S.Ct. 1705, 60 L.Ed.2d 208 (1979) (internal quotation marks omitted).

Not all "rules" must be issued through the notice-and-comment process. 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." 5 U.S.C. § 553(b)(A). The term "interpretative rule," or "interpretive rule,"1 is not further defined by the APA, and its precise meaning is the source of much scholarly and judicial debate. See generally Pierce, Distinguishing Legislative Rules From Interpretative Rules, 52 Admin. L.Rev. 547 (2000) ; Manning, Nonlegislative Rules, 72 Geo. Wash. L.Rev. 893 (2004). We need not, and do not, wade into that debate here. For our purposes, it suffices to say 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." Shalala v. Guernsey Memorial Hospital, 514 U.S. 87, 99, 115 S.Ct. 1232, 131 L.Ed.2d 106 (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.


These cases began as a dispute over efforts by the Department of Labor to determine whether mortgage-loan officers are covered by the Fair Labor Standards Act of 1938 (FLSA), 52 Stat. 1060, as amended, 29 U.S.C. § 201 et seq. The FLSA "establishe[s] a minimum wage and overtime compensation for each hour worked in excess of 40 hours in each workweek" for many employees. Integrity Staffing Solutions, Inc. v. Busk, 574 U.S. ––––, ––––, 135 S.Ct. 513, 516, 190 L.Ed.2d 410 (2014). Certain classes of employees, however, are exempt from these provisions. Among these exempt individuals are those "employed in a bona fide executive, administrative, or professional capacity ... or in the capacity of outside salesman ...." § 213(a)(1). The exemption for such employees is known as the "administrative" exemption.

The FLSA grants the Secretary of Labor authority to "defin[e]" and "delimi[t]" the categories of exempt administrative employees. Ibid. The Secretary's current regulations regarding the administrative exemption were promulgated in 2004 through a notice-and-comment rulemaking. As relevant here, the 2004 regulations differed from the previous regulations in that they contained a new section providing several examples of exempt administrative employees. See 29 C.F.R. § 541.203. One of the examples is "[e]mployees in the financial services industry," who, depending on the nature of their day-to-day work, "generally meet the duties requirements for the administrative exception." § 541.203(b). The financial services example ends with a caveat, noting that "an employee whose primary duty is selling financial products does not qualify for the administrative exemption." Ibid.

In 1999 and again in 2001, the Department's Wage and Hour Division issued letters opining that mortgage-loan officers do not qualify for the administrative exemption. See Opinion Letter, Loan Officers/Exempt Status, 6A LRR, Wages and Hours Manual 99:8351 (Feb. 16, 2001); Opinion Letter, Mortgage Loan Officers/Exempt Status, id., at 99:8249. (May 17, 1999). In other words, the Department concluded that the FLSA's minimum wage and maximum hour requirements applied to mortgage-loan officers. When the Department promulgated its current FLSA regulations in 2004, respondent Mortgage Bankers Association (MBA), a national trade association representing real estate finance companies, requested a new opinion interpreting the revised regulations. In 2006, the Department issued an opinion letter finding that mortgage-loan officers fell within the administrative exemption under the 2004 regulations. See App. to Pet. for Cert. in No. 13–1041, pp. 70a–84a. Four years later, however, the Wage and Hour Division again altered its interpretation of the FLSA's administrative exemption as it applied to mortgage-loan officers. Id., at 49a–69a. Reviewing the provisions of the 2004 regulations and judicial decisions addressing the administrative exemption, the Department's 2010 Administrator's Interpretation concluded that mortgage-loan officers "have a primary duty of making sales for their employers, and, therefore, do not qualify" for the administrative exemption. Id., at 49a, 69a. The Department accordingly withdrew its 2006 opinion letter, which it now viewed as relying on "misleading assumption[s] and selective and narrow analysis" of the exemption example in § 541.203(b). Id., at 68a. Like the 1999, 2001, and 2006 opinion letters, the 2010 Administrator's Interpretation was issued without notice or an opportunity for comment.


MBA filed a complaint in Federal District Court challenging the Administrator's Interpretation. MBA contended that the document was inconsistent with the 2004 regulation it purported to interpret, and thus arbitrary and capricious in violation of § 10 of the APA, 5 U.S.C. § 706. More pertinent to this case, MBA also argued that the Administrator's Interpretation was procedurally invalid in light of the D.C. Circuit's decision in Paralyzed Veterans, 117 F.3d 579. Under the Paralyzed Veterans doctrine, if "an agency has given its regulation a definitive interpretation, and later significantly revises that interpretation, the agency has in effect amended its rule, something it may not accomplish" under the APA "without notice and comment." Alaska Professional Hunters Assn., Inc. v. FAA, 177 F.3d 1030, 1034 (C.A.D.C.1999). Three former mortgage-loan officers—Beverly Buck, Ryan Henry, and Jerome Nickols—subsequently intervened in the case to defend the Administrator's Interpretation.2

The District Court granted summary judgment to the Department. Mortgage Bankers Assn. v. Solis, 864 F.Supp.2d 193 (D.D.C.2012). Though it accepted the parties'...

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