Hears Argument on Agency Rulemaking

Kayla Moreland , May 19, 2015

Today, the Supreme Court of the United States will hear oral arguments in Perez v. Mortgage Bankers Association regarding whether a federal agency must engage in advance notice and public comment rulemaking when issuing an Administrative Interpretation.  Here is some background as to what the Court will address:

The Administrative Procedure Act (APA) requires that an agency give notice and allow an opportunity for regulated parties to comment on the rulemaking process before the agency significantly alters an agency’s rule.  This “notice-and-comment” requirement only applies to rules having “significant, far-reaching effects,” which gives agencies flexibility in issuing “interpretative” rules designed to clarify regulations without going through the formal notice-and-comment process.

In 2010, the DOL issued an “Administrator’s Interpretation” reiterating that mortgage loan officers (MLOs) are not exempt from the FLSA because the primary job duty of a typical MLO—the sale of financial products—did not meet one of the qualifications under the administrative exemption.  The DOL sought to clarify the mortgage industry’s widespread misinterpretation of a 2006 DOL Opinion letter that opined that MLOs who performed specific tasks (tasks that most MLOs do not perform) might qualify for the administrative exemption.

Thus, the issue framed for the Court is whether the DOL’s interpretative statement required the DOL to set forth formal notice and take public comments regarding its 2010 Administrative Interpretation.  The Mortgage Bankers Association (MBA) contends that the DOL’s 2010 Administrative Interpretation established a substantive rule, therefore subjecting it to the notice-and-comment requirement of the APA.  The Solicitor General argues that the APA’s “interpretative rules” exemption from the notice-and-comment requirement applies to the DOL’s 2010 Administrative Interpretation.

This case could have a significant effect on the rulemaking power of federal agencies.

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