Academic journal article Harvard Law Review

Administrative Procedure Act - Changing Interpretive Rules

Academic journal article Harvard Law Review

Administrative Procedure Act - Changing Interpretive Rules

Article excerpt

The Administrative Procedure Act (1) (APA) requires an agency to post notice and solicit comments when issuing regulations that have the force of law, (2) but does not require an agency to use notice-and-comment procedures to publicize its interpretation--which does not carry the force of law--of a statute or regulation. (3) Beginning with 1997's Paralyzed Veterans of America v. D.C. Arena L.P., (4) out of concern that agencies would abuse the "interpretive rule" exemption from notice-and-comment procedures to change their regulations without the APA's procedural safeguards, the D.C. Circuit required agencies to go through notice-and-comment rulemaking when they changed their interpretations. (5) Last Term, in Perez v. Mortgage Bankers Ass'n, (6) the Supreme Court overturned the D.C. Circuit's Paralyzed Veterans doctrine, ruling that because the APA does not require agencies to go through notice-and-comment rulemaking to issue an interpretive rule in the first place, agencies also do not need to go through notice-and-comment rulemaking to change an interpretive rule. (7) Although the Mortgage Bankers Court unanimously rejected the D.C. Circuit's attempt to impose additional procedures on top of the APA, three separate concurrences shared the D.C. Circuit's concern that interpretive rules pose a risk of agency self-dealing. In particular, the concurrences took issue with another line of administrative law doctrine that had first spurred the D.C. Circuit to adopt additional procedures against agency overreaching in Paralyzed Veterans. That other doctrine, solidified in Auer v. Robbins, (8) holds that even though interpretive rules lack the force of law, courts should defer to agency interpretations of their own regulations. (9) After Mortgage Bankers, four Justices have expressed interest in revisiting Auer. (10) While it remains to be seen whether a majority of the Court might eventually overturn Auer, in the meantime, the Mortgage Bankers majority's analysis leaves the door open to policing agency misconduct not by imposing additional procedure or eroding deference to agencies, but with a third tool: courts' existing APA authority to invalidate agency actions that are "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." (11) Under this approach, litigants will be required to show what is substantively wrong with an agency's interpretation--for example, that it upsets reliance interests, is unlawful, or is overly vague. When challengers can show that an agency's interpretation is substantively objectionable, the APA gives courts authority to intervene.

Mortgage Bankers arose out of a controversy over whether mortgage-loan officers must be paid overtime under the Fair Labor Standards Act of 1938 (12) (FLSA). (13) The FLSA's minimum wage and overtime provisions do not apply to those "employed in a bona fide executive, administrative, or professional capacity ... or in the capacity of outside salesman." (14) The FLSA delegates to the Secretary of Labor the task of "defin[ing] and delimit[ing]" the employees who fall under the administrative exemption from minimum wage and overtime requirements. (15) In 1999 and 2001, the Department of Labor (DOL) issued letters (without going through notice-and-comment procedures) interpreting its regulations to require that mortgage-loan officers be paid overtime. (16) In 2004, DOL updated its FLSA regulations through a notice-and-comment rulemaking; the new regulations, among other things, included "[e]mployees in the financial services industry" (depending on their day-to-day activities) as an example of employees that would generally fall under the administrative exemption. (17) In 2006, responding to a request from the Mortgage Bankers Association to revisit the status of mortgage-loan officers in light of the revised regulations, DOL issued an opinion letter finding that mortgage-loan officers were not subject to minimum wage and overtime requirements. …

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