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Perez v. Mortgage Bankers Association

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Supreme Court of the United States
Perez v. Mortgage Bankers Association
Reference: 575 US _ (2015)
Term: 2014-2015
Important Dates
Argued: December 1, 2014
Decided: March 9, 2015
Outcome
United States Court of Appeals for the District of Columbia Circuit reversed
Majority
Chief Justice John Roberts • Sonia Sotomayor • Anthony Kennedy • Elena Kagan • Ruth Bader Ginsburg • Stephen Breyer
Concurring
Samuel Alito • Antonin Scalia • Clarence Thomas

Perez v. Mortgage Bankers Association is a case decided on March 9, 2015, by the United States Supreme Court in which the court clarified that federal agencies must engage in the rulemaking process in order to make changes to regulations that carry the force of law. Agencies are not required to follow rulemaking procedures, however, when making changes to interpretive rules and other guidance documents. The case concerned a change in the interpretation of an "administrative employee" for the purposes of determining overtime exemptions under the Fair Labor Standards Act (FLSA).[1][2][3]

HIGHLIGHTS
  • The case: The Mortgage Bankers Association sued the U.S. Department of Labor (DOL) after the department changed its interpretation of a regulation and determined that mortgage loan officers qualified for overtime exemptions as administrative employees pursuant to FLSA.
  • The issue: Does a federal agency need to engage in the rulemaking process in order to significantly alter an interpretation of a rule or regulation?
  • The outcome: The United States Supreme Court reversed the lower court's ruling. The unanimous opinion clarified that federal agencies must engage in the rulemaking process in order to make changes to regulations that carry the force of law. Changes to interpretive rules, which are generally issued through guidance documents, do not need to proceed through the rulemaking process.


    • In brief: A 2006 opinion letter from the DOL re-classified the Mortgage Bankers Association's (MBA) staff of mortgage loan officers as administrative employees pursuant to the Fair Labor Standards Act (FLSA). Under the new classification, mortgage loan officers were no longer exempt from the FLSA's overtime requirements. The MBA sued the DOL and argued that the agency was statutorily required to use the notice-and-comment rulemaking process in order to make substantive changes to its interpretations of regulations. The United States Supreme Court disagreed and held that while federal agencies must engage in the rulemaking process in order to make changes to regulations that carry the force of law, they do not need to follow rulemaking procedures to make changes to interpretations of regulations.[3]

    Why it matters: The ruling in Perez v. Mortgage Bankers Association clarified the process for altering agency policies and guidance documents that do not carry the force of law. The United States Supreme Court unanimously held that since the rulemaking process is not required to issue policy statements, interpretive rules, or guidance documents, it should not be required to make subsequent changes to such documents.[1][3]

    Background

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    The Mortgage Bankers Association's (MBA) staff of mortgage loan officers were considered to be administrative employees under the Fair Labor Standards Act (FLSA) according to a 2006 opinion letter from the U.S. Department of Labor (DOL). The classification as administrative employees exempted mortgage loan officers from the overtime requirements of the FSLA. In 2010, the DOL reversed its opinion and stated that mortgage loan officers did not qualify as administrative employees and, therefore, were not exempt from the FSLA's overtime requirements.[3]

    The MBA sued the DOL in district court and argued that the DOL must use the notice-and-comment rulemaking process, also known as informal rulemaking, in order to make substantive changes to its interpretations of regulations as required by the Administrative Procedure Act (APA). Notice-and-comment rulemaking incorporates a comment period for agencies to solicit public feedback on proposed regulations before issuing final rules. The district court granted summary judgment to the DOL and the MBA appealed to the United States Court of Appeals for the District of Columbia Circuit. The court of appeals reversed and remanded the case based on a precedent established in Paralyzed Veterans of America v. D.C. Arena L.P., which required an agency to employ notice-and-comment rulemaking in order to significantly change an interpretation of a regulation. The DOL appealed the decision to the United States Supreme Court.[3][2]

    Oral argument

    Oral arguments were held on December 1, 2014. The case was decided on March 9, 2015.[2]

    Decision

    The United States Supreme Court unanimously decided to reverse and remand the lower court's ruling. The majority opinion was written by Justice Sonia Sotomayor and joined by Chief Justice John Roberts and Justices Anthony Kennedy, Elena Kagan, Ruth Bader Ginsburg, and Stephen Breyer. Justice Samuel Alito joined in part of the majority opinion and issued a concurring opinion. Justices Antonin Scalia and Clarence Thomas issued concurring opinions.[3]

    Opinions

    Opinion of the court

    See also: Guidance (administrative state)

    Writing for the majority, Justice Sonia Sotomayor argued that the precedent established in Paralyzed Veterans of America v. D.C. Arena L.P., which required an agency to use notice-and-comment rulemaking in order to significantly change an interpretation of a regulation, was invalid and contrary to the requirements of the Administrative Procedure Act (APA). Sotomayor observed that the APA only requires agencies to use notice-and-comment rulemaking when enacting a legislative rule that has the force of law. Interpretive rules, often issued through guidance documents, are suggestions for best practices and do not carry the force of law.[1]

    “ The Paralyzed Veterans doctrine is contrary to the clear text of the APA’s rulemaking provisions, and it improperly imposes on agencies an obligation beyond the 'maximum procedural requirements' specified in the APA.


    The text of the APA answers the question presented. Section 4 of the APA provides that 'notice of proposed rule making shall be published in the Federal Register.' When such notice is required by the APA, 'the agency shall give interested persons an opportunity to participate in the rule making.' But §4 further states that unless 'notice or hearing is required by statute,' the Act’s notice-and-comment requirement 'does not apply . . . to interpretative rules.' This exemption of interpretive rules from the notice-and-comment process is categorical, and it is fatal to the rule announced in Paralyzed Veterans.[4]

    		”
    —Justice Sonia Sotomayor, majority opinion in Perez v. Mortgage Bankers Association (2015)[1]

    Concurring opinions

    Justice Samuel Alito filed an opinion concurring in part with the majority and concurring in the judgment. Justices Antonin Scalia and Clarence Thomas also authored opinions concurring in the judgment. The justices agreed that the precedent established in Paralyzed Veterans of America v. D.C. Arena L.P. was incompatible with the Administrative Procedure Act (APA). They also observed that Seminole Rock deference (also known as Auer deference), in which a federal court yields to an agency's interpretation of its own ambiguous regulation, may have been a motivating factor in crafting the Paralyzed Veterans decision and warrants further review. Alito stated, "I await a case in which the validity of Seminole Rock may be explored through full briefing and argument."[2][5]

    Impact

    The ruling in Perez v. Mortgage Bankers Association clarified the process for altering agency policies, interpretive rules, and guidance documents that do not carry the force of law. The United States Supreme Court unanimously held that since the rulemaking process is not required to issue such documents, it should not be required to make subsequent changes.[1][3]

    See also

    External links

    Footnotes

    1. ↑ 1.0 1.1 1.2 1.3 1.4 Legal Information Institute, "PEREZ v. MORTGAGE BANKERS ASSN.," accessed May 30, 2018
    2. ↑ 2.0 2.1 2.2 2.3 JUSTIA, "Perez v. Mortgage Bankers Ass'n, 575 U.S. ___ (2015)," accessed May 30, 2018
    3. ↑ 3.0 3.1 3.2 3.3 3.4 3.5 3.6 Oyez, "Perez v. Mortgage Bankers Association," accessed May 30, 2018
    4. ↑ Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
    5. ↑ SCOTUSBlog, "Perez v. Mortgage Bankers Association," accessed May 30, 2018
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