On March 9, 2015, the U.S. Supreme Court unanimously held in
Perez v. Mortgage Bankers Association, that the Department
of Labor (DOL) may issue its interpretations of wage and hour
regulations without seeking input from the public. This case
concerned the procedures required when federal
agencies — here, the DOL — issue guidance to
the public on existing regulations. Specifically, the issue was
whether the DOL could unilaterally alter its interpretative rules
without first giving notice to the public and an opportunity to
comment. The Supreme Court held that it could.
The interpretive rules at issue in this case concern the classes
of employees who are exempt from the overtime requirements of the
Fair Labor Standards Act (FLSA). In particular, the FLSA
regulations provide that certain administrative employees are
exempt from minimum wage and overtime requirements based on the
nature of their duties and the basis of their pay. In 1999 and
2001, the DOL issued opinion letters providing that mortgage-loan
officers do not qualify for this exemption. In 2006, following
amendments to the FLSA regulations, the DOL issued a new opinion
letter stating that mortgage-loan officers could qualify for the
exemption. Then in 2010, the DOL again changed course and withdrew
its 2006 opinion letter. The plaintiffs in this case, relying on
the Administrative Procedure Act (APA), argued that the DOL could
not act on its own to change its interpretations of the law;
instead, it needed to follow the notice-and-comment process before
reversing course. The Supreme Court disagreed, finding that Section
4 of the APA expressly permits the DOL, as well as other federal
agencies, to modify its interpretative guidance on its
own.
This decision makes clear that the DOL may reverse itself or
modify guidance interpreting its own regulations. While such
guidance is not legally binding, courts tend to defer to the
agency's interpretations when resolving disputes under the law.
The effect, then, is that the DOL will have great flexibility in
interpreting its own regulations, particularly in the context of
the overtime exemptions. As the dispute over mortgage-loan officers
demonstrates, changes by the DOL to its own interpretive guidance
create challenges for employers who are looking to classify
employees appropriately.
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