The Department of Labor (DOL) administers the Fair Labor Standards Act (FLSA), which requires overtime pay but exempts employees in a bona fide executive, administrative, or professional capacity. In 2006, DOL issued an opinion letter stating that mortgage loan officers generally fell within the FLSA's administrative exemption and thus were not entitled to overtime. In 2010, without going through notice-and-comment, the agency withdrew the 2006 letter and issued an Administrator's Interpretation concluding that mortgage loan officers generally do not qualify for the administrative exemption and therefore are entitled to overtime. The Mortgage Bankers Association (MBA), representing lenders, sued under the APA, arguing that because the 2010 interpretation significantly altered DOL's prior, definitive interpretation of its regulations, the agency was required to use notice-and-comment rulemaking. The district court granted summary judgment for DOL, holding the 2010 issuance was an interpretive rule exempt from notice-and-comment. The D.C. Circuit reversed based on its Paralyzed Veterans doctrine, which required notice-and-comment when an agency substantially revises a definitive interpretation of a regulation. The Supreme Court granted certiorari and reversed the D.C. Circuit.
Does the APA require an agency to use notice-and-comment rulemaking before it can significantly alter a definitive interpretation of its own regulations, or may the agency amend or repeal interpretive rules without notice-and-comment?
Under the APA, 5 U.S.C. § 553(b)(A), notice-and-comment procedures do not apply to interpretive rules, general statements of policy, or rules of agency organization, procedure, or practice. Courts may not impose additional procedural requirements on agencies beyond those specified in the APA or the agency's own regulations (Vermont Yankee Nuclear Power Corp. v. NRDC). An agency may issue, amend, or repeal interpretive rules without notice-and-comment. However, interpretive rules do not have the force and effect of law and cannot create new rights or obligations; if a rule is legislative (i.e., it binds with the force of law), notice-and-comment is required. When changing policy, an agency must provide a reasoned explanation and consider reliance interests (FCC v. Fox Television Stations), and changes remain subject to arbitrary-and-capricious review under 5 U.S.C. § 706.
No. The APA does not require notice-and-comment to issue or significantly revise interpretive rules. The D.C. Circuit's Paralyzed Veterans doctrine is inconsistent with the APA and is invalid. The judgment of the D.C. Circuit was reversed.
The Court, in an opinion by Justice Sotomayor, began with the APA's text. Section 553(b)(A) expressly exempts interpretive rules from notice-and-comment. Nothing in the statute distinguishes between issuing an interpretive rule and amending or repealing one. Reading such a distinction into the statute, the Court explained, would contravene the APA's plain language. The Court rejected the D.C. Circuit's Paralyzed Veterans doctrine on two grounds. First, it conflicts with the APA's categorical exemption for interpretive rules by conditioning an agency's ability to change interpretations on a procedure the statute does not require. Second, it violates Vermont Yankee's principle that courts cannot impose procedural requirements on agencies beyond those specified by statute or self-imposed by the agency. The doctrine effectively created a judicially crafted notice-and-comment requirement for changes to interpretive rules, which the APA does not authorize. Addressing fairness and reliance concerns, the Court emphasized that the APA provides other safeguards. When an agency changes its interpretation, the action is reviewable under § 706 for arbitrariness, and the agency must provide a reasoned explanation that accounts for any serious reliance interests (as reflected in Fox). Moreover, interpretive rules do not carry the force of law; if an agency seeks to bind the public with new obligations, it must proceed through legislative rulemaking with notice-and-comment. Agencies also can bind themselves by adopting procedural rules requiring notice-and-comment for certain actions; if so, they must follow those procedures (Accardi principle). The Court noted, but did not resolve, criticisms of Auer/Seminole Rock deference raised in concurring opinions (Scalia, Thomas, Alito). Those concerns did not affect the outcome because the question was purely procedural under § 553. Applying these principles, the Court held that DOL's 2010 Administrator's Interpretation was an interpretive rule and, therefore, exempt from notice-and-comment. The D.C. Circuit erred in requiring notice-and-comment simply because the agency had significantly revised a prior definitive interpretation.
Perez clarifies the scope of the APA's notice-and-comment exceptions by confirming that interpretive rules can be issued, amended, or repealed without notice-and-comment. It eliminates the Paralyzed Veterans doctrine, restoring the primacy of the APA's text and Vermont Yankee's limit on judicial augmentation of agency procedures. For students and practitioners, the case reorients challenges to changed interpretations away from procedural attacks (i.e., lack of notice-and-comment) and toward substantive review (arbitrary-and-capricious, inconsistency with the statute or regulation, impermissible retroactivity, or misclassification of an ostensibly interpretive rule that actually functions as a legislative rule). It also foreshadows later developments in deference doctrine, culminating in Kisor's refinement of Auer deference.
Perez v. Mortgage Bankers Association firmly anchors the interpretive-rule exception in the APA's text, holding that agencies may issue and significantly revise interpretive rules without resorting to notice-and-comment. By dismantling the Paralyzed Veterans doctrine, the Court reaffirmed Vermont Yankee's bar on judicially created procedural add-ons and clarified that the proper checks on shifting interpretations lie in substantive administrative law review and accurate classification of rules.