Federal regulatory agencies regularly interpret their regulations through guidance, letters, and memoranda explaining how the rules will be applied. But just how much interpreting and re-interpreting of those rules are the agencies allowed to do? The U.S. Supreme Court is considering that question and its answer could have sweeping implications for the rule-making process – potentially requiring a new set of hearings and public comments before agencies can significantly reinterpret an existing rule.
The underlying suit (Perez v. Mortgage Bankers Association) involves a Department of Labor advisory opinion issued in 2006 (during the administration of former President George Bush) holding that mortgage loan officers qualified as “exempt” employees who were not entitled to overtime pay. Six years later, under the Obama Administration, the DOL issued an opinion letter reaching the opposite conclusion and withdrawing the 2006 interpretive letter. During oral arguments before the High Court, justices on both ends of the liberal/conservative spectrum appeared troubled by the issues raised.
“What is motivating [this] in a sense is that agencies more and more are using interpretive rules and guidance documents to make law…it is essentially an end run around the notice and comment provisions,” Justice Elena Kagan observed.
Noting that the different interpretations were issued during different Administrations, Justice Antonin Scalia suggested that the courts should look more closely and less deferentially at how agencies interpret their rules. “Maybe we shouldn’t give deference to [an] agency’s interpretations of its own regulations,” he suggested. “That would solve this.”