435. Id. (quoting Paralyzed Veterans of Am. v. D.C. Arena, LP, 117 F.3d 579, 588 (D.C. Cir. 1997)). 436.
However, I agree with the D.C. Circuit’s position that “”allow[ing]an agency to make a fundamental change in its interpretation of a substantive regulation without notice and comment” would undermine the APA’s procedural framework. Paralyzed Veterans of Am. v. D. C. Arena L. P., 117 F. 3d 579, 586(1997), which was overruled in part last year by the Supreme Court in Perez v. Mortg. Bankers Ass’n, 135 S. Ct. 1199 (2015). The SEC choice to forego notice and comment rulemaking does come with a significant downside.
These new rules may render a great many exemption classifications moot, as the department is widely expected to greatly limit the overtime exemptions available.Perez v. Mortgage Bankers Association, No. 13-1041, 575 U.S. ___ (2015)Paralyzed Veterans of Am. v. D. C. Arena L. P., 117 F. 3d 579 (D.C. Cir. 1997)Perez at 7
Perez v. Mortgage Bankers Assn., 575 U.S. ___ (2015).The Supreme Court's Decision The issue before the Supreme Court in Perez was whether the rule announced in Paralyzed Veterans of Am. v. D.C. Arena L.P., 117 F.3d 579 (D.C. Cir. 1997) -- requiring an agency to use notice-and-comment procedures if it intends to make a significant departure from a prior interpretation of a regulation -- is consistent with the APA. The Supreme Court answered in the negative, reasoning that while agencies are required to use a notice-and-comment process when promulgating legislative rules, the plain language of the APA states that notice-and-comment procedures do not apply to interpretive rules.
Under Perez, federal administrative agencies may modify or repeal an interpretative rule in a sub-regulatory publication, such as a manual, without first allowing for prior notice or public comment. The Perez ruling reversed the so-called Paralyzed Veterans doctrine, a doctrine stemming from the D.C. Circuit court’s decision in Paralyzed Veterans of America v. D.C. Arena L.P., 117 F. 3d 579 (1997). Under the Paralyzed Veterans doctrine, an agency was required to use the APA’s notice-and-comment procedures when it wishes to issue a new interpretation of a regulation that deviates significantly from a previously adopted interpretation.
The Mortgage Bankers Association (MBA) filed suit in U.S. District Court, District of Columbia, challenging the procedural validity of the Interpretation. The MBA's suit argued that the DOL's substantive change in its interpretation of the 2004 FLSA regulations required a notice-and-comment process under both the APA and the D.C. Circuit precedent, Paralyzed Veterans of Am. v. D.C. Arena L.P., 117 F.3d 579 (D.C. Cir. 1997). Following discovery, the district court entered summary judgment for the DOL.
Litigation followed challenging the DOL’s ability to significantly revise an interpretive rule without using the notice-and-comment process. Agreeing with the DOL that the APA did not require a notice-and-comment process for interpretive rules, the Court vacated Paralyzed Veterans of America v. D.C. Arena L.P., 117 F. 3d 579 (1997), which required an agency to use the notice-and-comment procedure when significant changes were being made to a prior interpretive rule.Loan Officers do not Qualify for Exemption In light of this decision, banks and lending institutions, especially those that focus on consumer transactions, will need to re-evaluate whether certain employees qualify for the Administrative exemption thereby allowing them to be salaried rather than hourly workers. Simply speaking, the Administrative exemption to the FLSA applies where an employee is performing an administrative role for the employer as opposed to a production role (i.e., sales).
In 2010, the Obama DOL withdrew the 2006 opinion letter and issued an Administrator’s Interpretation finding that mortgage loan officers did not qualify for the administration exemption. The Mortgage Bankers Association’s (MBA) challenged the 2010 interpretation arguing that it was invalid under Paralyzed Veterans of America v. D.C. Arena L.P., 117 F.3d 579 (1997) because it significantly altered the DOL’s 2006 opinion letter and it was issued without employing the notice-and-comment procedures required by the Administrative Procedures Act (APA). The district court rejected the argument, finding that the MBA had not demonstrated substantial and justifiable reliance on a well-established agency interpretation.
Perez v. Mortgage Bankers Assn., No. 13 1041: On Monday, March 9, 2015, the Court ruled that a longstanding decision from the DC Circuit under the Administrative Procedure Act (“APA”) was incorrectly decided in contravention to the APA. Paralyzed Veterans of Am. v. D.C. Arena L.P., 117 F.3d 579 (D.C. Cir. 1997) held that an agency must use the APA's notice-and-comment procedures when it wishes to issue a new interpretation of a regulation that deviates significantly from one the agency has previously adopted, even if the initial interpretation was not issued via notice-and-comment procedures. Perez involved the Mortgage Bankers Association (“MBA”) challenge to the Department of Labor’s Wage and Hour Division’s interpretation of its 2004 regulations concerning the administrative exemption to overtime pay requirements under the Fair Labor Standards Act; specifically, the MBA objected to the DOL's 2010 rescission of its 2006 opinion letter that stated that mortgage-loan officers fell within the exemption under the 2004 regulations.
The Supreme Court's DecisionThe specific question in Mortgage Bankers was whether the APA requires administrative agencies to undertake notice-and-comment rulemaking when they issue an interpretation of a regulation that "deviates significantly" from the agency's prior interpretation of that rule. The D.C. Circuit had said there was such a requirement in its 1997 decision in Paralyzed Veterans of Am. v. D.C. Arena L.P., 117 F.3d 579 (D.C. Cir. 1997). In a unanimous decision, the Supreme Court disagreed.