By Tammy Binford

A U.S. Supreme Court ruling handing the Department of Labor (DOL) a victory on how it can issue interpretations of its rules has major implications for employers, according to Judith E. Kramer, an attorney with Fortney & Scott, LLC in Washington, D.C.

The Court’s March 9 decision in Perez v. Mortgage Bankers Association means that the DOL’s most recent interpretation that mortgage loan officers are eligible for overtime is valid. “The long-term impact of the Court’s decision, however, is much more significant for employers and, more broadly, for any person or entity subject to regulation by federal administrative agencies,” Kramer said.

The Mortgage Bankers ruling invalidates a 1997 decision by the Court of Appeals for the D.C. Circuit. Kramer explained that the 1997 decision (Paralyzed Veterans of America v. D.C. Arena, L.P.) and many subsequent decisions held that an agency must use the notice-and-comment procedures prescribed by the Administrative Procedure Act (APA) when it wants to issue a new interpretation of a regulation that significantly differs from a previously adopted interpretation.

The Supreme Court’s new ruling says the Paralyzed Veterans doctrine is contrary to the APA and improperly imposes obligations on agencies that are beyond the APA’s requirements, Kramer said. Since an agency isn’t required to use notice-and-comment procedures to issue an initial interpretative rule, it isn’t required to use those procedures to amend or repeal that rule.

“For employers and others in the regulated public, the Court’s decision means that in the future, agencies will find it simpler and faster to change their interpretations of their regulations, thus providing less certainty and predictability,” Kramer said. “It should be noted, however, that the Court reiterated that agencies are not free to issue an interpretation of a regulation that is in conflict with the text of the regulation it purports to interpret.”