Big win for regulators at Supreme Court

Regulators won a big victory at the Supreme Court on Monday as the justices endorsed expansive powers for changing the interpretation of federal rules.

The Supreme Court ruled 9-0 that federal agencies do not have to follow procedures for notifying the public and collecting comment when changing the interpretations of rules, effectively removing steps from the process that can take months and sometimes years to complete.

The case, Perez v. Mortgage Bankers Association, stemmed from a longstanding Labor Department rule that determines which employees are eligible to earn overtime and minimum wage.

The Mortgage Bankers Association sued after the Labor Department changed its interpretation of the the rule to include mortgage loan officers. The bankers said Labor violated the Administrative Procedures Act (APA) by failing to provide time for provide public notice and time for comment.

But the high court unanimously rejected that argument in an opinion wrote by Justice Sonia Sotomayor.

“Because an agency is not required to use notice-and-comment procedures to issue an initial interpretive rule, it is also not required to use those procedures when it amends or repeals that interpretive rule,” Sotomayor wrote.

The decision contradicts the D.C. Circuit Court’s Paralyzed Veterans doctrine, which holds 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 previously adopted.

Justice Samuel Alito said the Paralyzed Doctrine likely stemmed from fear that federal agencies were becoming too powerful and concerns that Congress was affording them too much lawmaking authority

“I do not dismiss these concerns, but the Paralyzed Doctrine is not a viable cure for these problems,” he said.

John Meyers, an attorney with Barnes & Thornburg, said the ruling gives the Labor Department, the Equal Employment Opportunity Commission and the National Labor Relations Board a wide berth when it comes to promulgating rules outside of the normal agency rulemaking process, which requires notice, time for rebuttal and comment considerations from constituent groups.

“We can expect the current administration to use this ruling to back up its authority to pass new or change existing precedents,” he said.