Not all “rules” must be issued through the notice-and-comment process. Section 4(b)(A) of the Administrative Procedure Act ("APA") provides that, unless another statute states otherwise, the notice-and-comment requirement does not apply to interpretative rules, general statements of policy, or rules of agency organization, procedure, or practice. 5 U.S.C.S. § 553(b)(A). The term “interpretative rule,” or “interpretive rule,” is not further defined by the APA, and its precise meaning is the source of much scholarly and judicial debate. The critical feature of interpretive rules is that they are issued by an agency to advise the public of the agency’s construction of the statutes and rules which it administers. The absence of a notice-and-comment obligation makes the process of issuing interpretive rules comparatively easier for agencies than issuing legislative rules. But that convenience comes at a price: Interpretive rules do not have the force and effect of law and are not accorded that weight in the adjudicatory process.
In 1999 and 2001, the Department of Labor's Wage and Hour Division issued letters opining that mortgage-loan officers do not qualify for the administrative exemption to overtime pay requirements under the Fair Labor Standards Act of 1938. In 2004, the Department issued new regulations regarding the exemption. Respondent Mortgage Bankers Association (MBA) requested a new interpretation of the revised regulations as they applied to mortgage-loan officers, and in 2006, the Wage and Hour Division issued an opinion letter finding that mortgage-loan officers fell within the administrative exemption under the 2004 regulations. In 2010, the Department again altered its interpretation of the administrative exemption. Without notice or an opportunity for comment, the Department withdrew the 2006 opinion letter and issued an Administrator's Interpretation concluding that mortgage-loan officers do not qualify for the administrative exemption.
MBA filed suit contending that the Administrator's Interpretation was procedurally invalid under the D. C. Circuit's decision in Paralyzed Veterans of Am. v. D. C. Arena L. P., 117 F. 3d 579, 326 U.S. App. D.C. 25. The Paralyzed Veterans doctrine holds that an agency must use the Administrative Procedure Act’s (APA) notice-and-comment procedures when it wishes to issue a new interpretation of a regulation that deviates significantly from a previously adopted interpretation. The District Court granted summary judgment to the Department, but the D. C. Circuit applied Paralyzed Veterans and reversed.
Should an agency follow the doctrine laid down in the Paralyzed Veterans case, and thereby use the Administrative Procedure Act’s notice-and-comment procedures when the agency wishes to use a new interpretation of a regulation that deviates significantly from a previously adopted interpretation?
The Court held that although the court of appeals had ruled in a long line of cases beginning with Paralyzed Veterans of Am. v. D. C. Arena L. P., that agencies had to use the Administrative Procedure Act’s (APA) notice-and-comment procedures when they issued a new interpretation of a regulation that deviated significantly from one previously adopted, that approach was contrary to the clear text of the APA's rulemaking provisions, and improperly imposes on agencies an obligation beyond the APA's maximum procedural requirements. According to the Court, APA's categorical exemption of interpretive rules from the notice-and-comment process is fatal to the Paralyzed Veterans doctrine. The Court ruled that the D. C. Circuit's reading of the APA conflates the differing purposes of §§1 and 4 of the Act.