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Supreme Court Rules on Interpretive Guidance

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A recent Supreme Court ruling made it easier for federal administrative agencies to change their previously issued guidance on the agencies' rules. Before, the agencies were required to engage in a formal process of giving notice and accepting comments whenever they rescinded their guidance. In Perez v. Mortgage Bankers Association, Docket No. 13-1041, however, the Court unanimously held that the Administrative Procedure Act (APA) does not require the agencies to engage in that formal process.

Can the ruling lead to OSHA changes? To the extent that the APA applies to OSHA on this issue, then OSHA will be able to make significant changes in the guidance it issues without prior notice. These abrupt changes could increase uncertainty for companies that rely on OSHA's guidance when making decisions about how to comply with OSHA regulations.

In Perez v. Mortgage Bankers, the Department of Labor (DOL) had originally issued guidance saying that under the Fair Labor Standards Act, mortgage loan officers were exempt employees -- that is, they did not have to be paid overtime. Later, after a change in presidential administrations, the DOL issued new guidance saying that the loan officers were non-exempt, so their employers did have to pay them overtime. Although this was a complete reversal of the previous of the old guidance, the DOL gave no notice and did not gather comments.

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An industry group challenged DOL's reversal, arguing that allowing these kinds of changes in guidance without notice enabled agency "flip-flopping." The Supreme Court disagreed and held that the APA did not require agencies to engage in formal notice-and-comment rulemaking for interpretive guidance changes.

Although interpretive guidance does not have the same force and effect of law as legislative rules and, according to the Court, guidance merely "advises" the public of how an agency constructs its rules, interpretive guidance can make a big difference in how companies conduct their operations, as can be seen in the case of the mortgage loan officers. Quick changes without notice do not give companies the time they need to adjust, and companies do not have a chance to give their input into the process.

As the political winds shift, agencies may now, under this ruling, change their guidance accordingly, catching companies by surprise. Businesses may have to be more vigilant in keeping up with changes that OSHA and other federal agencies make that will affect their efforts to comply with administrative rules.

 

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