Perez v. Mortgage Bankers Assn.
The Court ruled that federal agencies do not need to use notice-and-comment procedures when they revise an existing interpretation of one of their own regulations, striking down a D.C. Circuit rule that had required it.
The decision means the Department of Labor could withdraw a 2006 letter saying mortgage-loan officers were exempt from overtime pay and replace it in 2010 with the opposite conclusion, without any public input, and it clears agencies generally to update their interpretive guidance without the delay and cost of formal rulemaking.
“The Paralyzed Veterans doctrine creates just such a judge-made procedural right: the right to notice and an opportunity to comment when an agency changes its interpretation of one of the regulations it enforces.”
The Court's core objection to the D.C. Circuit's notice-and-comment requirement for revised interpretations.
How it got here: A federal trial court sided with the Department; the D.C. Circuit reversed under its own Paralyzed Veterans precedent; the government asked the Supreme Court to review that doctrine.
The Case in Depth
What happened
The Department of Labor had to decide whether mortgage-loan officers count as exempt "administrative" employees under federal overtime law. In 2006 it told a mortgage industry trade group they were exempt; in 2010, without warning, it reversed course and said they were not. The Mortgage Bankers Association sued, arguing the abrupt switch should have gone through public notice and comment first.
The question before the Court
Does a federal agency have to go through public notice and comment before it can change its own earlier interpretation of one of its regulations?
The Court's answer
No — the Court ruled that the Administrative Procedure Act's exemption for "interpretive rules" applies whether an agency is issuing its very first interpretation of a regulation or revising an earlier one. Because interpretive rules never require notice and comment under the statute's plain text, an agency changing its mind about what a regulation means doesn't need to invite public comment first, even if the change contradicts an interpretation regulated parties had relied on for years.
The Court rejected the D.C. Circuit's Paralyzed Veterans rule, which had required notice and comment whenever an agency significantly revised a prior interpretation, calling that a judge-made add-on beyond what Congress wrote into the statute. The Department of Labor's 2010 guidance reclassifying mortgage-loan officers as non-exempt from overtime pay was therefore valid despite reversing a 2006 letter reaching the opposite conclusion.
Curious how the Court got there? See the step-by-step legal reasoning →
Why it matters
Businesses and workers who rely on agency guidance letters and interpretive memos should know those interpretations can change abruptly, without advance warning or a chance to weigh in, whenever the agency believes a new interpretation is more accurate. This gives agencies more flexibility but less predictability for regulated industries and employees who plan around existing guidance.
What changes now
The D.C. Circuit's ruling that had blocked the Department's 2010 guidance is reversed, so the guidance concluding mortgage-loan officers are not exempt from overtime pay stands as valid on procedural grounds. This is a final merits ruling, not a temporary order. The Court did not resolve a separate, unaddressed question about whether courts should keep deferring to agencies' interpretations of their own regulations at all — a debate three justices raised in separate opinions and that remained open for a future case.
What this does not decide
The Court did not decide whether courts should continue giving deference to agencies' interpretations of their own regulations (the so-called Seminole Rock/Auer doctrine) — three justices wrote separately urging that question be reconsidered, but the majority left it for another case. The Court also did not decide whether the 2010 guidance was actually a legislative rule, since that argument was waived.
Concurrences and dissents
Concurrence in part — Justice Alito
Justice Alito joined the majority opinion except for the part responding to the trade association's procedural-fairness argument. He agreed the D.C. Circuit's rule conflicts with the Administrative Procedure Act, but wrote separately to flag a related concern: courts' practice of deferring to agencies' own interpretations of their ambiguous regulations, which he thought the Court should reconsider in a future case with full briefing.
Concurrence — Justice Scalia
Justice Scalia agreed the D.C. Circuit's rule was unlawful but argued the real distortion in administrative law is the practice of courts deferring to agencies' interpretations of their own regulations. He argued that when courts defer to such interpretations, those interpretations effectively become binding law issued without notice and comment, and he would abandon that deference doctrine rather than rely on Congress's supposed balance.
Concurrence — Justice Thomas
Justice Thomas agreed with the Court's holding but wrote separately to argue that the broader practice of deferring to agencies' interpretations of their own regulations raises serious separation-of-powers problems. He argued that such deference transfers the judiciary's core interpretive power to executive agencies, undermining courts' constitutional role as a check on the other branches, and urged that the doctrine be reconsidered.
How the Court got there
The legal reasoning, step by step
- The Court examined the text of the Administrative Procedure Act, which sorts agency rules into two categories: 'legislative rules' that must go through public notice and comment because they carry the force of law, and 'interpretive rules' that explain an agency's view of a law or regulation and are exempt from that process.
- Because the statute exempts interpretive rules from notice and comment without qualification, the Court held that this exemption covers not just an agency's first interpretation but also any later interpretation that revises or replaces it — the statute draws no such line.
- The Court rejected the D.C. Circuit's reasoning that revising an interpretation is effectively 'amending' the underlying regulation, explaining that interpreting a rule and formally changing it are different acts, and interpretive statements never carry the binding force of law regardless of when they are issued.
- Applying its earlier ruling in Vermont Yankee that the Act's notice-and-comment requirements represent the maximum procedures courts may impose on agencies, the Court concluded that judges cannot add an extra notice-and-comment requirement for revised interpretations that Congress did not write into the statute.
- Having concluded the exemption for interpretive rules applies equally to revisions, the Court held that the 2010 guidance on mortgage-loan officers did not need to go through notice and comment, regardless of whether it conflicted with the agency's earlier 2006 letter.
Doctrinal impact
Cases affected by this decision
Reaffirms Vermont Yankee Nuclear Power Corp. v. Natural Resources Defense Council, Inc. (435 U. S. 519)
The Court leaned on this case's rule that the Act's procedures are the maximum courts may impose on agencies.
Distinguishes Christensen v. Harris County (529 U. S. 576)
The Court said this case was about an interpretation conflicting with clear rule text, not about changed interpretations.
Distinguishes Shalala v. Guernsey Memorial Hospital (514 U. S. 87)
The Court said language the trade group relied on was dictum about legislative, not interpretive, rules.