Supreme Court Widens Federal Agency Latitude on Guidance Documents
On March 9, 2015, the U.S. Supreme Court held in Perez v. Mortgage Bankers Association that federal agencies are not required to provide public notice or solicit comments when they revise interpretive rules, which often take the form of guidance documents. While the case itself addressed an industry challenge to revisions that the U.S. Department of Labor made to an interpretive rule concerning certain exemptions to minimum wage and overtime payment requirements, the Court's opinion will likely have far-reaching consequences that affect all federal agencies and regulated entities subject to agency guidance documents.
The Administrative Procedure Act ("APA") establishes rulemaking procedures that federal agencies must follow, and it distinguishes between two different types of rules: "legislative rules" and "interpretive rules." Legislative rules have the force and effect of law, and federal agencies must provide the public with notice of these rules and an opportunity to comment before a rule becomes final. Interpretive rules, which agencies frequently refer to as "guidance" or "policy statements," do not technically have the force and effect of law, but do explain to the public how the agency will interpret and apply the statutes and rules it is charged with administering.
While the APA provides that federal agencies are not required to provide public notice or solicit comments before issuing interpretive rules, an agency's authority to change its formerly relied upon interpretation was another story. Previously, in a 1997 case, Paralyzed Veterans of America v. D.C. Arena L.P., the U.S. Court of Appeals for the D.C. Circuit held that federal agencies must provide public notice and solicit comments when an agency significantly revises an interpretive rule (i.e., substantially changes its interpretation of a statute or regulation). This doctrine (known as the "Paralyzed Veterans doctrine") was subsequently adopted by the Third, Fifth, and Sixth Circuits, but rejected by the First and Ninth Circuits.
In Perez, looking to the plain language of the APA, the Supreme Court struck down the Paralyzed Veterans doctrine and held that agencies are not required to provide the public with notice or solicit comments when revising interpretive rules, no matter how significant those revisions may be. The Court reasoned that the APA provides the complete extent to which courts may review agency actions for procedural correctness, and that the Paralyzed Veterans doctrine created a judicial review process that Congress had not intended.
By authorizing agencies to significantly revise interpretive rules with no prior notice or opportunity to comment, the ruling effectively allows federal agencies to amend this type of guidance without any procedural safeguards. The decision may therefore lead to an immediate increase in the number of interpretive rules issued and/or revised by federal agencies and give rise to fears of potential adverse impacts from this expansive latitude.
For instance, arguments in the Perez case raised concerns about policy reversals that could occur with the transition from one Administration to the next, and the lack of protection available to parties that rely, to their detriment, on an easily changed legislative rule/guidance. The regulated community will need to be vigilant regarding these contingencies and tailor expectations and planning to the lack of finality represented by interpretive guidance.
On a related note, simply because a federal agency identifies an agency pronouncement as interpretive does not necessarily mean its classification is correct. A long line of cases makes clear that interested parties can successfully challenge agencies that seek to use guidance or interpretive rules when implementing what is actually a binding legislative rule that should have been subject to notice and comment procedures. With increasing agency reliance on guidance documents and policy statements that do not require notice and comment rulemaking, regulated entities should make it a regular practice to critically assess the actual nature and effect of agency actions.
For more information on interpretive rules or how the Supreme Court's decision may affect your business, please contact Kenneth von Schaumburg (email@example.com | (202) 772-0904), Jane Luxton (firstname.lastname@example.org | (202) 572-8674) or your Clark Hill attorney.
 575 U.S. ____ (2015); 2015 U.S. LEXIS 1740 (U.S. Mar. 9, 2015).
 117 F. 3d 579 (D.C. Cir. 1997).
 See, e.g., National Mining Association v. McCarthy, 758 F.3d 243 (D.C. Cir. 2014).
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