Abrupt Changes in FLSA, FMLA Remain a Possibility in Wake of Supreme Court Decision

Author: Michael Cardman, XpertHR Legal Editor

March 9, 2015

The US Department of Labor (DOL) may continue to change its interpretations of the Fair Labor Standards Act (FLSA), the Family and Medical Leave Act (FMLA) and other laws without providing advance notice to employers.

The Supreme Court ruled March 9 in Perez v. Mortgage Bankers Assoc. that federal agencies do not need to use the notice-and-comment procedures of the Administrative Procedure Act (APA) when they wish to issue a new interpretation of a regulation that deviates significantly from one they had previously adopted.

The Perez ruling involves some of the finer points of how federal employment laws are applied in the real world.

After a law is passed, the federal agency in charge of enforcing it may issue regulations that interpret the law, often fleshing it out with examples and other details. These regulations are usually issued through the APA's notice-and-comment rulemaking process. First, the agency publishes a notice of its intent to issue regulations. Then it publishes proposed regulations in the Federal Register. During this time, parties affected by the law and the public at large are given the chance to comment. The agencies sometimes change the proposed regulations based on these comments before finalizing them. Courts usually defer to these notice-and-comment regulations if they do not conflict with the statute.

Sometimes the DOL and other agencies offer less formal guidance, such as opinion letters or administrator interpretations, in which they interpret how the law applies to a particular scenario presented by an employer. These non-notice-and-comment interpretations are not given the same deference by courts, but they can help limit an employer's damages if it can demonstrate that it followed such an interpretation in good faith.

The Perez case involved the kind of 180-degree turns that can make it difficult for an employer to comply with the law. In 2006 the DOL, under the Bush administration, issued an opinion letter in which it concluded that mortgage loan officers were exempt from the minimum wage and overtime requirements of the FLSA. Four years later in 2010, under the Obama administration, the DOL issued a new administrator interpretation rescinding the old opinion letter and finding the mortgage loan officers not exempt.

The Mortgage Brokers Association filed a lawsuit to void the DOL's new interpretation, arguing that it was invalid because the DOL had not gone through the notice-and-comment rulemaking process. The United States Court of Appeals for the District of Columbia Circuit granted the Association's request, but the Supreme Court reversed that ruling, stating, "The straightforward reading of the APA we now adopt harmonizes with longstanding principles of our administrative law jurisprudence."

Although the Perez ruling allows agencies to continue turning on a dime, it appears unlikely the DOL will make many abrupt shifts in the near future. In the five years since the DOL abandoned its longstanding practice of issuing opinion letters in favor of "administrator opinions," it has issued only four interpretations of the FLSA and two of the FMLA.