By: Dalton Carty
Lansing Managing Editor
First, President LeDuc explained that the matter was exceedingly emotional. DOL was attempting to preserve a long standing administrative law tradition that allowed administrative agencies to modify their interpretive rules without public commentary. If administrative agencies wanted to draft and ratify substantive rules, they would need public commentary before this could be done. These stipulations were accorded to all administrative agencies as a result of the Administrative Procedure Act (APA). Passed in 1946, the APA is federal legislation that provides for the creation and maintenance of administrative agencies. The problem is the APA does not define interpretive or substantive rules. Thus, courts have developed broad tests to differentiate between the two types of rules considering their dissimilar requirements.
In Perez, DOL construed a provision of the Fair Labor Standards ACT (FLSA), which provides key guidelines for employer-employee relations like workweek hours and overtime payments, to mean mortgage loan officers were not administrative employees and were entitled to overtime pay. This change directly contradicted DOL’s former interpretation that mortgage loan officers were administrative employees and exempt from overtime pay. Representing hundreds of mortgage loan businesses throughout the nation, Mortgage Bankers Association challenged DOL’s modification of the interpretation because it meant increased personnel costs for the businesses the association represented. Mortgage Bankers Association asserted that the new interpretation was not an interpretation, but rather a substantive rule and public input was required before DOL could create or implement it. DOL countered by saying that the modification was not a substantive rule, but an interpretive augmentation that did not require public notice.
Second, President LeDuc discussed the lack of public notice and commentary for interpretive rules and the need for public notice and commentary for substantive rules. He said interpretive rules are informal, advisory statements or opinions usually issued when a stakeholder asks an administrative agency for insight as to how a particular Congressional statute may affect it. However, substantive rules have undergone the substantive rulemaking process including public commentary on proposed rules prior to their adoption as laws by an administrative agency. Thus, both interpretive and substantive rules are binding declarations with the former not requiring public notice and commentary but the latter does. President LeDuc continued by stating some jurisdictions believe interpretive rules should require public notice and commentary. However, he said that was impractical because agencies would not give advice to a stakeholder if the agency needed to first obtain public commentary about what that opinion should be.
Third, President LeDuc said the decision whether DOL’s modification was an interpretive change or a substantive rule was extremely subjective because of the lack of a definition for either an interpretive or substantive rule in the APA and the measure could be interpreted one way by one court and perceived contrarily by another court. Lastly, President LeDuc said that administrative agencies resist making substantive rules because the process is slow, tedious, expensive, and utterly bureaucratic.
Without President LeDuc’s help, I would have had a considerably harder time discerning the subtleties involved in Perez v. Mortgage Bankers Association. Always the educator, he thanked me at the close of our conversation and expressed how much he enjoyed feeling like he was back in the classroom if only for a minute. However, it was I who had to thank him for taking time out of his busy schedule to accommodate a solitary student interested in the finer aspects of administrative law.