Executive Branch agencies write vague rules. Then they give them meaning through interpretation. That meaning may change over time through re-interpretation. Indeed, it is not hard to find examples of rules that meant one thing one day and the opposite the next. See, e.g., Perez v. Mortgage Bankers Association, 135 S. Ct. 1199 (2015). This is a problem for regulated entities that face penalties for failure to comply. Reflecting such concerns, the deference doctrine has eroded slowly over the past two decades, with pronounced critical commentary from conservative Justices. In October 2016, the Supreme Court granted review in a case from the Fourth Circuit -- GG v. Gloucester County School Board (cert. granted Oct. 28, 2016)—where the court gave “controlling weight” to a staff interpretation of a Department of Labor (“DOL”) regulation. In Gloucester County, the Court will have an opportunity to rein in a particularly aggressive use of agency deference. Does this case presage more comprehensive review of the Court’s deference jurisprudence? And what does it portend for the Trump Administration’s efforts to reverse Obama Administration regulatory priorities?
The deference doctrine has been long in the making. Starting prior to enactment of the Administrative Procedure Act (“APA”) in 1945, the judiciary had given agency interpretations of their regulations “controlling weight” unless “plainly erroneous” or “inconsistent with the regulation.” Bowles v. Seminole Rock & Sand Co., 325 U.S. 410 (1945) (announcing a standard that is often referred to as Seminole Rock deference). On one hand, the deference doctrine recognizes that the expert agency responsible for writing a rule is best positioned to know what it means. On the other hand, this doctrine presents a challenge when administrations change and new agency decision-makers had no role in writing the rule. In such cases, original meaning may be lost (inadvertently or unapologetically) in the mists of time.
From a statutory standpoint, we live in a post-APA world where “the reviewing court”— not the agency — “shall … interpret … statutory provisions and determine the meaning or applicability of the terms of agency actions.” APA § 706. This has led some to suggest that uncritical deference to evolving agency interpretations is an abdication of judicial authority and contrary to law.
Despite the APA, deference to an agency’s interpretation of its own regulations has continued as the general rule. This rule achieved perhaps its most expansive expression (ironically) in Justice Scalia’s opinion for a unanimous Court in Auer v. Robbins, 519 U.S. 452 (1997). In Auer, the Court addressed whether the employee plaintiffs had been compensated on a “salary basis,” and therefore were not entitled to overtime pay under the Department of Labor’s Fair Labor Standards Act (“FLSA”) regulations. According to the Court, “[t]he Secretary of Labor, in an amicus brief filed at the request of the Court, interprets [the rule] … to deny exempt status” in this case. “Because the salary-basis test is a creature of the Secretary’s own regulations,” the Court continued, the Secretary’s “interpretation is, under our jurisprudence, controlling unless plainly enormous or inconsistent with the regulation.” Id. at 461.
Where regulatory language lacks precision, Auer’s “plainly erroneous” or “inconsistent with regulation” standard offers little in the way of a practical barrier to changed interpretations. That Auer’s deference was announced in the course of litigation opens the door wide to regulatory surprise orchestrated by agency counsel offering new theories of liability. Where an agency re-interprets a vague regulation to give it new meaning, the regulated party that legitimately thought it was in compliance may learn by pronouncement of counsel that it was not. Auer thus raises the specter of agencies making the law and enforcing it in the same proceeding. See John Manning, 96 Columbia Law Review 612 (1996) (cataloging constitutional and other problems with the deference doctrine).
This is not a mere hypothetical. In Perez v. Mortgage Bankers Ass’n, the Court revisited the FLSA regulations: do they apply to mortgage-loan officers? In 1999 and again in 2001, the Department’s Wage and Hour Division issued opinions letters saying these officers were covered. Then, in 2006, the Department reversed course — they were not covered. This interpretation lasted for four years until 2010, when the Department issued another opinion letter saying they were covered. According to the APA, a rule is an agency statement of “future effect” meant to “implement … or prescribe law.” 5 U.S.C. § 551(4). But what is the law in this case? And what happens to regulated entities who relied on what they thought the law was from 2006-2010?
In the environmental area (and this is, after all, an environmental blog), the vagaries of the deference doctrine were in play in EPA’s Clean Air Act “new source review” enforcement initiative, which applied regulations addressing when an “existing” plant becomes a “new” plant subject to more stringent pollution control requirements. Two decades after the rules were issued, EPA filed a raft of law suits against companies that thought they had been in compliance. In response, some courts gave EPA counsel’s regulatory interpretations “controlling weight” and found violations of the rules. See, e.g., United States. v. Ohio Edison, 276 F. Supp. 2d 829 (S.D. OH 2003). Other courts looked at the same rules and similar facts and found the rules meant exactly the opposite, finding no violations. See, e.g., United States v. Duke Energy, 278 F.Supp.2d (M.D.N.C. 2003); United States v. Alabama Power Co., 372 F. Supp. 2d 1283 (N.D. Ala. 2005). How can a regulation simultaneously mean two different things?
These deference problems have not gone unnoticed. Justice Thomas recently explained in his concurrence in Michigan v. EPA, 135 S. Ct. 2699, 2712 (2015), that judicial deference creates “tension with Article III’s vesting clause, which vests judicial power exclusively in Article III courts,” and “runs headlong into … Article I, which vests ‘[a]ll legislative powers herein granted’ in Congress.” It also deprives regulated parties of notice of their compliance obligations, raising due process concerns. GE v. EPA, 53 F.3d 1324 (D.C. Cir. 1995).
The judiciary has responded to these problems in a variety of ways. In United States v. Mead Corp., 533 U.S. 218 (2001), for example, the Supreme Court clarified that agency deference applies only when “Congress delegated authority to the agency generally to make rules carrying the force of law,” and the agency’s interpretation “was promulgated in the exercise of that authority.” More recently, in UARG v. EPA, 134 S. Ct. 2427 (2014), the Court addressed an agency interpretation asserting “an unheralded power to regulate a significant portion of the American economy,” and found such an assertion of authority must be the product of clear statutory authority (not ambiguity).
The D.C. Circuit – the nation’s chief administrative law court – has responded in its own fashion, for example, finding that due process prevents an agency from holding a company responsible where the agency’s interpretation is not clear on the face of its rules. GE v. EPA, 53 F.3d 1324 (D.C. Cir. 1995). And in a line of cases starting with Paralyzed Veterans of Am. v. DC Arena, LLP, 117 F.3d 579 (D.C. Cir. 1997), the D.C. Circuit gave agencies only one bite at the interpretive apple: once an agency interprets a regulation, that is the law and any change in interpretation must be accomplished prospectively through notice and current rulemaking.
The D.C. Circuit’s Paralyzed Veterans doctrine, of course, was recently vacated by the Supreme Court in Perez v. Mortgage Bankers Assoc. According to the Court, the APA provides that “interpretative rules” – whether the first or the fifteenth interpretation – are not subject to notice and comment rulemaking. In their concurring opinions, however, Justices Thomas, Scalia, and Alito all recognized that the underlying problem is Seminole Rock deference. As Justice Alito said, “I await a case in which the validity of Seminole Rock may be explored through full briefing and argument.”
With GG v. Gloucester County School Board, the Supreme Court has taken a step closer to the case Justice Alito seeks. In Gloucester County, the Fourth Circuit rejected the lower court’s dismissal of a Title IX discrimination claim, based on DOL’s interpretation of a regulation governing separate bathroom facilities based on sex. This interpretation was announced in an unpublished staff letter written during the course of the litigation. The Fourth Circuit found the regulation ambiguous and gave the unpublished staff interpretation “controlling weight.” Judge Niemeyer dissented.
The first question presented for review was whether “this Court [should] retain the Auer doctrine.” Apparently, there are not four Justices who feel that it is the time (or that the right case has been presented) to revisit the Court’s deference jurisprudence. This issue therefore was not accepted for review.
The Court, however, did accept two other issues for review:
“2. If Auer is retained, should deference extend to an unpublished agency letter….
- With or without deference to the agency’s interpretation, should the Department's specific interpretation … be given effect.”
The Court’s action suggests that, for the present, it will continue its cautious approach to cabining the deference doctrine. At a minimum, an unpublished staff letter adopted in the context of the very dispute in which deference is sought should not be viewed as having the “force of law,” entitling it to deference. A more robust examination of the deference doctrine, though, will have to await confirmation of a ninth Justice.
In the meantime, how might the continuing judicial debate over agency deference affect the new Administration? There is much talk of new policies and changed positions, and the Trump Administration will undoubtedly seek deference for changes in policy based on new interpretations of regulations. It is equally certain that such changes in position will be closely scrutinized by the courts. The recent trends in deference jurisprudence suggest that new policy-driven interpretations will require careful justification through a formal processes, such as rulemaking or adjudication.
- Special Counsel
Described as “absolutely one of the leaders in the field,” by Chambers USA, 2016, Bill Brownell is highly sought for his consummate understanding of environmental law. Bill has been lead counsel for some of the most important and ...
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Authors
- Yaniel Abreu
- Elizabeth E. Aldridge
- Walter J. Andrews
- John J. Beardsworth, Jr.
- Nancy B. Beck, PhD, DABT
- Jordan L. Bernstein
- Timothy E. Biller
- George Borovas
- Lawrence J. Bracken II
- Shannon S. Broome
- Karma B. Brown
- Samuel L. Brown
- F. William Brownell
- Courtney Cochran Butler
- Julia J. Casciotti
- Michelle G. Chan
- E. Carter Chandler Clements
- Abigail Contreras
- Benjamin Y. Cooper IV
- Christopher J. Cunio
- Alexandra B. Cunningham
- Andrea DeField
- Meredith Doswell
- Douglas L. Dua
- Deidre G. Duncan
- Frederick R. Eames
- Clare Ellis
- Latosha M. Ellis
- Susan S. Failla
- Geoffrey B. Fehling
- Andrea Field
- Hannah Flint
- Steven C. Friend
- Kevin E. Gaunt
- Andrew G. Geyer
- Erin Grisby
- Elisabeth R. Gunther
- Steven M. Haas
- Alexandra Hamilton
- Patrick Jamieson
- Kevin W. Jones
- Dan J. Jordanger
- Ryan T. Ketchum
- Sami M. Khan
- Jonathan H. Kim
- Scott H. Kimpel
- Charles H. Knauss
- Garrett Kral
- J. Pierce Lamberson
- Lucinda Minton Langworthy
- Jaclyn E. Lee
- Matthew Z. Leopold
- Charlotte Leszinske
- Brian R. Levey
- Michael S. Levine
- Elbert Lin
- Eric R. Link
- Nash E. Long
- David S. Lowman, Jr.
- Phyllis H. Marcus
- Jeffrey N. Martin
- Lorelie S. Masters
- Patrick M. McDermott
- Kerry L. McGrath
- Robert J. McNamara
- Michael J. Messonnier, Jr.
- Jennifer MikoLevine
- Todd S. Mikolop
- Angela Morrison
- Michael J. Mueller
- Eric J. Murdock
- Ted J. Murphy
- William L. Newton
- Henry V. Nickel
- Paul T. Nyffeler, PhD
- Peter K. O’Brien
- G. Michael O’Leary
- Evangeline C. Paschal
- Kate Perkins
- Shemin V. Proctor
- Shawn Patrick Regan
- Myles F. Reynolds
- Doris Rodríguez
- Brent A. Rosser
- Christian Rudloff
- Rachel Saltzman
- Arthur E. Schmalz
- Penny A. Shamblin
- Michael R. Shebelskie
- George P. Sibley, III
- Joseph C. Stanko
- Martin P. Stratte
- Javaneh S. Tarter
- Thomas W. Taylor
- Patricia Tiller
- Linda Trees
- Andrew J. Turner
- Emily Burkhardt Vicente
- Gregory R. Wall
- Thomas R. Waskom
- Malcolm C. Weiss
- Michelle-Ann C. Williams
- Susan F. Wiltsie