Senators Review Agency Use of Guidance as Law

Even Promulgated Rules Have Rules


May 7 Letter to Secretary Burwell requesting a long list of documents concerning sub-regulatory guidance by agencies of HHS

Senators Lamar Alexander (R-TN), chairman of the Committee on Health, Education, Labor and Pensions, and James Lankford (R-OK), chairman of the Homeland Security and Governmental Affairs Subcommittee on Regulatory Affairs and Federal Management, asked the Secretary of the Department of Health and Human Services for all documents regarding the agency’s use of “sub-regulatory guidance” created or issued as far back as July 24, 2007, in a letter dated May 7. The senators expressed concern that the agency may be issuing such guidance to avoid regulatory requirements, and then treating and enforcing such guidance as binding, as if they carry the force of law.

Advice is Just Advice

The senators note that only rules that are subject to notice and comment rule-making under the Administrative Procedure Act (APA) are enforceable, and that informal guidance documents should never be considered binding. The letter cites a recent Supreme Court (SCOTUS) decision, Perez v. Morgage Bankers Association, which makes clear that “guidance” is only meant to “advise the public” and “do[es] not have the force and effect of law.”

The letter instructs HHS to deliver a long list of guidance documents, especially those that have been the subject of complaints that the agency has treated those documents as binding requirements.  HHS must produce the documents for the senators by May 29, 2015.

[Given the specific date mentioned in the letter, July 24, 2007, one wonders if there is a specific complaint that provided the impetus for this examination by the senators. Nevertheless, we have not been able, so far, to exactly identify such a complaint.]

Interpretive Rules: What are they?

The Perez decision by SCOTUS, correcting lower court rulings that sought to tell agencies how to interpret or create procedures to enact and enforce regulations.

The Perez decision by SCOTUS, correcting lower court rulings that sought to tell agencies how to interpret or create procedures to enact and enforce legislative regulations.

In the Perez decision, SCOTUS gave a rare 9-0 decision (even including a comment that “Time and again, we have reiterated [this]…“), holding that the D.C. Circuit Court was incorrect in deciding that (1) the courts could “review executive agency action for procedural correctness,” and that (2) the agency in question must engage in notice-and-comment procedures when either issuing or changing an interpretive rule.

The term “interpretive rule” is not further defined by the APA, and there is much scholarly and judicial debate about its meaning. SCOTUS did not wish to “wade into that debate” in this decision, but stated that the critical feature of interpretive rules is that they are “issued by an agency to advise the public of the agency’s construction of the statutes and rules which it administers.” While that may or may not help understanding, the Court did point out that the absence of a notice-and-comment obligation makes the process of issuing “interpretive rules” comparatively easy for agencies, compared to issuing “legislative rules.” But that convenience comes at a price: “interpretive rules” do not have the force and effect of law, and are not accorded that weight in enforcement.


The Fair Labor Standards Act of 1938 – an example of a regulation with many changing interpretations issued by an agency over the years, properly done without the use of notice-and-comment rule-making process.

The example of the Perez case may illuminate the difference between issuing or amending a rule, versus interpreting a rule. The dispute in Perez was over efforts by the Department of Labor to determine (interpret) whether mortgage-loan officers are covered by the Fair Labor Standards Act of 1938 (FLSA). That act established a minimum wage and overtime pay for many employees. Certain classes of employees, however — such as executives or professionals — are exempt from the Act, and employers do not have to apply such a rule to them. And example of an employee that is exempt from the rule was given in the regulation itself: “employees in the financial services industry,” who, depending on the nature of their day-to-day work, “generally meet the duties requirements for the administrative exception.” However, in 1999, and again in 2001, the Department of Labor issued letters (an interpretation of the rule, or so-called sub-regulatory guidance) opining that mortgage-loan officers do not qualify for the administrative exemption, and therefore the FLSA’s minimum wage and maximum hour requirements did apply to mortgage-loan officers. End of story, right? Wrong.

The Department of Labor promulgated the current FLSA regulations in 2004, and at that time, a private firm that deals with financial lenders, the Mortgage Bankers Association (MBA), requested a new opinion from the Department interpreting the newly revised regulations. In 2006, the Department reversed its previous opinion and stated that mortgage-loan officers did fall within the administrative exception under the 2004 regulations. It took them two years to form that opinion (interpretation), but they finally did. End of story, you think. Wrong again.

Interpretation apparently means they can change their mind at will, on a dime, and willy-nilly.

Interpretation apparently means they can change their mind at will, on a dime, and willy-nilly.

In 2010, the Department changed its opinion (again), concluding that mortgage-loan officers “have a primary duty of making sales for their employers,” and, therefore, do not qualify for the administrative exemption. (sigh)

When the Department issued the 1999, 2001, 2006 and 2010 opinion letters, these “Administrator’s Interpretations” were all issued without notice or opportunity for comment. (They can be called “sub-regulatory guidance” for our purposes.) These were in fact interpretive rules. According to SCOTUS, then, the lower court went wrong in failing to apply an accurate understanding of the exemption for interpretive rules found in §4 of the APA. That is, “…because an agency is not required to use notice-and-comment procedures to issue an initial interpretive rule, it is also not required to use those procedures when it amends or repeals that interpretive rule.

Quoting from another case, the SCOTUS decision concludes:

“…beyond the APA’s minimum requirements, courts lack authority to impose upon an agency its own notion of which procedures are ‘best’ or most likely to further some vague, undefined public good. To do otherwise would violate the very basic tenet of administrative law that agencies should be free to fashion their own rules of procedure.  …The APA established the maximum procedural requirements which Congress was willing to have the courts impose upon agencies in conducting rule-making procedures. …When Congress enacted the APA, it settled long-continued and hardfought contentions, and enact[ed] a formula upon which opposing social and political forces have come to rest. In the end, Congress decided to adopt standards that permit agencies to promulgate freely such rules—whether or not they are consistent with earlier interpretations. That the D. C. Circuit would have struck the balance differently does not permit that court or this one to overturn Congress’ contrary judgment.”

Back to the Senators’ Request for HHS Documents

Mess? What mess?

Mess? What mess?

It would seem, then, that the Senators are looking for situations where HHS has issued sub-regulatory guidance that Congress might not like, or that Congress might feel is outside the boundaries of “interpretive rules.” Perhaps the Senate has noticed something that HHS is doing; knows that SCOTUS won’t (and can’t) do anything about it; so they’ve decided to look into it themselves?

Perhaps they think they’ve done enough for healthcare this year, since they got through all that SGR stuff, and are tired of hearing all that ICD-10 stuff from the AMA, the AHA, AHIMA, YMCA, LBJ, Y.A. Tittle, and someone else – I can’t remember who.

As I said… I wonder who or what made them look? Stay tuned… you’ll know when we do.

Unless OMHA gets involved somehow, in which case, it will be 3 years before they even open the mail, so we may not be young enough to care anymore by the time Congress gets to see it all.

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