Revising interpretations

If a federal agency has published an interpretation of a regulation, can the agency later revise that interpretation at will or is it fixed in stone?

In a recent case, the U.S. Supreme Court said agencies could revise their interpretations without using procedures required for creating new regulations. The Supreme Court ended a longstanding split in opinion by the U.S. Courts of Appeals. The high court’s ruling is likely to increase the power of agencies to impose new requirements unilaterally without formal rulemaking procedures and public participation.

Rulemaking procedures

In our complex federal legal system, Congress creates regulatory agencies and delegates to them power to make rules and regulations. Procedures for making regulations are set forth in the Administrative Procedure Act. Sometimes, laws provide separate procedures for rulemaking. The Federal Mine Safety and Health Act provides distinct procedures for creating mandatory safety and health standards, violations of which can cause civil or criminal penalties.

Failure of an agency to comply with rulemaking procedures can render a regulation invalid and unenforceable. The fundamental requirement for substantive regulations is the opportunity for public participation. Agencies cannot impose substantive obligations on regulated parties without giving notice and providing an opportunity for public comment.

Issuance of interpretations

The public participation requirement can be a source of contention when an agency issues an interpretation of one of its regulations. The Administrative Procedure Act does not mandate public participation for “interpretive rules,” as they are sometimes called. But if an interpretation is more than just that, if it creates new substantive requirements not found in the regulation being interpreted, then the “interpretation” may be challenged.

Is the agency just clarifying how it will enforce a regulation, or is it creating a new requirement not found in the regulation? Assuming the agency’s interpretation is deemed consistent with the regulation, federal courts will defer to it. If the interpretation is contrary or unreasonably inconsistent, courts will reject it for lack of rulemaking procedures.

Revision of interpretations

Interpretative actions by an agency are most likely to meet opposition when they discard a prior interpretation and adopt a new one. The most significant legal controversies have involved reinterpretations of regulations.

When an agency reinterprets a regulation, it raises obvious questions whether the prior interpretation was correct and the new one was not, or whether the agency is creating a new requirement without proper rulemaking. Challenge is especially likely if the new interpretation imposes more onerous requirements.

Challenges to interpretations

Challenges to interpretations may be raised in litigation when regulated parties defend against enforcement actions. They may also be raised directly with the agency.

MSHA metal/nonmetal regulations provide: “A competent person … shall examine each working place at least once each shift for [safety and health],” and, “A record that such examinations were made shall be kept by the operator for one year, and shall be made available to [inspectors].”

MSHA published interpretations clarifying the requirement for a written record of examinations includes no requirement to record conditions found during the examination. The record needs to only show who examined what and when.

MSHA later sought to reinterpret the regulation to require conditions to be reported, but the agency encountered vigorous opposition on grounds new requirements would be created without proper rulemaking, including public notice and opportunities for comment.

Faced with this, MSHA abandoned its new interpretation. Had the issue gone to court, the question would be whether the reinterpretation was reasonably compatible with the regulation, or whether the “reinterpretation” created new requirements without proper procedures.

The Federal Mine Safety and Health Review Commission has stated: “An agency may not escape the notice and comment requirements by labeling a major substantive legal addition to a rule a mere interpretation.”

Rulings on reinterpretations

The U.S. Court of Appeals for the District of Columbia Circuit (where many federal regulations are challenged) had long held that to revise an interpretation, an agency must go through notice and comment rulemaking. The D.C. Circuit pointed to requirements of the Administrative Procedure Act that modifications or amendments to regulations must be made through formal rulemaking. Other circuit courts, however, held agencies could change their past interpretations without formal rulemaking.

The disagreement among the courts whether public rulemaking is required for reinterpretations was resolved in March 2015 when the U.S. Supreme Court, in Perez v. Mortgage Bankers Association, held that agencies may change prior interpretations without rulemaking and public participation.

The Supreme Court said: “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.”

Agencies will now feel freer to reinterpret regulations. Regarding MSHA’s workplace examination requirements, it is possible MSHA will, by change of interpretation, require listing of conditions in workplace examination records. MSHA would argue that it is not imposing a new requirement. Industry would argue the interpretation would unlawfully impose a requirement not stated in the regulation – a fact that MSHA recognized with its original and longstanding interpretation.