By Andrew H. Perellis, Patrick D. Joyce, and Craig B. Simonsen

Seyfarth Synopsis:  The U.S. Supreme Court agreed this week to reconsider a key precedent of administrative law that tells judges to defer to an agency’s interpretation of its own ambiguous regulation, taking up a challenge to the so-called “Auer” or “Seminole Rock” deference.  The Auer deference has been criticized by conservative justices on the court. Kisor v. Sectretary of Veterans Affairs, No. 18-15 (US Dec. 10, 2018).

The specific question being considered is whether the Court should overrule Auer and Seminole Rock. In context, the specific question being considered is: what deference, if any, should courts give to an agency interpretation of its own regulation that has not gone through Administrative Procedure Act (APA) notice and comment rulemaking?

Historically, courts have struggled with the extent of deference to give an agency’s interpretations of its own regulations. Under the APA § 553(b)(A), agency interpretive rules and general statements of policy are exempt from notice and comment rulemaking because interpretative rules are non-substantive, and the APA only requires substantive interpretations, having the force of law, to go through notice and comment rulemaking. However, the “Auer doctrine,” from Auer v. Robbins, 519 U.S. 452, 117 S.Ct. 905 (1997), accords substantial deference to an Agency’s allegedly non-substantive interpretation of its own regulations, even if presented in an unofficial manner such as in an amicus brief.

We have blogged frequently on Auer deference and its impact on case law, precedent, and regulatory and agency authority — and ultimately on business and employers. These cases run the scope of topical law and issues. See for instance Ninth Circuit Issues En Banc Decision Upholding DOL’s 20% Tip Credit Rule; Ball is Now in DOL’s Court, Supreme Court to Rule on Case Addressing Bathroom Access Based on Gender Identity, Fourth Circuit Holds that “Sex” Under Title IX Incorporates Gender Identity, Texas District Court Enjoins Federal Gender Identity Protection Of Students, Judicial Deference to Informal Agency Interpretations: Could this be the Beginning of the End for Auer?, and Eighth Circuit Rejects OSHA’s Attempt to Expand the Scope of its Machine Guarding Standard.

In in Perez v. Mortgage Bankers Association (MBA), 575 U.S. ____, 135 S.Ct. 1199 (2015), Supreme Court Justices Scalia and Thomas expressed their discontent with agency deference under the “Auer doctrine.”

In his analysis, Justice Scalia cited to § 556 of the APA for the proposition that only the courts may interpret agency actions, not the agencies themselves. Justice Scalia opined that the purpose of the § 553(b)(A) exemption was to allow agencies to advise the public on the impact of a complex regulation without binding the public to that interpretation.

However, Justice Scalia believed Auer deference acts to allow agencies to both advise and bind the public because the agency can draft the regulation to be broad and vague and then interpret it in a manner that would not have been evident to the public when the regulation was originally proposed for notice and comment. Further, under Auer, a reviewing court is beholden to an agency interpretation unless its interpretation is unreasonable, and the public is thus bound by the agency’s interpretation with the force of law. Justice Scalia called for abandoning Auer in a future decision, when the question was properly before the Court.

Justice Scalia distinguished Auer deference and deference to an agency’s interpretation of its governing statute, also known as “Chevron deference,” from Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). Under Chevron, if a statutory term is ambiguous, then the agency has authority to construe that term and interpret its meaning within the statutory scheme by promulgating regulations following APA notice and comment procedures. This is arguably permissible because Congress explicitly granted agencies the ability to interpret their governing statutes, and APA rulemaking procedures are followed in establishing the interpretation via regulations. Justice Scalia pointed out that Auer is unlike Chevron because, under the Auer doctrine, an agency does not use APA notice and comment procedures and Congress has not explicitly granted agencies the ability to interpret their regulations. This difference was enough for Justice Scalia to call for the end of Auer.

Justice Thomas takes a different route when calling Auer into question, looking instead to the separation of powers and checks and balances put in place by the U.S. Constitution. In his concurrence in MBA, Justice Thomas referred to the cases dealing with deference to agency interpretations of regulations, beginning with Bowles v. Seminole Rock & Sand Co., 325 U.S. 410, 65 S.Ct. 1215 (1945), and calls into question the constitutionality of the entire line of cases, including Auer.

Justice Thomas believed that any deference to administrative interpretations of regulations constitutes a transfer of judicial power to the executive, contrary to the language of the Constitution. Because Seminole Rock and Auer erode the judicial obligation to serve as a check on the other branches and muddle the separation between the Judicial and the Executive Branches, Justice Thomas called for reconsideration of the entire Seminole Rock line of cases, including Auer, at the appropriate moment.

In addition, in a joint concurrence to a prior case, Decker v. Northwest Environmental Defense Center, 568 U.S. ___, 133 S.Ct. 1326 (2013), Chief Justice Roberts and Justice Alito indicated that reconsideration of Auer may be appropriate when the issue is properly before the Court. The issue of Auer deference was not before the Court in MBA or Decker, but with at least four Justices questioning the continued validity of the doctrine, it is possible the question of judicial deference to agency interpretive rules will be reconsidered under in Kisor.

Such a reconsideration of Auer would have significant impact upon administrative law. Judicial review of agency action provides important protection against arbitrary or unfair agency action. However, that review is significantly restricted under Auer¸ because a court must defer to an agency interpretation simply because it is issued by the agency, with little check on the reasonableness of the interpretation. Allowing courts to consider but not defer to agency interpretations would compel agencies to be more exacting (and perhaps more forthcoming) when engaging in rulemaking and interpreting regulations. Rulemaking, while perhaps a tedious process for the agency, required notice to the public, an opportunity for the public to comment, and an opportunity for judicial review, all to ensure that the agency action is consistent with law and not arbitrary or capricious.

For more information on this or any related topic please contact the authors, your Seyfarth attorney, or any member of the Seyfarth Environmental Compliance, Enforcement & Permitting or Workplace Safety and Health (OSHA/MSHA) Teams.

By Brent I. Clark, James L. Curtis, Adam R. Young, and Craig B. Simonsen

In a review of an Occupational Safety & Health Review Commission (OSHRC) decision, the U.S. Court of Appeals for the Eighth Circuit ruled this week to vacate a $490,000 penalty for failure to employ machine guards to prevent the ejection of a workpiece in a catastrophic breakdown of a lathe. Perez v. Loren Cook Company, No. 13-1310, __ F.3rd __ (8th Cir. October 13, 2015).

In its decision, the Court agreed with the OSHRC and its Administrative Law Judge (ALJ), which concluded that 29 CFR § 1910.212(a)(1) focuses on “point-of-contact risks and risks associated with the routine operation of lathes, such as flakes and sparks,” but the rule does not contemplate the catastrophic failure of a lathe that would result in a workpiece being thrown out of the lathe. The ALJ vacated the Occupational Safety & Health Administration’s (OSHA’s) citation issued against Loren Cook Company, and the OSHRC adopted the unmodified recommendation of the ALJ. Disagreeing, the Secretary of Labor petitioned the Court for review of the OSHRC order arguing that the Court should defer to OSHA’s interpretation of the standard. The Court denied the Secretary’s petition for review and affirmed the OSHRC’s order.

In its discussion, the Court noted that “we generally afford substantial deference to the Secretary’s interpretation of his own regulations.” “But deference to the Secretary’s interpretation is only appropriate when both the interpretation itself and the manner in which the Secretary announces the interpretation are reasonable.” The Court relied on and cited to Martin v. Occupational Safety & Health Review Comm’n, 499 U.S. 144, 157-58 (1991). The Court cited Supreme Court precedent that deference to an Agency’s interpretation is inappropriate when the interpretation is “‘plainly erroneous or inconsistent with the regulation.’” Auer v. Robbins, 519 U.S. 452, 461 (1997) (quoting Robertson v. Methow Valley Citizens Council, 490 U.S. 332, 359 (1989)). Also, deference is inappropriate “when there is reason to suspect that the Agency’s interpretation ‘does not reflect the agency’s fair and considered judgment on the matter in question.’” Christopher v. SmithKline Beecham Corp., 132 S. Ct. 2156, 2166 (2012) (quoting Auer, 519 U.S. at 462).

The Court noted that in Perez v. Loren Cook Company, OSHA’s position conflicted with prior interpretations, and evidenced a position as nothing more than a litigating position, or using the interpretation as “a post hoc rationalization for a prior action.”

The Court also had its own precedent for parameters under which it should afford an Agency’s interpretation deference:

[D]eference is due when an agency has developed its interpretation contemporaneously with the regulation, when the agency has consistently applied the regulation over time, and when the agency’s interpretation is the result of thorough and reasoned consideration.” Solis v. Summit Contractors, Inc., 558 F.3d 815, 823 (8th Cir. 2009) (quoting Advanta USA, Inc. v. Chao, 350 F.3d 726, 728 (8th Cir. 2003)).

As such, the Court concluded that having determined that the Secretary’s interpretation of section 1910.212(a)(1) was not entitled to deference, and found that the section did not cover the conduct for which the Secretary cited Loren Cook.

OSHA Compliance Safety and Health Officers (CSHOs) and Area Directors often apply their own interpretations of the OSHA standards. This Eighth Circuit decision is a clear reminder that there are limits to OSHA’s ability to adopt new interpretations of its standards.

By Andrew H. Perellis and Patrick D. Joyce

US Supreme Court Capitol Hill Daytime Washington DCIn the recently released decision in Perez v. Mortgage Bankers Association (MBA), 575 U.S. ____, 135 S.Ct. 1199 (2015), Supreme Court Justices Scalia and Thomas expressed their discontent with agency deference under the “Auer doctrine.”

Another Seyfarth blog, the Wage & Hour Litigation Blog, discusses the major holding in MBA: to reject the reasoning used by the D.C. Circuit that held notice and comment rulemaking pursuant to the Administrative Procedure Act (APA) must take place when an agency issues a new interpretation at odds with a prior interpretation. The focus of this blog is on an issue that MBA did not address, but which is creating friction for the courts. Specifically, what deference, if any, should courts give to an agency interpretation that has not gone through APA notice and comment rulemaking?

Historically, courts have struggled with the extent of deference to give an agency’s interpretations of its own regulations. Under the APA § 553(b)(A), agency interpretive rules and general statements of policy are exempt from notice and comment rulemaking because interpretative rules are non-substantive, and the APA only requires substantive interpretations, having the force of law, to go through notice and comment rulemaking. However, the “Auer doctrine,” from Auer v. Robbins, 519 U.S. 452, 117 S.Ct. 905 (1997), accords substantial deference to an Agency’s interpretation of its own regulations, even if presented in an unofficial manner such as in an amicus brief.

In separate concurrences in MBA, Justices Scalia and Thomas both call into question whether any judicial deference to agency interpretations of regulations is appropriate.

In his analysis, Justice Scalia cites § 556 of the APA for the proposition that only the courts may interpret agency actions, not the agencies themselves. Justice Scalia opines that the purpose of the § 553(b)(A) exemption was to allow agencies to advise the public on the impact of a complex regulation without binding the public to that interpretation.

However, Justice Scalia believes Auer deference allows agencies to both advise and bind the public because the agency can draft the regulation to be broad and vague and then interpret it in a manner that would not have been evident to the public when the regulation was originally proposed for notice and comment. Further, under Auer, a reviewing court is beholden to an agency interpretation unless its interpretation is unreasonable, and the public is thus bound by the agency’s interpretation with the force of law. Justice Scalia calls for abandoning Auer in a future decision, when the question is properly before the Court.

Justice Scalia distinguishes Auer deference and deference to an agency’s interpretation of its governing statute, also known as “Chevron deference,” from Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). Under Chevron, if a statutory term is ambiguous, then the agency has authority to construe that term and interpret its meaning within the statutory scheme by promulgating regulations following APA notice and comment procedures. This is arguably permissible because Congress explicitly granted agencies the ability to interpret their governing statutes, and APA rulemaking procedures are followed in establishing the interpretation via regulations. Justice Scalia points out that Auer is unlike Chevron because, under the Auer doctrine, an agency does not use APA notice and comment procedures and Congress has not explicitly granted agencies the ability to interpret their regulations. This difference is enough for Justice Scalia to call for the end of Auer.

Justice Thomas takes a different route when calling Auer into question, looking instead to the separation of powers and checks and balances put in place by the U.S. Constitution. In his concurrence, Justice Thomas refers to the cases dealing with deference to agency interpretations of regulations, beginning with Bowles v. Seminole Rock & Sand Co., 325 U.S. 410, 65 S.Ct. 1215 (1945), and calls into question the constitutionality of the entire line of cases, including Auer.

Justice Thomas believes any deference to administrative interpretations of regulations constitutes a transfer of judicial power to the executive, contrary to the language of the Constitution. Because Seminole Rock and Auer erode the judicial obligation to serve as a check on the other branches and muddle the separation between the Judicial and the Executive Branches, Justice Thomas calls for reconsideration of the entire Seminole Rock line of cases, including Auer, at the appropriate moment.

In addition, in a joint concurrence to a prior case, Decker v. Northwest Environmental Defense Center, 568 U.S. ___, 133 S.Ct. 1326 (2013), Chief Justice Roberts and Justice Alito indicated that reconsideration of Auer may be appropriate when the issue is properly before the Court. The issue of Auer deference was not before the Court in MBA or in Decker, but with at least four Justices questioning the continued validity of the doctrine, it is possible the question of judicial deference to agency interpretive rules will be reconsidered in the near future.

Such a reconsideration of Auer could have significant impact upon administrative law. Judicial review of agency action provides important protection against arbitrary or unfair agency action. However, that review is significantly restricted under Auer¸ because a court must defer to an agency interpretation simply because it is issued by the agency, with little check on the reasonableness of the interpretation. Allowing courts to consider but not defer to agency interpretations would compel agencies to be more exacting (and perhaps more forthcoming) when engaging in rulemaking. Rulemaking, while perhaps a tedious process for the agency, required notice to the public, an opportunity for the public to comment, and an opportunity for judicial review, all to ensure that the agency action is consistent with law and not arbitrary or capricious.

By Andrew H. Perellis and Craig B. Simonsen

In City of Arlington v. Federal Communications Commission, __ U.S. ___, No. 11-1545 (May 20, 2013), the Supreme Court re-affirmed the Chevron standard for deferring to an agency interpretation of an ambiguous statute even where the agency interpretation pertains to whether the agency possesses authority to act in the first instance. 

In this case the lower court considered whether an agency’s interpretation of a statutory ambiguity that related to its regulatory authority (its jurisdiction) was entitled to deference under Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U. S. 837 (1984).  The lower court decided it was.  The Supreme Court agreed, holding that courts must apply the Chevron framework to an agency’s interpretation of statutory ambiguities that concern the scope of the agency’s own statutory authority.

The Supreme Court concluded that a “general conferral of rulemaking authority validates rules for all the matters the agency is charged with administering. It suffices to decide this case that the preconditions to deference under Chevron are satisfied because Congress has unambiguously vested the FCC with general authority to administer the Communications Act through rulemaking and adjudication, and the agency interpretation at issue was promulgated in the exercise of that authority.”

The decision has broad implications for all of the various federal agencies vested with rulemaking authority, including, of course, the Environmental Protection Agency. Under the familiar two-step approach mandated by Chevron, the first step is whether the statutory language to be interpreted, on its face, is ambiguous, and whether Congress was silent regarding that ambiguity. If the answer to both of these questions is yes, then the second step is to evaluate whether the administering agency’s interpretation of that language is reasonable. Under the second step of Chevron, an agency’s interpretation of the statute it administers is afforded deference. If that interpretation is reasonable, it must be followed, regardless of whether or not the reviewing court would have come to the same conclusion.

Because the second step of Chevron requires deference, the holding of City of Arlington elevates the importance of Chevron’s first step when challenging whether the agency has authority to engage in a particular action or rulemaking under a statute. This requires arguing either that the statute is unambiguous in not providing such authority, or, although the particular statutory language is ambiguous, that Congress was not silent regarding the ambiguity – meaning that Congress resolved the ambiguity with other statutory language – so as to preclude the exercise of agency action.