The U.S Court of Appeals for the D.C. Circuit has vacated a U.S. Department of Labor (“DOL”) interpretation that mortgage loan officers do not qualify for the “administrative exemption” from the overtime provisions of the Fair Labor Standards Act (“FLSA”).
In Mortgage Bankers Association v. Harris, No. 12-5246 (D.C. Cir. July 2, 2013), a three-judge panel of the D.C. Circuit vacated the DOL’s 2010 “Administrator Interpretation” regarding loan officers’ non-exempt status because the agency did not follow a public notice-and-comment rulemaking process before issuing the guidance.
The issue first arose in 2006, when the DOL released an Opinion Letter that determined mortgage loan officers were exempt. In 2010, under a new administration, the DOL withdrew this Opinion Letter and issued an Administrator Interpretation declaring that mortgage loan officers did not meet the exemption test.
The Mortgage Bankers Association (“MBA”), a national association representing the real estate finance industry, sued and the D.C. Circuit upheld the claim, explaining “When an agency has given its regulation a definitive interpretation, and later significantly revises that interpretation, the agency has in effect amended its rule, something it may not accomplish [under the Administrative Procedures Act] without notice and comment.”
The D.C. Circuit made clear that they were not ruling one way or the other on the substantive exemption issue. However, if the DOL does intend to adopt its 2010 position on the non-exempt status of mortgage loan officers, it will have to go through the full regulatory process and conduct the required notice-and-comment rulemaking.
Bottom Line
Whether mortgage loan officers are exempt remains completely up in the air. However, despite the fact that the DOL’s Administrative Interpretation was ruled invalid, we know how they view this issue. Therefore, any financial institution that deems their mortgage loan officers exempt can anticipate that the DOL will seek to foreclose on that decision.