D.C. Circuit Court Vacates U.S. DOL Interpretation Classifying Mortgage Loan Officers as Non-Exempt

Contributed by Samantha Esmond

On July 2, 2013, the United States Court of Appeals for the District of Columbia Circuit vacated the U.S. Department of Labor’s (“DOL”) prior 2010 administrative interpretation regarding mortgage loan officers’ non-exempt status under the Fair Labor Standards Act (“FLSA”) because the DOL did not adhere to the proper public notice, comment, and rulemaking process before issuing such guidance. (Mortgage Bankers Ass’n v. Harris, D.C. Cir., No. 12-5246, July 2, 2013).

By way of background, in 2006, the agency issued an Opinion Letter finding that the typical job duties of a mortgage loan officer qualified for the “administrative” exemption under the FLSA. However, in 2010 the DOL reversed its prior stance by explicitly withdrawing its prior 2006 Opinion Letter and issuing an “Administrator’s Interpretation” declaring that typical mortgage loan officers do not qualify as bona fide administrative employees.

The U.S. Circuit Court for the District of Columbia found that the DOL failed to comply with the federal Administrative Procedures Act when issuing its 2010 administrative interpretation. The Court held that a notice and public comment period were required under the Administrative Procedures Act because the 2010 interpretation effectively served as an amendment reversing the agency’s prior stance. Because the DOL simply issued with the 2010 interpretation without advance notice and an opportunity for public comment, the Court vacated its interpretation.

In its decision, the D.C. Circuit recognized that whether mortgage loan officers qualify for the “administrative exemption” under the FLSA is a difficult and contentious question and that even the DOL has found itself on both sides of the debate. As such, it is important to note that the D.C. Circuit did not invalidate the DOL interpretation on its merits.

Rather, the Circuit Court vacated the interpretation on procedural grounds and stated, “[i]f the Department of Labor (”DOL”) wishes to readopt the later-in-time interpretation, it is free to. We take no position on the merits of their interpretation. [The] DOL must, however, conduct the required notice and comment rulemaking.”

It remains to be seen whether the DOL will elect to issue new guidance and/or regulations on the applicability of the administrative exemption to mortgage loan officers in accordance with the public notice and comment requirements or choose to remain silent. Employers should consult with their labor and employment attorney when drafting, revising, interpreting, and/or reviewing employee job descriptions and employee classifications under the FLSA.