Tag Archives: Mortgage Loan Officers

Supreme Court Holds that Mortgage Loan Officers are Eligible for Overtime

Contributed by Michael Wong

On March 9, 2015, the U.S. Supreme Court issued a ruling in Perez v. Mortgage Bankers Association that should put all employers on notice.  In this decision, the Court held that federal agencies, specifically the Department of Labor (DOL), do not need to go through the same rulemaking procedure of providing notice to the public and soliciting input before issuing their own interpretive guidance, even if it contradicts the agency’s prior guidance.

In Perez, the DOL issued opinion letters that stated mortgage loan officers were not eligible for overtime under the administrative exemption of the Fair Labor Standards Act (FLSA). Subsequently, at the request of the Mortgage Bankers Association (MBA), the DOL issued another opinion letter reaffirming that mortgage loan officers were exempt from overtime under the administrative exemption of the FLSA. However, several years later the DOL flip flopped and reversed its prior opinion letters stating that mortgage loan officers did not fall under any of the FLSA exemptions and thus were entitled to overtime.

At issue in Perez was whether the DOL’s 2010 interpretation was procedurally invalid under the Administrative Procedure Act’s (APA) and doctrine set forth in Paralyzed Veterans of Am. v. D.C. Arena L.P., 117 F.3d 579 (D.C. Cir. 1997).  Under the Paralyzed Veterans doctrine and APA, when a federal agency was issuing an interpretation that significantly revised its prior interpretation, the federal agency had to comply with the APA notice-and-comment procedures.   The APA’s notice-and-comment procedures required that federal agencies publish a notice of the proposed rulemaking in the federal registry and allow interested persons to provide input on the proposal. Then, in finalizing the rule, the federal agency was required to take all comments into consideration and any amendments or changes would be subject to the same notice-and-comment requirements.

In Perez, the Supreme Court reversed the lower court’s decision applying the Paralyzed Veterans doctrine and held that the Paralyzed Veterans doctrine was contrary to the text of the APA and exceeded the scope of judicial review authorized by Congress.

The first takeaway for employers from the Supreme Court’s decision in Perez is that under the DOL’s opinion letter, mortgage loan officers are not exempt from overtime under the FLSA administrative exemption.  As such, mortgage loan officers must be paid overtime, unless you can show that they fit under another FLSA exemption. Additionally, it creates significant questions for employers in how much credence they should give to interpretations, opinion letters and guidance issued by federal agencies, as the agencies may be able to issue contradictory opinions or interpretations without having to go through the notice and comment procedures set by the APA.

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.