by Elizabeth B. Bradley

On July 2, 2013, in Mortgage Bankers Ass’n v. DOL, the U.S. Court of Appeals for the District of Columbia vacated a DOL Administrative Interpretation issued in 2010 which declared that Mortgage Loan Officers are not exempt from the FLSA overtime requirements. 

Does this mean that employers can now covert their Mortgage Loan Officers to exempt, salaried, compensation plan? Not likely.

The Court of Appeals ruling vacated the DOL Administrative Interpretation on a technicality – the Court found that the DOL failed to provide the required public notice and comment period before issuing the 2010 Administrative Interpretation. The Court did not express an opinion as to merits of the DOL’s interpretation and, in fact, invited the DOL to readopt the interpretation after proceeding through the required notice and comment rulemaking procedures.  

The Court’s opinion was a reaffirmation of the requirements of the Administrative Procedure Act (“APA”), which governs administrative agency rule making; not a ruling on the proper classification of Mortgage Loan Officers.

In 2006, the DOL issued an opinion letter concluding that Mortgage Loan Officers qualified as exempt employees under the FLSA. In that opinion letter, the DOL reasoned that Mortgage Loan Officers archetypal job duties fell within the administrative exemption. Four years later, in 2010, the DOL flip-flopped and issued an Administrative Interpretation which declared that Mortgage Loan Officers do not qualify for the administrative exemption. The DOL reasoned that the primary job duty of a Mortgage Loan Officer is to make sales, which is not directly related to the management or general business operations.

Relying on Paralyzed Veterans of America v. D.C. Arena, L.P. and Alaska Professional Hunters Ass’n v. FAA, the Court of Appeals reiterated that the APA requires that agencies undergo a notice and comment rulemaking process when an agency (1) has given its regulations a definitive interpretation and (2) later significantly revises that interpretation. The Court ruled that reliance on the prior interpretation is a factor to be considered in determining the definitiveness of the prior rule and not, as the DOL argued, a third element required in order for the APA rulemaking requirements to attach.  

Accordingly, the Court’s ruling that the DOL’s 2010 Administrative Interpretation was vacated due to the DOL’s failure to follow that APA rulemaking notice and comment requirements.

Employers are cautioned that this decision should not be relied on for any modifications in the current classification of Mortgage Loan Officers. It is likely that the DOL will reissue its interpretation that Mortgage Loan Officer do not qualify under the administrative exemption in the near future – this time following the mandates of the APA.