Under the Fair Labor Standards Act ("FLSA"), employers are generally required to pay overtime wages to employees who work longer than 40 hours per week. The FLSA provides several exceptions to this rule. Those "employed in a bona fide executive, administrative, or professional capacity[,] . . . or in the capacity of outside salesman," for example, are exempt from the statute’s minimum wage and maximum hour requirements. Whether mortgage loan officers (who typically assist prospective borrowers in identifying and then applying for various mortgage offerings) qualify for this "administrative exemption" has been the subject of some debate, even within the Department of Labor.
In 2006, the Department of Labor had issued an opinion letter concluding that Mortgage Loan Officers qualified as exempt employees under the FLSA. Four years later, in 2010, the DOL flip-flopped and issued an Administrative Interpretation declaring that Mortgage Loan Officers do not qualify for the administrative exemption (and are therefore entitled to overtime pay under the FLSA). The DOL’s reasoning was that the primary job duty of a Mortgage Loan Officer is to make sales, akin to other commissioned salespersons, a function not directly related to the management or general business operations.
On July 2, 2013, in Mortgage Bankers Ass’n v. Dept. of Labor, the U.S. Court of Appeals for the District of Columbia overturned the DOL’s 2010 Administrative Interpretation, siding with the petitioner, a national trade association representing over 2,200 real estate finance companies with more than 280,000 employees nationwide.
The Court of Appeal’s ruling vacated the 2010 Administrative Interpretation, but this is not the end of the issue. The Court’s ruling was purely on a technicality – the DOL had failed to provide the public notice and comment period required by the Administrative Procedures Act (“APA”) before issuing its 2010 Administrative Interpretation. The Court specifically said it “took no position” on the merits of the DOL’s interpretation – in fact, the Court said that “if the Department of Labor ("DOL") wishes to readopt the later-in-time interpretation, it is free to” – assuming it follows the proper procedure.
Banks and other employers of mortgage loan officers may not want to not rush to reclassify them just yet, because we anticipate that the DOL will promptly (and in compliance with the APA this time) re-adopt the 2010 interpretation that Mortgage Loan Officer do not qualify under the administrative exemption.