Supreme Court Says It’s Okay for DOL to Change Its Mind – and Affirms That Mortgage Brokers Are Entitled to Overtime

by Susan G. Fentin

Earlier this month, the United States Supreme Court, in a rare display of unanimity, issued a decision in Perez v. Mortgage Bankers Assn., a case where the Association had challenged the Department of Labor’s decision to reverse a 2006 opinion letter concerning whether mortgage loan officers could be considered administrative employees, exempt from the Fair Labor Standards Act’s minimum wage and overtime protections.

This is a topic where the DOL has flip flopped a number of times.  In 1999 and 2001, the DOL issued opinion letters saying that mortgage loan officers were not exempt under the FLSA.  In 2006, the DOL changed its mind in light of the 2004 amendments to the FLSA and issued an opinion letter holding the loan offers exempt.  Then, in 2010, it released an administrator’s interpretation that “explicitly withdrew” the 2006 letter, concluding that workers who perform the “typical job duties” of a mortgage loan officer could not be considered as “bona fide administrative employees” under the FLSA and applicable regulations.

The 2006 letter was challenged by the Mortgage Bankers Association, a national trade association representing over 2,200 firms in the real estate finance industry.  The MBA argued that the agency should not be able to significantly modify a previously issued definitive interpretation of a rule without public notice and comment.  Such public notice and comment is required under the Administrative Procedure Act when federal agencies change their regulations, but the Court’s decision today confirms that those agencies are exempt from “notice-and-comment” rulemaking requirements when they are making changes to interpretations.

The majority opinion, authored by Justice Sonia Sotomayor, overruled a decision from the U.S. Court of Appeals for the District of Columbia Circuit, which had held that an agency cannot significantly modify a previously issued definitive interpretation of a rule without public comment and notice.  In so holding, the Court also indicated that deference to a federal agency’s opinion may be weakened when the opinion conflicts with a previous interpretation.

Bottom line here: The first takeaway for employers from the Supreme Court’s decision in Perez is that the DOL’s 2010 opinion letter is the latest (if not final) word on the subject of whether mortgage loan officers are exempt from overtime under the FLSA administrative exemption.  According to that opinion letter, mortgage loan officers must be paid overtime, unless you can show that they fit under another FLSA exemption.  In addition, however, employers should be cautious when relying upon DOL opinion letters as a basis for determining the exempt status of particular job categories.  Exempt status issues should also be in the news again soon, as we are expecting the DOL to follow the standard notice-and-comment period when it issues new regulations this spring.  Stay tuned.

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