WHD Administrator Need Not Follow the Administrative Procedures Act After All

In today’s 9-0 decision, the United States Supreme Court reversed the D.C. Circuit Court of Appeals in Perez v. Mortgage Bankers Association.1 The question at the heart of the case was whether or not the Department of Labor Wage and Hour Division (WHD) was required under the Administrative Procedures Act to engage in notice and comment procedures when it issued an Administrator Interpretation involving the exempt status of typical mortgage brokers.   

The Supreme Court disagreed with the DC Circuit’s interpretation of the Administrative Procedures Act, finding that, “[B]ecause an agency is not required to use notice-and-comment procedures to issue an initial interpretive rule, it is also not required to use those procedures when it amends or repeals that interpretive rule.” The Court did not address, nor was it asked to address, the substantive provisions of the Administrator Interpretation. Rather, this case was decided solely on the procedural validity of the Administrator Interpretation, thus leaving for another day the question of whether or not mortgage brokers with the typical job duties are exempt from overtime under the FLSA.   

As background, on March 24, 2010, the WHD issued an “Administrator’s Interpretation” declaring that employees who perform the typical job duties of a mortgage loan officer do not qualify for the administrative exemption under the Fair Labor Standards Act (FLSA).2   

The WHD determined, based upon its own investigations and the facts set out in case law, the following are typical mortgage loan officer job duties:

  • Receive internal leads and contact potential customers or receive contacts from customers generated by direct mail or other marketing activity.
  • Collect required financial information from customers they contact or who contact them, including information about income, employment history, assets, investments, home ownership, debts, credit history, prior bankruptcies, judgments, and liens. 
  • Run credit reports.
  • Enter the collected financial information into a computer program that identifies which loan products may be offered to customers based on the financial information provided.
  • Assess the loan products identified and discuss with the customers the terms and conditions of particular loans, trying to match the customers’ needs with one of the company’s loan products.
  • Compile customer documents for forwarding to an underwriter or loan processor, and may finalize documents for closings.

The DC Circuit vacated the Administrator Interpretation in July, 2013 on the grounds that in 2006 the WHD issued an opinion letter “concluding on the facts presented that mortgage loan officers with archetypal job duties fell within the administrative exemption”. The Court reasoned that WHD had issued a definitive interpretation in the 2006 opinion letter, and although it is free to adopt a later, conflicting interpretation, it must comply with the Administrative Procedures Act notice and comment rulemaking to do so.

For now, the WHD Administrator Interpretation regarding mortgage brokers is in effect. Employers need to be fully aware of the WHD’s enforcement agenda, including moving from complaint driven to directed investigations involving specific industries, the forthcoming proposed amended white collar exemptions and with this decision the likelihood of additional Administrator Interpretations.