The Mortgage Bankers Association (MBA) recently sued the United States Department of Labor (DOL) seeking to set aside the agency’s new interpretation that mortgage loan officers are not exempt administrative staff under the Fair Labor Standards Act (FLSA). The MBA alleges the DOL unlawfully charted a new course when it withdrew a 2006 opinion advising that typical loan officers were exempt from overtime payments under the FLSA's "administrative exemption."
According to the complaint, the DOL’s interpretation runs afoul of the Administrative Procedure Act (APA), which sets forth certain procedural requirements that govern the way in which administrative agencies, such as the DOL, propose and establish regulations. More specifically, the MBA argues the Agency violated the APA when it failed to provide notice and opportunity for public comment before acting. Additionally, the MBA asserts that the interpretation conflicts with existing DOL regulations and is therefore arbitrary, capricious and an abuse of discretion.
In a related development, the American Bankers Association (ABA) has filed an amicus brief in a federal lawsuit in Michigan over this issue, also arguing against the dramatic shift in the DOL’s position. Among other things, the ABA argues that the DOL’s interpretation is inconsistent with its regulations and results in unfair surprise to employers who have reasonably relied on its prior interpretation.
In the meantime, banks, mortgage lenders and other financial institutions should consult counsel to evaluate how the DOL’s abrupt reversal could impact their classification of mortgage loan officers and similar employees. Moreover, the DOL’s interpretation serves as a reminder to all employers about the importance of conducting wage-and-hour audits to ensure their employees are properly classified.