Mortgage Loan Officers Are Exempt Again!

On July 2, 2013, a three judge panel from the Court of Appeals for the D.C. Circuit agreed with the Mortgage Bankers Association and vacated a 2010 DOL Administrative Interpretation declaring that mortgage loan officers did not qualify under the “administrative exemption” to overtime pay.  The case is Mortgage Bankers Association v. Seth D. Harris, No. 12-5246, D.C. Cir. July 2, 2013 (link).

As background, in 2006 the DOL under the Bush Administration issued an Administrative Interpretation finding that the typical job duties of mortgage loan officers fell within the “administrative exemption” to the FLSA’s overtime requirements. However, in 2010, the DOL under the Obama Administration, reversed its position and declared that mortgage loan officers are not exempt under the FLSA.

The Mortgage Bankers Association filed suit against the DOL arguing based upon established precedent that “When an agency has given its regulation a definitive interpretation, and later significantly revises that interpretation, the agency has in effect amended its rule, something it may not accomplish [under the APA] without notice and comment.”  The D.C. District Court denied the motion for summary judgment filed by the Mortgage Bankers Association.

In reversing the District Court, the D.C. Circuit did not comment on the validity of the DOL’s revised interpretation.  In fact, it specifically left open the possibility of the DOL conducting the required notice and comment rulemaking to implement the change.

This case is a victory for the Mortgage Bankers Association and employers in general because it places clear restrictions on the ability of the DOL to change its established Administrative Interpretations without engaging in the proper rulemaking process.  However, the case also highlights the difficulty of applying the FLSA to 21st century employment.  The D.C. Circuit recognized that the FLSA is “an old law DOL must adapt to new circumstances.”  Instead of adapting a law designed to be applied to Industrial Revolution jobs, the FLSA needs to be overhauled to accommodate the significant changes in how work is performed during the Information Revolution of the 21st century.