The US Department of Labor (“DOL”) yesterday began a new practice of issuing interpretive guidance through “Administrator’s Interpretations,” which will set forth generally applicable interpretations of laws within the DOL’s jurisdiction and will not be bound by any particular set of facts. The announcement signals that DOL is moving away from responding to fact-specific opinion letter requests made by individuals and organizations and toward issuing broader guidance “clarifying the law as it relates to an entire industry, a category of employees, or to all employees.” DOL will no longer be required to wait until it receives opinion letter requests to weigh in on interpretive issues, but rather can issue guidance whenever it wants.
In its first Administrator’s Interpretation, No. 2010-1, the DOL determined that mortgage loan officers typically do not qualify for the administrative exemption to the Fair Labor Standards Act’s (“FLSA”) overtime pay requirements. It also withdrew two opinion letters issued in 2006 that determined mortgage loan officers were administratively exempt, stating that the letters were based on “misleading assumption[s]” and “selective and narrow analysis.”
DOL’s analysis focused on whether these duties meet the regulatory requirement that the primary duty of administratively exempt employees must be “the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers.” DOL did not address whether mortgage loan officers typically satisfy the salary basis test or the requirement that administratively exempt employees exercise discretion and independent judgment with respect to matters of significance.
In reaching its conclusion that mortgage loan officers do not typically engage in work related to general business operations, DOL drew a strict dichotomy between “production employees” and “administrative employees,” a distinction DOL had previously criticized when it issued revised overtime regulations in 2004. Citing cases that made this distinction with respect to mortgage loan officers, the DOL determined that the primary duty of mortgage loan officers is to sell their employer’s financial products. Such sales duties “constitute the production work of an employer engaged in selling or brokering mortgage loan products,” rather than the internal management or general business operations of the company. The DOL cited several aspects of the mortgage loan officers’ employment that support this conclusion: they are typically paid by commissions; employers often train them in sales and evaluate them based on their sales success; and employers defending law suits brought by mortgage loan officers, as well as courts, have recognized that they have a primary duty of sales. The DOL contrasted the mortgage loan officers’ duties with those of employees working in, for example, a firm’s human resources department, accounting department, or research department. Since mortgage loan officers’ duties “involve the day-to-day carrying out of the employer’s business,” they “fall squarely on the production side of the business.”
The DOL noted that mortgage loan officers might qualify for the administrative exemption in certain circumstances, e.g. if their primary duty is directly related to the management or general business operations of their employers’ customers, and those customers are businesses seeking advice about a mortgage. Stressing the need to “focus on the identity of the customer,” the DOL distinguished between customers that are businesses and those that are individuals, who typically do not have “management or general business operations” within the meaning of the regulations.
Administrator’s Interpretation No. 2010-1 is the first major guidance document issued by the Obama administration’s Wage and Hour Division (WHD), and may signal that WHD is now ready to begin issuing major interpretive statements, even though there is no Senateconfirmed Wage and Hour Administrator in place. The DOL stated that, while it will not end its practice of issuing opinion letters, those letters will provide references to statutes, regulations, interpretations, and cases that are relevant to the specific request, but will not include an analysis of the specific facts presented. In addition to the FLSA, the DOL issues opinion letters on the Family and Medical Leave Act, the Davis-Bacon Act, and the Service Contract Act.