DOL Improperly Changed its Mind on Exemption for Mortgage Brokers

When determining whether employees in particular jobs are exempt from overtime under the Fair Labor Standards Act (FLSA), many employers look to, and rely on, opinion letters issued by the Department of Labor.  Back in 2006, the DOL issued an opinion letter in which it determined that mortgage loan officers fell within the administrative exemption from overtime under the FLSA.  Based on the DOL opinion, employers in the mortgage and financial industries classified mortgage loan officers, and many employees in analogous positions, as exempt and did not pay these employees overtime.  In 2010, the DOL issued an Administrator’s Interpretation that reversed course, and stated that mortgage loan offers were not covered by the administrative exemption and thus were potentially entitled to overtime as non-exempt employees. 

Because this change of opinion had the potential to result in liability for overtime for hundreds and thousands of previously exempt employees, industry groups impacted by the Administrator’s Interpretation filed suit to challenge the DOL’s action.  Earlier this week the D.C. Circuit Court of Appeals ruled that the DOL did not comply with the Administrative Procedures Act when it issued the Administrator’s Interpretation because it did not provide notice or an opportunity for public comment before issuing the Administrator’s Interpretation.

The D.C. Circuit decision essentially voids the Administrator’s Interpretation.  However, what the DOL will do next is unclear –  although it is clear that if public comment is permitted, there will be vocal opposition to any rule that categorically excludes mortgage loan officers from the administrative exemption.

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