MBA Scores Another Court Victory in Mortgage Loan Officer Overtime Case, New DOL Rulemaking Likely
The Mortgage Bankers Association last week won affirmation of its July victory over the Department of Labor in the trade group’s appeal of a government policy that declared mortgage loan officers did not qualify under the administrative exemption to overtime pay.
On Oct. 2, the U.S. Court of Appeals for the District of Columbia refused to grant a full-court review of its decision exactly three months earlier that sided with the MBA on how the DOL imposed overtime compensation requirements under the Fair Labor Standards Act.
The MBA filed suit in January 2011 challenging that the Labor Department did not follow proper rulemaking procedures, including the chance for public comment, when in 2010 DOL withdrew its previous opinion that certain loan officers qualify for the administrative exemption from overtime requirements under FLSA rules.
FLSA requires that covered nonexempt employees must receive overtime pay for hours worked over 40 hours per week at a rate not less than one-and-a-half times the regular rate of pay. However, FLSA provides an administrative exemption from overtime pay for salaried employees who earn more than $455 per week and whose primary duties are directly related to management.
A 2006 Bush administration DOL opinion letter suggested that mortgage loan officers are exempt from the overtime requirement. However, in its challenge of the Obama DOL’s 2010 reclassification of loan officers as nonexempt, the Mortgage Bankers argued that the Administrative Procedures Act and underlying case law required the DOL to follow notice-and-comment rulemaking to reinterpret a regulation.
Three former loan officers from Quicken Loans with pending claims for unpaid overtime had sought to intervene in the MBA’s legal action against the DOL by filing a petition in August asking the full appeals court to rehear the case after a panel of the Second Circuit upheld a lower court order to the DOL to vacate its 2010 administrative interpretation.
Robert Sheeder, a labor and employment attorney at Bracewell & Giuliani, noted in an analysis that the decision will have good-news/bad-news consequences for the mortgage industry.
“The D.C. Circuit’s refusal to rehear the case upholds the holding that the DOL’s attempt to reclassify loan officers constitutes a fundamental modification of its previous interpretation and that it can only modify that interpretation through the formal process of notice and comment rule making,” said Sheeder.
Until the DOL goes through the proper rulemaking process to legally reclassify their status, mortgage loan officers remain exempt.
On the flip side, Sheeder noted that the court took no position on the substance of the DOL’s interpretation. “As a result, mortgage lenders may face more claims regarding overtime payment once the DOL properly reclassifies loan officers,” he said.
The MBA did not return a request for comment on the case.
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One Voice. One Vision. One Resource.
John T. Mechem
Vice President, Public Affairs
External Relations
Mortgage Bankers Association
1919 M Street NW, 5th Floor
Washington, DC 20036
Phone: (202) 557-2924
Cell: (703) 634-9205
