Supreme Court Upholds DOL Mortgage-Loan Officer Interpretation

By March 9, 2015 News

Today, the United States Supreme Court held — in a decision followed closely by those in the mortgage industry — that a controversial 2010 Administrator’s Interpretation issued by the federal Department of Labor (DOL) was a valid exercise of the DOL’s authority to interpret the rules it administers.  At issue in this case, Perez v. Mortgage Bankers Assn., was the DOL’s 2010 Administrative Interpretation regarding the applicability to mortgage-loan officers of the minimum wage and overtime requirements of the Fair Labor Standards Act (FLSA).  When it was issued in 2010, the Administrative Interpretation announced the DOL’s position that most mortgage-loan officers were not exempt from the FLSA’s minimum wage and overtime requirements and, therefore, could not be treated as salaried, exempt employees by their employers.

The 2010 Administrative Interpretation had been preceded by other opinions from the DOL.  In 1999 and 2001, the DOL’s Wage and Hour Division issued opinion letters taking the position that mortgage-loan officers were not exempt under the FLSA’s minimum wage and overtime requirements, a position consistent with the 2010 Administrative Interpretation.  In 2006, however, the DOL issued a new opinion letter (following the 2004 revisions to the FLSA regulations) that took the position that mortgage-loan officers were exempt from the minimum wage and overtime requirements.  Feeling whipsawed by this pendulum of DOL opinions and the uncertainty they created, the Mortgage Bankers Association sued the DOL.

In today’s opinion, the Supreme Court distinguished between “legislative rules” and “interpretive rules” issued by government agencies.  Legislative rules are designed to implement, interpret or prescribe law or policy, have the force and effect of law and must be promulgated through the rule-making process prescribed by the Administrative Procedure Act (APA).  Interpretive rules are issued by an agency to advise the public of the agency’s construction of the statutes and rules which it administers, do not have to go through the APA’s rule-making process and do not have the force or effect of law.  In essence, interpretive rules are no better than the opinion of one lawyer with regard to the interpretation of an agency’s regulations.

In holding that the DOL’s 2010 Administrative Interpretation regarding the exempt status of mortgage-loan officers did not have to go through the administrative rule-making process (due to its status as an interpretive rule), the Supreme Court gave it no more weight than an opinion letter issued by a government agency.  While such an opinion is relatively easy to issue — it does not require notice from the agency and an opportunity for the public to comment on it — the Supreme Court indicated that such an interpretive rule does not carry the weight of law and that it is up to the courts to decide whether a given regulation means what the agency claims it means in its opinion or interpretive guidance.

What does this mean to employers who employ mortgage-loan officers?  First, it means that the pendulum of DOL interpretation of the exempt versus non-exempt status of mortgage-loan officers will likely continue to swing with new administrations.  Second, it means that employers of mortgage-loan officers know, at this moment in time, that the DOL is likely to take the position it took under the 2010 Administrative Interpretation and find most mortgage-loan officers eligible for minimum wage and overtime treatment.  This assumption may change, however, under a new administration with a new interpretation.  Third, a court decision challenging a DOL determination about the exempt status of a given group of mortgage-loan officers under the FLSA will likely be case-specific.  As the Supreme Court stated, “[I]t is the court that ultimately decides whether a given regulation means what the agency says.”  Employers know that it takes time and money to go to court to challenge a decision of the DOL, and many employers will be unwilling or unable to do so.  Fourth, as a result of this decision, most employers of mortgage-loan officers will probably take the safest route and treat their mortgage-loan officers as non-exempt employees eligible for minimum wage and overtime compensation.  That is, at least until the DOL issues another interpretation reversing itself.

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