|
June
11, 2012
United State=
s District
Court Upholds Department of Labor's Administrator's Interpretation
Finding Mortgage Loan Officers Non-Exempt Under FLSA
By: Ellen Hoeppner
=
On June 6, 2012, a
federal district court in Washington, D.C., rejected the Mortgage
Bankers Association's (MBA) challenge to a recent U.S. Department=
of Labor
(DOL) Administrator's Interpretation,=
which
takes the position that mortgage loan officers do not qualify for=
the
administrative exemption under the Fair Labor Standards Act (FLSA).
Under the FLSA, employees are generally entitled to m=
inimum
wage and overtime compensation, unless they work "in a bona =
fide
executive, administrative or professional capacity." 29 U.S.C. § 213(a)(1). Over the last
fifteen years, the DOL has taken vary=
ing
positions on the issue of whether mortgage loan officers come wit=
hin
this provision and qualify for the administrative exemption. =
;
Beginning in 1999, =
the DOL issued an opinion letter stating that
"loan officers are engaged in carrying out the employer's
day-to-day activities rather than in determining the overall cour=
se
and policies of the business" and, as such, determined them =
to
be non-exempt.
=
In 2004, the DOL took a change of position and amended t=
he FLSA regulations to provide:
Employees in the financial services industry g=
enerally
meet the duties requirements for the administrative exemption=
if their duties include work such as collecting and analyzing
information regarding the customer's income, assets, investments =
or
debts; determining which financial products best meet the custome=
r's
needs and financial circumstances; advising the customer regarding
the advantages and disadvantages of different financial products;=
and
marketing, servicing or promoting the employer's financial produc=
ts.
However, an employee whose primary duty is selling financial
products does not qualify for the administrative exemption.
29 C.F.R. § 541.203(b) (em=
phasis
added).
In 2006, relying in part on the above regulation, th=
e DOL issued an opinion letter concluding that
mortgage loan officers are exempt under the =
FLSA,
finding that they "have a primary duty other than sales, as
their work includes collecting and analyzing a customer's financi=
al
information, advising the customer about the risks and benefits of
various mortgage loan alternatives in light of their individual
financial circumstances, and advising the customer about avenues =
to
obtain a more advantageous loan program." Relying on this
opinion letter, many employers in the financial services sector b=
egan
to classify their mortgage loan officers and other similar person=
nel
as exempt.
In 2010, the DOL changed
positions yet again and issued its first ever "Administrator=
's
Interpretation." The Administrator's Interpretation took the
position that employees who "perform the typical job duties =
of a
mortgage loan officer . . . do not qualify as bona fide
administrative employees" because such individuals
"typically have the primary duty of making sales on behalf of
their employer." The Administrator's Interpretation explicit=
ly
withdrew the 2006 opinion letter finding mortgage loan officers t=
o be
exempt.
In January 2011, the MBA filed a lawsuit seeking to
invalidate the Administrator's Interpretation under the
Administrative Procedures Act (APA), =
5 U.S.C. § 702. In its Complaint, the MBA
argued that the DOL acted improperly =
in
reversing the 2006 opinion letter without first engaging in a
rulemaking process with notice and an opportunity for public comm=
ent.
The MBA also asserted that the Administrator's Interpretation was
arbitrary and capricious. Judge Reggie B. Walton of the U.S. Dist=
rict
Court for the District of Columbia rejected both of the MBA's cla=
ims,
finding the Administrator's Interpretation was lawfully adopted a=
nd
was consistent with the language of the statute and the correspon=
ding
regulations.
The DOL's interpretation=
is
not binding on courts. However, in light of this decision, employ=
ers
in the financial services industry are encouraged to carefully
evaluate their classification of loan officers, underwriters, per=
sonal
bankers, consultants and other similar personnel under the FLSA.
Employers wi=
th
questions may contact Ellen Hoeppner =
at
(313) 965-8262 - ehoeppner@=
clarkhill.com,
or any of Clark Hill's Labor and Employment Law or Banking &
Financial Institutions Industry Team attorneys.
|