MBA Sues DOL Over Whether Mortgage Brokers Are Exempt from Overtime
On January 12th, 2011, the Mortgage Banker’s Association (MBA)—sued the Department of Labor (DOL) over the DOL’s March 24th, 2010 interpretation that mortgage loan officers are not exempt administrative staff. This interpretation reversed a prior 2006 DOL opinion which had been relied on by the industry, that confirmed that loan officers were exempt administrative employees, ineligible for overtime pay. Under the March 2010 interpretation, loan officers would earn overtime wages—which means that mortgage lenders are potentially on the hook for millions of dollars of unpaid and future overtime wages.
The DOL’s position in Administrative Interpretation No. 2010-1 is that because the primary job of a mortgage loan officer is to sell mortgages, and anything administrative they do is incidental to that, they’re not exempt administrative employees whose primary duty is office work related to management or general business operations. Long story short: if an employee makes or sells the Company’s main product or service, the employee is not an exempt administrator.
The MBA takes exception to this and is bringing two arguments to bear on the DOL in its lawsuit. First is a procedural one: if the DOL is going to reverse a previous interpretation of its regulations, it has to do so only after notice and an opportunity for public comment. It can’t just arbitrarily say “oops, we changed our minds.”
Second, is a substantive argument: the MBA feels that the new interpretation is contrary to the plain language of the DOL’s own regulations, and therefore is arbitrary, capricious, an abuse of agency discretion, and otherwise illegal.
Additionally, the Association lays out further objections in its fact sheet on the lawsuit. For example, if loan officers are suddenly held to be non-exempt—after years of the industry treating them as exempt, in good faith reliance on the DOL’s own opinion on the subject—the industry faces significant exposure to lawsuits for unpaid overtime pay. Furthermore, on a forward-looking basis, the industry will have to restructure the position of loan officer, track hours, keep records of time worked, and generally spend more while having less flexibility—all costs that will be passed on to consumers just because the DOL changed its mind.
What does this mean for employers who are not mortgage lenders? Two things. Whether or not the DOL’s new interpretation stands, it’s still a reminder that in determining who’s exempt and who’s not, performing some administrative functions does not necessarily an exempt administrator make. More importantly though, it’s a reminder that labor law is constantly changing and prior understandings of overtime exemptions may not be accurate today. Employers need to ensure they keep on top of the latest information.
