In the ongoing battle between the Department of Labor and the financial industry over the exempt status of mortgage loan officers, the Mortgage Bankers’ Association (MBA) struck the latest blow by filing suit seeking to vacate the DOL’s recent Administrator’s Interpretation (AI) declaring that mortgage loan officers, in general, do not qualify for the administrative exemption to the FLSA’s overtime requirements. The DOL’s AI issued in March 2010 reversed the DOL’s own prior opinion letter from September 2006 stating that the specific mortgage loan officers discussed in the letter–and whose job duties were spelled out in the letter–did qualify for the administrative exemption.
According to the MBA’s complaint filed on January 12 in federal court in Washington, the DOL’s March 2010 AI violates Section 702 of the Administrative Procedure Act (APA), 5 U.S.C. § 702 for two reasons. First, the DOL’s abrupt reversal of its longstanding interpretation, issued with no prior warning, violates the APA because the DOL failed to go through the process of notice and comment rulemaking required by the statute. Second, the MBA asserts that the AI is arbitrary and capricious. That is, the MBA alleges, “[b]ecause the AI conflicts with existing DOL regulations, and because those regulations have been afforded the force of law by courts, DOL’s issuance of the AI is arbitrary, capricious, an abuse of discretion, and otherwise not in accordance with [the APA].” Based on these grounds, the MBA asked the court to vacate and set aside the AI in its entirety. The MBA also filed a motion for summary judgment along with its complaint, contending that there are no questions of fact that the court needs to resolve to determine whether the AI is valid.
As a result of the AI, the financial services industry “now faces substantial exposure from private-party litigation alleging that well-compensated mortgage loan officers are misclassified and are entitled to collect both back overtime wages and penalties.” Indeed, based on the AI’s reasoning that mortgage loan officers are not administratively exempt in part because they engage in sales activity, the AI has been used by plaintiffs’ lawyers to support misclassification claims on behalf of other employees in the financial services industry such as underwriters, personal bankers, brokers, loan originators, and consultants.