Supreme Court OK’s DOL Position that MLOs Aren’t Exempt under FLSA

On March 9, the U.S. Supreme Court issued its decision in the case brought by the Mortgage Bankers Association challenging the Department of Labor’s 2010 interpretation that mortgage loan officers were not eligible for the administrative exemption under the Fair Labor Standards Act and thus must be paid overtime.

Perez v. Mortgage Bankers Association. The Court held that DOL did not have to go through the notice and comment process when it issued its 2010 interpretation. The 2010 interpretation reversed a 2006 opinion letter that mortgage loans officers did qualify for the administrative exemption. The only question before the Supreme Court was whether DOL had to issue a formal proposal and seek public comment before it could change its position. The MBA had prevailed in the Court of Appeals for the D.C. Circuit, and DOL appealed that decision to the Supreme Court.

Under the Administrative Procedures Act, which governs federal agency rulemaking, “legislative rules” – which have the force and effect of law – must be adopted through the notice and comment process that permits interested parties to provide input on the proposed rules. “Interpretive rules,” by contrast are not supposed to have the force of law and thus do not require input from the public. The D.C. Circuit, recognizing that interpretive rules often do have the effect of law, established a doctrine in Paralyzed Veterans of Am. v. D.C. Arena that requires agencies to go through the notice and comment process when significantly changing interpretive rules. However, in its decision, the Supreme Court invalidated the D.C. Circuit’s doctrine and held that changes in interpretive rules do not need to go through the notice and comment process.

Other exemptions may be available. As a result of the Supreme Court’s decision, DOL has secured the interpretation that mortgage loan officers do not qualify for the FLSA administrative exemption. However, there may be other FLSA exemptions, such as the outside sales exemption, that apply. Click here for a discussion of the possible exemptions available for mortgage loan officers.