Overview: The U.S. Supreme Court has held that the U.S. Department of Labor (“DOL”) did not violate the Administrative Procedure Act (“APA”) when it failed to provide the public with notice and an opportunity to comment before it changes its position on the application of the Fair Labor Standards Act’s administrative exemption to loan officers, finding them newly non-exempt. Perez v. Mortgage Bankers Association, et al.
Effective Date: Currently in effect.
Action Required: Review FLSA exemption status of mortgage-loan officers and contact your HR Business Partner for guidance.
The Details
Under the DOL’s interpretation (the “2010 Administrator’s Interpretation”), the administrative exemption is not applicable to mortgage-loan officers (therefore they are entitled to overtime pay) under the FLSA unless they qualify under another exemption. As a practical matter, generally the only viable alternative exemptions are the outside sales exemption (if loan product sales are regularly conducted outside the office) or the highly compensated employee exemption.
http://www.dol.gov/whd/regs/compliance/fairpay/fs17f_outsidesales.pdf
http://www.dol.gov/whd/regs/compliance/fairpay/fs17h_highly_comp.pdf
It is important to note that while the decision leaves in place the 2010 Administrator’s Interpretation, the decision did not itself assess whether mortgage-loan officers qualify for the FLSA’s administrative exemption.
The decision focused on narrow issues of process and administrative law. With that focus in mind, the Court held that a federal agency’s significant changes to prior “interpretations” of its own regulations (as distinguished from changes to the regulations themselves) need not be issued through the public notice-and comment process under the Administrative Procedures Act. The immediate effect of the decision is that an agency may now change interpretations without any notice. In this case, the DOL’s position changed when the agency administration changed.
A copy of the DOL’s 2010 Interpretation Letter is available on the DOL website.
As with all exemptions, a case by case analysis is required. However, the DOL’s position is clear that in the vast majority of cases, the administrative exemption will not apply.
As always, please contact your HR Business Partner if you have any questions.
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This content provides practical information concerning the subject matter covered and is provided with the understanding that ADP is not rendering legal advice.
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