Supreme Court Decision: MLOs Not Exempt from Overtime

On March 9, 2015, the U.S. Supreme Court issued a decision in Perez v. Mortgage Bankers Association, Nos. 13-1041 and 13-1052, cert. granted (U.S. June 16, 2014),[i] holding that the U.S. Department of Labor’s Wage and Hour Division (“DOL”) did not need to adhere to notice-and-comment procedures prior to issuing its 2010 Administrator’s Interpretation.[ii]

As a result, mortgage loan originators are not exempt from overtime and minimum wage requirements under the administrative exemption of the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201.[iii]

It is possible that a mortgage loan originator may qualify for another exemption under the FLSA although this determination is very fact specific.

Background

In 2006, the DOL issued an opinion letter finding that mortgage loan originators fell within the administrative exemption. However, in 2010 without a notice-and-comment period, the DOL altered its 2006 interpretation by issuing an Administrator’s Interpretation opining that mortgage loan originators do not qualify for the administrative exemption.

Shortly thereafter, the Mortgage Bankers Association filed suit challenging the validity of this 2010 Interpretation and arguing that the Administrative Procedures Act, 5 U.S.C. § 551, and underlying case law required the DOL to follow notice-and-comment rulemaking in order to reinterpret a regulation.

The District Court initially granted summary judgment in favor of the DOL, but in 2013 the D. C. Circuit Court reversed this decision vacating the 2010 Interpretation in the Circuit Court’s venue and indicating that if the DOL wanted to readopt its 2006 Interpretation it could do so but it would need to follow notice-and-comment rulemaking procedures.

This decision left the status of whether to exempt mortgage loan originators from minimum wage and overtime pay in question.

Effect of U.S. Supreme Court Decision

The U.S. Supreme Court’s recent decision reverses the finding of the D.C. Circuit and upholds the validity of the 2010 Administrator’s Interpretation.

Since the 2010 Interpretation finds that employees who perform the typical job duties of mortgage loan originators do not qualify for the administrative exemption, there is no longer a question of whether employers can rely on this exemption.

Michael Barone

Director/Legal & Regulatory Compliance

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[i] The U.S. Supreme Court’s decision can be found at:

http://www.supremecourt.gov/opinions/14pdf/13-1041_0861.pdf.

[ii] DOL’s Administrator’s Interpretation No. 2010-1 can be found at:
http://www.dol.gov/WHD/opinion/adminIntrprtn/FLSA/2010/FLSAAI2010_1.pdf.

[iii] FLSA requires that nonexempt employees receive overtime pay for hours worked over 40 hours per week at a rate not less than one-and-a-half times the employee’s regular rate of pay. Notwithstanding, FLSA provides an exemption for administrative employees that (i) are compensated a salary or fee not less than $455 per week, (ii) exercise discretion and independent judgment with respect to matters of significance, and (iii) whose primary duties include office or non-manual work directly related to the employer’s management or general business operations.