The U.S. Court of Appeals for the D.C. Circuit recently directed that the U.S. Department of Labor's 2010 opinion letter determining that mortgage loan officers do not fall within the "administrative exemption" of the federal Fair Labor Standards Act be vacated.
A copy of the opinion is available at: Opinion
As you may recall, the federal Fair Labor Standards Act ("FLSA") generally provides that employees who work more than 40 hours per week must be paid overtime. See 29 U.S.C. Sec. 207(a). However, the FLSA also provides those who are employed in a bona fide administrative capacity are exempt from the overtime requirement. Id. at 213(a)(1).
In 2006, the Department of Labor ("DOL") issued an opinion letter providing that mortgage loan officers fall within the "administrative exemption" provided for by the FLSA. In 2010, the DOL changed its mind, and issued an opinion letter reversing its previous position.
The Mortgage Bankers' Association sued, arguing that under the federal Administrative Procedures Act ("APA"), the DOL could not change its "definitive interpretation" without first allowing for notice and comment. The lower court found against the MBA, which then appealed.
On appeal, the D.C. Circuit began by explaining that, where an agency has given its regulation a "definitive interpretation" which it later "significantly" revises, that agency has effectively amended its rule. See, e.g., Alaska Professional Hunters Ass'n v. FAA, 177 F.3d 1030, 1034 (D.C. Cir. 1999). Under the APA, such an amendment requires "notice and comment." Id.
The DOL contended that in addition to the "definitiveness" and "significant revision" requirements, relevant case law establishes a third requirement of justified and substantial reliance. The MBA argued that reliance is only one of several considerations that might determine whether the "definitiveness" requirement is met.
After scrutinizing the relevant cases, the D.C. Circuit ruled in favor of the MBA. The Court explained that "reliance is but one factor courts must consider in assessing whether an agency interpretation qualifies as definitive..." This is so because "[a]gency pronouncements effectively ignored by regulated entities are unlikely to bear the marks of an authoritative decision." Therefore, the Court determined that reliance was a "rough proxy for definiteness," and not a separate requirement.
That concluded the matter, as both parties stipulated that MBA would prevail if the Court determined that reliance was one part of the definitiveness calculus, rather than a separate matter.
Accordingly, the D.C. Circuit reversed the opinion of the lower court, and remanded the case with instructions to vacate the DOL's 2010 opinion letter.
Ralph T. Wutscher
McGinnis Wutscher Beiramee LLP
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