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Federal Appellate Court Rejects DOL Position That Mortgage Brokers are FLSA Non-Exempt

    Client Alerts
  • July 19, 2013

For years, the banking and mortgage industries have struggled with appropriate classification of retail mortgage brokers as exempt or non-exempt from the overtime and minimum wage provisions of the Fair Labor Standards Act. In 2006, the industry scored a major victory when DOL issued an opinion letter concluding that such employees typically fall with the FLSA's administrative exemption. In 2010, the Obama administration reversed this opinion, issuing an interpretive guidance withdrawing the opinion letter and concluding that typical mortgage officers do not qualify under the administrative exemption because their primary duties involve sales and not support work.
Last week, in Mortgage Bankers Ass'n v. Harris, the U.S. Court of Appeals for the D.C. Circuit rejected DOL's attempt to withdraw the 2006 opinion letter. The court concluded that under the Administrative Procedure Act, DOL had issued a definitive opinion in 2006 that could only be withdrawn through the public notice and comment rulemaking process. In effect, the agency amended its FLSA exemption rules through the withdrawal in violation of the APA.

The D.C. Circuit did not express any opinion on the merits of the two positions on exemption, limiting its decision to the procedural issue. Absent U.S. Supreme Court review, DOL will likely be forced to issue proposed rules on the change if it wishes to change the original 2006 position.