Under the Fair Labor and Standards Act (FLSA) Mortgage Loan Officers Entitled to Unpaid Overtime Pay
The U.S. Supreme Court recently upheld an Administrator’s Opinion issued by the Department of Labor stating that “typical” mortgage-loan officers are not covered by the “administrative exemption” to the Fair Labor Standards Act (FLSA), and thus would be entitled to overtime for all hours worked over 40 hours in any workweek. The Supreme Court in Perez v. Mortg. Bankers Ass’n reversed a Circuit Court decision which held that the DOL had failed to comply with the procedural requirements of the Administrative Procedure Act (“APA”) and that the DOL’s interpretative opinion was unenforceable. Specifically, the Supreme Court ruled that the APA expressly exempted the Department of Labor (and other federal agencies) from the notice-and-comment rulemaking process when it makes changes to its own interpretive rules. Thus, the DOL could issue opinions without having to follow the requirements of the APA.
The dispute in Perez v. Mortg. Bankers Ass’n arose from a lengthy controversy over whether mortgage-loan officers are covered by the administrative exemption to the FLSA. In 1999 and 2001, the DOL issued letters interpreting the FLSA and concluding that mortgage-loan officers did not qualify for the administrative exemption. Then, in 2006, the DOL reversed its position and issued an opinion letter finding that mortgage-loan officers fell within the FLSA “administrative exemption”. However, in 2010, the DOL again changed its interpretation (without giving notice or an opportunity for comment), withdrew the 2006 opinion letter and issued an Administrator’s Interpretation stating that mortgage-loan officers do not qualify as exempt from overtime under the FLSA’s administrative exemption and thus should be paid overtime for all hours worked over 40 hours in a workweek.
The Administrator’s Interpretation regarding Mortgage-loan Officers’ Unpaid Overtime
The 2010 Administrator’s Interpretation focused on whether the “typical” mortgage-loan officer was engaged in the administration of the employer’s business, or in the production of its products. Under the FLSA(Link to new Glossary section explanation), unless the Mortgage Loan Officer (MLO) qualified under an overtime exemption, then the MLO were entitled to be paid overtime for all hours over 40 hours in any work week. The Administrator cited case law stating that the primary business purpose of mortgage-loan companies “is to design, create and sell home lending products.” The DOL also stated that the primary duties of a MLO were making sales and related work including “collecting financial information from customers, entering it into the computer program to determine what particular loan products might be available to that customer, and explaining the terms of the available options and the pros and cons of each option, so that a sale can be made…” Thus, the DOL concluded that these activities constitute “the production work of an employer engaged in selling or brokering mortgage loan products.” The DOL further stated that the duties of mortgage-loan officers “do not relate to the internal management or general business operations of the company” and thus do not qualify for the Administrative exemption under the FLSA.
We feel that Perez is a significant opinion as it reaffirms that the Courts must give deference the administrative interpretations of the DOL, including the opinion that the “typical” mortgage-loan officer is not exempt from the overtime requirements of the FLSA and should be paid overtime compensation. Moreover, in light of this opinion, all mortgage loan officers should talk to an experienced overtime attorney to determine if they qualify for overtime.
If you have questions about whether you are entitled to overtime, please feel free to contact the overtime attorneys at the Law Office of J.J. Talbott at (850) 437-9600 for a free consultation.
 The DOL noted that it applied only to employees who spend the majority of their time working inside their employer’s place of business and thus do not qualify for the Outside Sales exemption.