• Related Professionals -

eLABORate: Department of Labor Makes U-Turn On Opinion Letters And Mortgage Loan Officers

April 04, 2010

On March 24th, the Department of Labor issued an Administrator’s Interpretation concluding that mortgage loan officers are not ordinarily covered by the administrative exemption to the minimum wage and overtime pay provisions of the Fair Labor Standards Act (FLSA). The new interpretation reverses a 2006 Department opinion finding mortgage loan officers were generally exempted from the FLSA’s pay requirements.

This clearly is a significant shift for banks and other lenders, who will need to revise their pay practices for mortgage loan officers. However, employers in other industries also should pay careful attention. The Department of Labor’s March 24th Interpretation signals a fundamental shift in how the agency will advise employers of their legal obligations, which likely will make it more difficult to assert certain defenses to liability.

Department of Labor Abandons Opinion Letters

For years, the Department of Labor issued “Opinion Letters” in response to specific questions from employers. Employers frequently relied on these opinions in their efforts to comply with wage and hour laws, as they provided specific guidance based on concrete factual situations. Just as importantly, adhering to the position stated in an Opinion Letter generally provided an employer with an “absolute good faith defense” to liability.

In its March 24th release, the Department of Labor explained that it will no longer provide situation-specific Opinion Letters in response to employer inquiries. Instead, the Department will release what it calls “Administrator’s Interpretations.” These new Interpretations will “set forth a general interpretation of the law and regulations, applicable across-the-board to all those affected by the provision at issue.” Employers with specific questions will be referred to statutes and regulations for guidance.

While the new Interpretations technically qualify as a basis for the so-called “absolute good faith defense” under 29 U.S.C. § 259, they will make these good faith defenses harder to maintain for two reasons.

First, the new Administrator’s Interpretations apparently will rely on the Department’s generalized assumptions about the duties of a given position, rather than particular facts submitted by an actual employer. This is problematic because exemptions to the FLSA’s overtime and minimum wage requirements depend on an employee’s “actual job duties.” The March 24th Interpretation reads more like a legal brief than a concrete discussion of job duties. If the Interpretations continue this practice and articulate only general legal principles, employers will have less practical guidance for tailoring their conduct to ensure compliance.

Second, Administrator’s Interpretations will not be provided in response to employer inquiries. Instead, they will be released at the discretion of the Department of Labor when it determines that clarification is needed regarding “the proper interpretation of a statutory or regulatory issue.” This means that employers cannot reliably turn to DOL for timely guidance on pressing issues, but must instead wait until the Department determines that an issue warrants clarification.

Employers still may rely on previously-issued Opinion Letters in their compliance efforts, so long as these opinions are not superseded by new authority. The new Administrator’s Interpretations, however, provide guidance that is considerably less clear. In all cases involving compliance with the FLSA and other employment statutes, it is worth consulting counsel when in doubt.

Mortgage Loan Officers No Longer Exempt Under FLSA

The substance of the March 24th Administrator’s Interpretation is just as significant as the manner in which it was issued. It reverses a September 8, 2006 opinion letter, in which the Department of Labor concluded that mortgage loan officers generally were exempt from the FLSA’s minimum wage and overtime requirements. The new Administrator’s Interpretation rejects that position, concluding that mortgage loan officers generally are not properly classified as “administrative employees” under the FLSA, and thus are not exempt from minimum wage and overtime requirements.

Some employers may also rely on the separate “outside sales exemption” for their mortgage loan employees. The March 24th Interpretation did not address a prior Department of Labor opinion finding that this exemption may apply to certain mortgage loan employees.

It is unclear how much weight courts will give the Department of Labor’s new position. The views of the Department are not binding on courts, although they often are cited as persuasive authority. In the interim, however, it is clear that the safe harbor for mortgage loan officers created by DOL’s 2006 opinion is no longer safe. Employers of mortgage loan officers who previously classified them as exempt from the FLSA should therefore consider revising their pay practices for these employees.