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D.C. Circuit Rejects Department of Labor’s Interpretation Regarding Exemption Status of Mortgage Loan Officers

On July 2, 2013, the United States Court of Appeals for the District of Columbia overturned a District Court’s denial of summary judgment holding that the Department of Labor’s 2010 interpretive bulletin regarding the exemption status of mortgage loan officers was invalid.  In Mortgage Bankers Association v. Harris, the D.C. Circuit was asked to determine whether a 2010 DOL pronouncement essentially overturning years of prior contrary interpretation was valid.  The court held that when an agency takes a position directly contrary to a long-standing prior position it must do so using the formal rule making and public comment process required by the Administrative Procedure Act rather than through less formal unilateral pronouncements. 

At issue in this case was a Department of Labor interpretive bulletin issued in 2010, which overturned years of the Department’s own interpretation that mortgage loan officers were generally exempt from the Fair Labor Standards Act’s overtime requirements.  Some courts, including the trial court in this case, gave the bulletin the same deference due a formal regulation.  The D.C. Circuit held this to be error and ordered the 2010 interpretive bulletin vacated.  It did so while expressly declining to rule on the merits of the Department of Labor’s interpretation.  That issue will have to be resolved if and when the Department issues a regulation on the exemption issue after engaging in the required notice and comment process. 

Unless the Department succeeds in overturning the Circuit Court’s decision on appeal to the Supreme Court or issues a formal regulation, the court’s ruling in this case means that the prior position of the DOL that mortgage loan officers can be exempt from the Fair Labor Standards Act should be controlling, or at least entitled to substantial judicial deference.