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Without notice and comment rulemaking, DOL’s first Administrator Interpretation deeming mortgage loan officers nonexempt invalid

July 3rd, 2013  |  David Stephanides

In a win for the Mortgage Bankers Association, the D.C. Circuit has reversed a district court order dismissing the Association’s challenge to the Wage and Hour Division’s first “Administrator Interpretation” concluding that mortgage loan officers were nonexempt under the FLSA (Mortgage Bankers Association v Harris, July 2, 2013, Brown, J). Without addressing the merits of the Interpretation, the appeals court remanded the case with instructions to vacate it.

Administrator interpretations. Reflecting a change in direction for compliance assistance, the Department of Labor in 2010 announced that in lieu of opinion letters, it would issue more generalized guidance in the form of Administrator Interpretations when it finds it necessary to provide further clarity regarding the proper interpretation of a statutory or regulatory issue. To date, four Interpretations have issused – two under the FLSA and two under the FMLA.

Administrator Interpretations are “intended to set forth a general interpretation of the law and regulations that are applicable across-the-board to an entire industry, category of employees, or to all employees,” the agency explained. In the DOL’s view, the approach represented a more efficient use of resources than attempting to provide definitive opinion letters in response to fact-specific requests submitted by individuals and organizations.

In the agency’s inaugural Interpretation, the exempt status of mortgage loan officers was addressed “to provide needed guidance on this important and frequently litigated area of the law.” The 2010 Administrator Interpretation rescinded a 2006 opinion letter and held that mortgage loan officers did not qualify for the administrative exemption. The appeals court found that the agency’s 2010 Interpretation was inconsistent with its white-collar exemption regulation, 29 CFR Sec. 541.203(b), as revised in 2004. Because the agency’s new interpretation was at odds with the agency’s rule, it had to conduct notice and comment rulemaking.

Notice and comment required. Relying on its decisions in Paralyzed Veterans of America v D.C. Arena L.P. and Alaska Professional Hunters Ass’n v FAA, the appeals court reaffirmed that when an agency has given its regulation a definitive interpretation, and later significantly revises that interpretation, the agency has in effect amended its rule, which it could not accomplish under the Administrative Procedure Act without notice and comment.

The appeals court found itself in general agreement with the association that there is no “separate and independent” requirement of reliance in determining whether an agency’s interpretation qualifies as definitive. Rather, reliance is just one of several factors courts can look to. Because the DOL conceded the existence of two definitive—and conflicting—agency interpretations at oral argument, the association prevailed. Thus, the appeals court reversed a lower court order and remanded the case with instructions to vacate the 2010 Administrator Interpretation.