Pub. 10 2015-2016 Issue 3

www.nebankers.org 12 Extraordinary Service for Extraordinary Members. T HE CLASSIFICATION OF MORTGAGE loan officers as exempt or non- exempt under the Fair Labor Standards Act (FLSA) has long been a matter of legal debate. The De- partment of Labor (DOL), which has enforcement authority over the FLSA and offers opinions regarding proper classifications, has changed its mind more than once on this issue in the last 25 years. For example, in 1999 and 2001 the DOL issued opinion letters that mort- gage loan officers did not qualify as exempt under the FLSA, which meant employers of employees in this position owed such individuals overtime wages for any hours worked more than 40 in a work week. Then, in 2006, the DOL switched course and issued an opinion that mort- gage loan officers may qualify as exempt from minimum wage and overtime requirements under the administra- tive exemption, in accordance with a requisite salary threshold and a finding that the employee’s primary duties in the position met certain requirements. In 2010, the DOL switched course again, withdrawing its prior 2006 opin- ion letter and determining that mort- gage loan officers fell within the scope of the FLSA as non-exempt employees. The reason for this change was rooted in whether mortgage loan officers’ pri- mary duty relates to the management or general business operations of their employer or their employer’s custom- ers. The DOL opinion letter reasoned that mortgage loan officers’ primary duty is to make sales on behalf of their employer, and thus their primary duty was not related to the management or general business operations of their employer or their employer’s customers. The Mortgage Bankers Association challenged this latest change and filed suit claiming the DOL’s new opinion letter violated the Administrative Practices Act (APA) rulemaking notice and comment requirements. The U.S. Supreme Court heard oral argument earlier this year in Perez v. Mortgage Bankers Ass’n., 135 S. Ct. 1199, 191 L. Ed. 2d 186 (2015), and found the DOL did not need to go through the formal rulemaking procedures outlined in the COUNSELOR’S CORNER Mortgage Loan Officers: The Classification Debate Continues Gigi O’Hara & Meaghan Gandy, Kutak Rock LLP APA when changing an interpretation of regulations unless the DOL adhered to those same rulemaking procedures in making its initial interpretation. Since the rulemaking procedures were not necessary when the agency issued its initial interpretation, the DOL did not have to follow that same protocol in amending its interpretation. The DOL’s opinion that mortgage loan officers must be paid overtime con- tinues today. However, at least one court has indicated in dicta that it would not give deference to this 2010DOL opinion letter. In Back v. Century Mortgage Co., 2015 WL 1931444 (W.D. Ky. Apr. 28, 2015), the court did not definitively de- termine whether the mortgage loan of- ficers at issue were exempt, but it noted that an opinion letter from the DOL was not binding. The court stated that opinion letters and other administrative interpretations are “entitled to respect” but “only to the extent those interpreta- tions have the power to persuade.” Whether mortgage officers are prop- erly classified as exempt is a fact- intensive issue, and courts will not necessarily defer to the DOL’s opinion letter. As the law continues to develop on this issue, banking industry employ- ers should consult with legal counsel to determine whether their particular mortgage loan officers should be paid as exempt or non-exempt employees. This exemption, like all others, will be subject to the mandatory increase for the minimum salary threshold from $455 a week to $970 a week, which will go into effect Jan. 1, 2016.  Gigi O’Hara is a partner and Meaghan Gandy is an associate with Kutak Rock LLP. They routinely advise employers on employment- related matters and may be reached at (402) 346-6000, or at gigi.ohara@kutakrock. com or meaghan.gandy@ kutakrock.com. This article is for general information only and should not be construed a s a c o m p r e h e n s i v e discussion of the law or as a replacement for legal advice.