In a victory for banking employers, the DC Circuit Court of Appeals refused to give an en banc hearing to a decision by one panel that voided the U.S. Department of Labor‘s “white paper” on the status or mortgage loan officers as (with few exceptions) non-exempt employees, i.e. eligible for overtime pay. The case is entitled Mortgage Bankers Association v. Thomas Perez et al.
A trio of former Quicken Loans loan officers filed a petition asking the entire Circuit to hear the case. The decision not to hear the matter en banc allows the July decision to stand, one which contended that 2010 DOL Administrative Interpretation that rescinded an earlier DOL Opinion Letter holding that the majority of loan officers were included within the administrative exemption of the Fair Labor Standards Act (“FLSA”) was invalid because the DOL did not go through notice-and-comment rulemaking.
Although the “original” panel did not formally address the DOL position on the loan officers’ exempt status, as its decision focused on the impropriety of the purported DOL “rulemaking.” The MBA had challenged the 2010 Interpretation on the basis that the agency impermissibly reversed its earlier position without allowing so-called interested parties to comment. The district court agreed with the DOL position but the MBA appealed and a panel of the DC Circuit reversed the lower court.
The appellate Court, relying on its own precedent, concluded that when an agency has interpreted its own regulation in a definitive manner and then does a complete about face on that interpretation, the practical consequence is that the agency has amended its own regulation and this then mandates the implementation of the rule making procedure. The DC Circuit panel determined that, given this longstanding precedent, the DOL was required to engage in rulemaking before it could make such a momentous change to the exempt status of loan officers under the FLSA.
What does this decision do for the employer-defendant banking community? Although the “merits” of the Interpretation were not struck down, this cannot but deal a blow to the agency’s position. Absent the official “endorsement” of the agency, which a court might well give deference to, I believe there is now an opening for banks/financial institutions to espouse and cogently argue that these employees are administratively exempt.