In Mortgage Bankers Association v. Solis et al., Case No. 1:11-cv-00073 (D.D.C. June 6, 2012), U.S. District Judge Reggie B. Walton ruled that the Department of Labor (“DOL”) lawfully acted within its discretion when, in 2010, it stated that mortgage loan officers are not generally exempt from overtime pay. Judge Walton held that the DOL did not violate the Administrative Procedures Act (“APA”) when it withdrew a 2006 opinion letter, which had suggested that mortgage loan officers were covered by the administrative exemption to the FLSA. The 2010 interpretation concluded that because loan officers’ primary duties focus on sales, they do not perform the administrative work necessary for the exemption.

The lawsuit argued that, under the APA, the DOL was required to give notice of its intent to change policy, and provide interested parties an opportunity to comment, before switching positions. Judge Walton disagreed, reasoning that such a requirement only applies where there has been substantial and justifiable reliance on the agency interpretation, but the prior opinion letter had been written in 2006, just four years before the new interpretation in 2010.  Further, the Association had argued that its members could assert a “good faith” defense to liability and damages based on the 2006 letter, which, according to the Court, negated detrimental reliance.  Finally, Judge Walton found that  the DOL’s position was not arbitrary, capricious or an abuse of discretion.

This decision clarifies any open question as to whether mortgage loan officers may be categorized as falling under the administrative exemption to the FLSA.  Typical loan officers, whose primary duties involve sales, cannot be categorized as exempt, unless they meet the test for the outside salesman or other exemption.