Law Suits & Courts

MBA Files Suit Against Labor Dept. Over Reversal of Overtime Ruling

Posted on Saturday, January 15, 2011

The Mortgage Bankers Association (MBA) on Wednesday filed a lawsuit against the U.S. Department of Labor (DOL) in an attempt to set aside a March ruling by the department that declared loan officers are entitled to overtime pay.
In 2006 DOL issued an interpretation to MBA stating that typical loan officers qualified as administrators and thus were exempt from overtime pay. MBA members have been operating under this interpretation since the 2006 release.
But in March of 2010, DOL released an administrative interpretation that rescinded the previous opinion, now mandating that loan officers are entitled to overtime pay.
According to the 2010 letter, part of the reasoning behind the DOL’s change in opinion is based on the definition of an administrator. The letter refers to a federal ruling from 2004 that defines an administrator as limited to those employees whose primary duty relates to the administrative as distinguished from the production operations of a business.
Quoting a 2009 lawsuit, the letter then states: “This ‘production versus administrative’ dichotomy is intended to distinguish ‘between work related to the goods and services which constitute the business’ marketplace offerings and work which contributes to ‘running the business itself.’”
Loan officers, then, are considered to work with the goods and services that make up the marketplace offerings, meaning they qualify for overtime pay when working more than 40 hours per week.
But MBA president and CEO John Courson said that there is an administrative procedure that must be followed to reverse an interpretation, which requires presenting a proposed rule for public comment. According to Courson, failure to follow that procedure renders the interpretation invalid, and enforcement of the new interpretation would cause costly and dangerous ramifications for lenders.
“This abrupt reversal by the department not only opens lenders up to lawsuits for past actions, but also could require them to make costly changes to their internal operations and compensation structure, costs that will ultimately be borne by the consumer,” said Courson.
Not only that, but in his opinion, resulting changes would leave people unsatisfied.
“Requiring loan officers to be paid overtime will not increase their compensation, and asking them to now track and report their hours will deprive them of the flexible schedules they and their customers have enjoyed,” he said.
The MBA suit, filed in the U.S. District Court for the District of Columbia asks that the court declare the department violated the Administrative Procedure Act (APA), vacate and set aside the administrator’s interpretation, and prevent its enforcement, application, and implementation.
“What we are asking the court to do is to set aside this ruling, effectively requiring that, if the department wants to reverse the 2006 ruling, it follow the APA and issue a proposed rule for public comment,” Courson said. “If the department were to do that, we are confident it would find that the existing ruling providing an administrative exemption for loan officers from overtime should remain.”
By: Joy Leopold, DS NEWS

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