Loan Officers Seek Full D.C Review of Significant Ruling Affecting Loan Officer Classification Status

On August 16th, 2013, three mortgage loan officers represented by Nichols Kaster filed a significant petition in the United States Court of Appeals for the District of Columbia Circuit, asking the full court to reverse an earlier decision blocking the U.S. Department of Labor’s 2010 interpretation that mortgage loan officers are eligible for overtime pay.  The petition was filed by three former loan officers represented by Nichols Kaster in a lawsuit involving unpaid overtime wages.

An earlier decision of the same court had invalidated the Department of Labor’s employee-friendly interpretation of the law.  Mortgage Bankers Association v. Seth Harris et al., 720 F.3d 966 (D.C. Cir. 2013). That court stated that the Department of Labor was required to engage in the formal process of notice and comment rulemaking before changing its position. Although the Department issued guidance in 1999 and 2001 stating that mortgage loan officers were entitled to overtime, the Department reversed itself in 2006, issuing an opinion that loan officers were exempt employees.  According to court documents filed by the loan officers seeking to review the decision, the 2006 opinion letter was issued under irregular circumstances, with former Department of Labor lawyers working hand-in-hand with government lawyers to change the law to favor banks and large financial organizations.  In 2010, however, the Department reinstated its original position that loan officers are entitled to overtime pay.

At the heart of the case is a rule, created by the D.C. Circuit in 1999, stating that although an agency may issue an interpretive rule without going through the notice and comment process, “[o]nce an agency gives its regulation an interpretation, it can only change that interpretation as it would formally modify the regulation itself: through the process of notice and comment rulemaking.” Alaska Professional Hunters Association, Inc. v. FAA, 177 F.3d 1030 (D.C. Cir. 1999) (citing Paralyzed Veterans of America v. D.C. Arena L.P., 117 F.3d 579 (D.C. Cir. 1997))

According to the petition, the one-bite-at-the-apple rule adopted by the D.C. Circuit is not supported by the text of the law governing agency action, is undermined by Supreme Court precedent, and has been rejected by the majority of other courts around the country.

“We believe the law gives the Department of Labor the tools to fix its own mistakes,” said Adam Hansen, the Nichols Kaster attorney who represents the loan officers bringing the petition. “Until the Department of Labor switched sides under pressure from the financial services lobby, everyone understood that mortgage loan officers were not exempt administrators—they sold loan products to customers.”

The case is Mortgage Bankers Association v. Thomas Perez et al., case number 12-5246, in the U.S. Court of Appeals for the District of Columbia Circuit. Nichols Kaster has represented over 10,000 mortgage loan officers, helping them and other misclassified employees receive proper compensation in accordance with the law.