An appeals court has decided to reverse a 2010 Department of Labor “administrative interpretation” decision that concluded that mortgage loan officers could not be exempted from overtime pay.
On July 2, an appeals court in Washington DC made of up of three judges decided to return to a Bush-era rule that allowed mortgage companies to exempt mortgage loan originators from being required to receive overtime pay.
The reversal was pushed by the Mortgage Bankers Association which filed a suit in 2011, that argued that the Department of Labor shouldn’t have been able to issue an amendment to a rule without proper industry notice and request for comment, according to attorney Michael E. Barnsback at LeClairRyan, a law firm in Alexandria, Virginia. The motion by the MBA was at first denied, but was recently reversed by an appeals court.
“This was a big win for the MBA,” said Barnsback, explaining that it was mostly a procedural win, making sure the Department of Labor doesn’t overstep its boundaries by amending rules as it pleases, he said.
But, in actual terms, it does help reduce companies’ liabilities to pay overtime to employees, he added. The 2010 administrative interpretation was in direct contrast to Bush-era rules that allowed mortgage loan originators the administrative exemption for its employees, thus saving them the costs of paying overtime.
The debate over wage and pay classification for originators will continue, Barnsback added. Whether originators are considered part of production or part of management will determine whether or not they are eligible for overtime.
In 2011, in Michigan, for example, employees of Quicken loans argued that its employer incorrectly considered them administrative positions, to avoid paying overtime. Employees, however, filed a suit explaining their main duties related to production, rather than management, and therefore they should have been considered eligible for overtime, according to a summary report of the case by Franczek Radelet in Chicago, Illinois. The jury ended up classifying the originators as administrative exempt employees, and as a result, the company did not owe the plaintiffs any overtime, the summary report said.