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Morgan Lewis Wins Reversal of DOL Position on Overtime, Litigation Daily

July 02, 2013

Reprinted with permission from the July 2, 2013 edition of The Litigation Daily© 2013 ALM media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382 or reprints@alm.com or visit www.almreprints.com.

Morgan Lewis has secured an important appellate ruling on overtime pay for the Mortgage Bankers Association. On Tuesday the U.S. Court of Appeals for the District of Columbia Circuit held that the Department of Labor had improperly changed its position that mortgage loan officers are eligible for overtime pay.

In this 11-page ruling, the court held that the agency should have conducted a notice and comment rule making process before changing its position in 2010. Four years earlier the agency had issued an opinion letter that these officers are exempt from overtime rules and don't have to be paid extra for working more than 40 hours a week under the Fair Labor Standards Act. Then in 2010 the agency came to the opposite conclusion in an "administrator's Interpretation."

The Mortgage Bankers Association--which represents real estate finance companies with more than 280,000 employees--sued. Represented by Morgan Lewis's Samuel Shaulson, it argued that the DOL should have gone through a notice-and-comment proceeding before changing its position. U.S. District Judge Reggie Walton of the District of Columbia denied the MBA's motion for summary judgment and rejected its challenge to the DOL's interpretation.

In reversing, the circuit court held that a notice and comment process is required if an agency's definitive interpretation of a rule significantly changes that rule. The court, however, noted in a footnote that most of the Circuits do not agree with this position. The First, Second, Fourth, Sixth, Seventh, and Ninth Circuits have held that changes in rules interpretations do not require notice and comment proceedings. Only the Fifth Circuit has held otherwise. The ruling was written by Judge Janice Rogers Brown, and was joined by Judges David Tatel and Senior Judge David Sentelle.

The court remanded the case with instructions to vacate the Department of Labor's 2010 administrator interpretation. We reached out to the Department of Labor but did not hear back.

"The decision confirms that the DOL violated the law in reversing its settled position on the exempt status of loan originators without going through the required notice and comment procedures," said Morgan Lewis' Shaulson in a statement. "In effect, the D.C. Circuit said the DOL should not have changed the rules in the middle of the game without providing fair notice of the proposed rule change and allowing impacted parties the opportunity to comment."