Legal Update

Mar 26, 2010

DOL Eliminates Issuance of Wage & Hour Opinion Letters While Finding Mortgage Loan Officers Non-Exempt Contrary to Prior Administration Rulings

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Seyfarth’s Washington Perspective

Earlier this week, the Wage and Hour Division (WHD) of the U.S. Department of Labor (DOL) issued a novel guidance document titled an “Administrator’s Interpretation” (AI). WHD found that the Fair Labor Standards Act’s (FLSA) administrative exemption did not apply to mortgage loan officers, reasoning that mortgage loan officers “typically have the primary duty of making sales on behalf of their employer.” In so concluding, WHD overruled and withdrew prior Opinion Letters, including a letter issued just three years ago. In issuing this AI, WHD announced that it would, for all practical purposes, be eliminating the issuance of Opinion Letters.

The substance of WHD’s guidance and WHD’s departure from the practice of issuing individual Opinion Letters should be troubling to employers in many industries. As an initial matter, employers have long submitted individualized, fact-specific inquiries and relied on responsive Opinion Letters as part of their good-faith efforts to comply with wage-and-hour laws. Indeed, the Portal-to-Portal Act provides that an employer is not subject to liability, including liquidated damages, under the FLSA if it can establish good-faith reliance on a “written administrative regulation, order, ruling, approval, or interpretation” of WHD. There is presently a backlog of approximately 400 requests for Opinion Letters.

Moreover, the AI, in contrast to prior WHD Opinion Letters, lacks any transparent factual inquiry and instead relies upon WHD’s generalized understanding of the duties that commonly accompany a position in an industry. Yet, for years, WHD has acknowledged that job titles alone are not dispositive in determining whether an exemption applies and recognized that the law requires a specific factual inquiry to be conducted into the actual duties an employee performed. Likewise, prior Opinion Letters have taken account of the reality that actual duties performed in a particular position often vary.

In addition, the AI exposes a new hostility to the administrative exemption. In fact, with this AI, the DOL has now argued against the application of the administrative exemption to both mortgage loan officers and pharmaceutical sales employees, a position the DOL’s solicitor argued in a brief last fall. Each of these positions has been (and continues to be) the subject of multi-million dollar lawsuits across the country, and these DOL actions will tip the scales in these cases towards the plaintiffs.

When the DOL gave serious attention to the issuance of Opinion Letters during the past seven years, the plaintiffs’ bar, which was ratcheting up wage and hour litigation, took notice. The Department was subjected to repeated FOIA requests seeking information about how a particular Opinion Letter came to be issued. In addition, certain Members of Congress regularly inquired about Opinion Letters. Employers who may now be subject to industry-wide, non-fact-specific DOL determinations about particular jobs may want to consider similar strategies in response to the DOL’s apparent reversal of its long-standing Opinion Letter process. Moreover, given the increased scrutiny that WHD is placing on the application of the administrative exemption, and their determination as to when an employee is or is not performing sales work, employers should take a close and hard look at all instances in which they rely on the administrative exemption.

Seyfarth Shaw LLP’s Wage and Hour Litigation Practice Group and Government Strategies and Public Policy Practice Group have experienced wage and hour practitioners and several former high-ranking officials of the U.S. Department of Labor, with extensive legislative and regulatory experience. These individuals are able to assist you in formulating a comprehensive strategy for compliance. If you have any questions, please contact the Seyfarth Shaw attorney with whom you regularly work or any Wage and Hour Litigation attorney on our website. This Alert was prepared by Alexander J. Passantino, former Acting Wage and Hour Administrator (2007-2009).