Login
In a unanimous decision on Monday, the Supreme Court held that the Department of Labor does not have to adhere to notice-and-comment procedures as outlined in the Administrative Procedures Act (APA). Perez v. Mortgage Bankers Association was the landmark case that allowed the Justices to come to this decision.
The case endured years of conflicting holdings that spanned two presidential administrations before finally reaching the Supreme Court for a definitive decision. The holding has many implications for both the mortgage industry and for future interpretations of federal rules.
For the mortgage industry, Monday’s decision means that the Department of Labor was validated in its decision to provide eligibility for overtime to mortgage loan officers. By doing so, mortgage loan officers are reclassified as non-exempt.
The saga began in 1999 and 2001 with the issuance of letters on behalf of the Department of Labor’s Wage and Hour Division. According to a syllabus released by the Supreme Court, the letters opined that “mortgage-loan officers do not qualify for the administrative exemption to overtime pay requirements under the Fair Labor Standards Act of 1938.”
New regulations regarding the issue were released in 2004 which provoked the Mortgage Bankers Association (MBA) to request a new interpretation of the revisions. Conflict grew when in 2010, the Department decided to withdraw its 2006 opinion—without any comments or notice—that loan officers did indeed fall within the administrative exemption.
This is where Perez v. Mortgage Bankers Association comes into fruition. Displeased by the Department’s lack of consideration for comments or notice, the MBA sued with the premise that the decision was invalid under the D.C. Circuit’s decision that resulted in the Paralyzed Veterans doctrine.
According to the Supreme Court’s syllabus on Monday’s case, the doctrine “holds that an agency must use the APA’s notice-and-comment procedures when it wishes to issue a new interpretation of a regulation that deviates significantly from a previously adopted interpretation.”
In the end, Justice Sonia Sotomayor stated in her consensus opinion that since agencies are not required to utilize notice-and-comment procedures for an initial interpretive rule, it is also not a requirement to amend or repeal the rule in question. The case was lost by the MBA with a 9-0 vote in favor of Thomas Perez, Secretary of Labor.