The Mortgage Bankers Association succeeded in getting a U.S. appeals court to overturn a Department of Labor interpretation that mortgage loan officers are entitled to overtime pay. But that may not be the end of this long-running legal battle.

The July 2 decision by the U.S. Court of Appeals for the District of Columbia Circuit leaves the door open for the Department of Labor to reinstate its position that MLOs should be paid overtime. “The DOL is reportedly evaluating its options,” according to Ballard Spahr attorney Brian Pedrow.

The appeals court simply ruled on a procedural issue, namely that the Department of Labor failed to follow proper rulemaking procedures in reversing a 2006 DOL opinion letter on overtime time pay.

The 2006 opinion letter support by the MBA determined that MLOs are mainly administrative personnel, who are not eligible for overtime pay under the Fair Labor Standards Act. The Department of Labor reversed that position in a 2010 opinion letter which determined that MLOs are mainly sales personnel.

When an agency engages in such “flip-flops,” it must go through a regular rulemaking process and seek public comment, according to the appeals court’s decision in MBA v. DOL acting secretary Seth Harris.

In striking down the 2010 interpretation, the circuit judges said the Department of Labor is “free” to re-adopt its 2010 interpretation. “DOL must, however, conduct the required notice and comment rulemaking,” the court said.

For now, the MBA v. Harris decision leaves the 2006 interpretation as the definitive interpretation on overtime pay, according to Pedrow.

The Ballard Spahr attorney stresses that the 2006 interpretation holds that MLOs are exempt from overtime pay based on their specific duties, which include collecting and analyzing a customer’s financial information and advising them about the risks and benefits of various mortgage loan alternatives.

“Notably, the 2006 interpretation was limited to the loan officers described” in the opinion letter.

Pedrow also noted that it is unclear if other circuit courts will adopt the District of Columbia circuit’s decision. “It remains to be seen what impact this decision will have on employers outside the D.C. Circuit’s jurisdiction,” Pedrow says in a July 9 Mortgage Banking Alert.

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