Record and brief — Perez v. Mortg. Bankers Ass'n, 134 S. Ct. 2820 (2014) (No. 13-1041)

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Text

No. 13-1041

Vide 13-1052

Title

Docketed:

Thomas E. Perez, Secretary of Labor, et al., Petitioners

Mortgage Bankers Association, et al

March 3, 2014

Linked with 13A636

Lower Ct United States Court of Appeals for the Distnct of Columbia Circuit

Case Nos (12-5246)

Decision Date: July 2, 2013

Rehearing Denied: October 2, 2013

Questions Presented

~~~Date~—~

Dec 18 2013

Dec 19 2013

Jan 17 2014

Jan 21 2014

Feb 18 2014

Feb 28 2014

Mar 24 2014

Mar 26 2014

May 2 2014

May 20 2014

May 21 2014

Jun 9 2014

Jun 16 2014

Jun 26 2014

Jul 7 2014

~~~~~~~Proceedings and Orders~~—~~—~—~ ~~~ ~~~

Application (13A636) to extend the time to file a petition for a writ of certiorari from

December 31, 2013 to January 30, 2014, submitted to The Chief Justice

Application (13A636) granted by The Chief Justice extending the time to file until

January 30, 2014

Application (13A636) to extend further the time from January 30, 2014 to February 28

2014, submitted to The Chief Justice

Application (13A636) granted by The Chief Justice extending the time to file until

February 28, 2014

Consent to the fling of amicus curiae briefs, in support of efher party or of neither

party, received from counsel for respondent. VIDED.

Petition for a wrt of certiorari filed. (Response due April2, 2014)

Order extending time to file response to petition to and including May 2, 2014

Bnef amici curiae of Administrative Law Scholars filed. VIDED.

Brief of respondent Mortgage Bankers Association in opposition filed. VIDED

DISTRIBUTED for Conference of June 5, 2014.

Reply of petitioner Thomas E. Perez, Secretary of Labor filed. (Distributed)

DISTRIBUTED for Conference of June 12, 2014

Petition GRANTED The petition for a writ of certiorari in No. 13-1052 is granted. The

cases are consolidated and a total of one hour is allotted for oral argument

Motion to dispense with printing the joint appendix filed by petitioner Thomas E

Perez, Secretary of Labor

The time to file the joint append& and petitioners’ bnefs on the mens is extended to

and including August 13, 2014. VIDED

Jul 7 2014

Jul 21 2014

Aug 112014

Aug 20 2014

Sep 4 2014

Sep 9 2014

Sep 22 2014

Sep 26 2014

Oct 9 2014

Oct 16 2014

Oct 27 2014

Oct 28 2014

Nov 10 2014

Dec 1 2014

Mar 9 2015

The time to file respondents’ brief(s) on the merits is extended to and including

September 25, 2014. VIDED

Motion to dispense with printing the joint appendix filed by petitioner GRANTED.

The time to file the joint appendix and petitioner's briefs on the ments is further

extended to and including August 20, 2014. VIDED

The time to file respondents’ brief(s) on the merits is further extended to and including

October 9, 2014. VIDED

Brief of petitioners Thomas E. Perez, Secretary of Labor, et al. filed. VIDED.

Brief of petitioners in No. 13-1052, Jerome Nickols, et al. filed.

SET FOR ARGUMENT on Monday, December 1, 2014. VIDED

Consent to the fling of amicus curiae briefs in support of either party or of neither

party from counsel for the respondents. VIDED

Record requested from U.S.C.A. Dist. of Columbia Circuit.

Record received from U.S.D.C. Dist. of Columbia Circuit. The record is electronic and

located on PACER.

Brief of respondents Mortgage Bankers Association, et al. filed. VIDED.

Brief amicus curiae of National Mining Association filed. VIDED.

Brief amici curiae of National Federation of Independent Business, et al. filed. VIDED.

Brief amici curiae of Washington Legal Foundation and Allied Educational Foundation

filed. VIDED.

Brief amici curiae of Cato Institute, et al. filed. VIDED.

Brief amici curiae of American Hospital Association, et al. filed. VIDED.

Brief amici curiae of Utiity Air Regulatory Group and American Forest & Paper

Association filed. VIDED.

Brief amicus curiae of Quicken Loans Inc. fied. VIDED.

Brief amicus curiae of Thomas Jefferson Institute for Pubic Policy fied. VIDED.

Brief amicus curiae of Center for Constitutional Jurisprudence filed. VIDED.

Motion for divided argument filed by petitioners Jerome Nickols, et al. VIDED.

Brief amici curiae of State and Local Government Associations filed. VIDED.

(Distributed)

Brief amici curiae of Chamber of Commerce of the United States of America, et al.

filed. VIDED.

CIRCULATED.

Opposition of petitioners Perez, et al. to motion of Nickols, et al. for divided argument

fied. VIDED

Motion for divided argument filed by petitioners Jerome Nickols, et al. DENIED.

Reply of petitioners Thomas E. Perez, Secretary of Labor fled. VIDED. (Distributed)

Reply of petitioners in No. 13-1052, Jerome Nickols, et al., filed. (Distributed)

Argued. For petitioners: Edwin S. Kneedler, Deputy Solicitor General, Department of

Justice, Washington, D. C. For respondents: Allyson N. Ho, Dallas, Tex.

Judgment REVERSED. Sotomayor, J., delivered the opinion of the Court, in which

Roberts, C. J., and Kennedy, Ginsburg, Breyer, and Kagan, JJ., joined, and in which

Alto, J., joined except for Part Ill-B. Alito, J., filed an opinion concuring in part and

concurring in the judgment. Scalia, J., and Thomas, J., filed opinions concurring in the

judgment. VIDED

Apr 102015 JUDGMENT ISSUED.

PETITION

FOR

WRIT OF

CERTIORARI

— Lom 104]

BRIEFS

In the Supreme ~ of the Gnited States

THOMAS E. PEREZ, SECRETARY OF LABOR, ET AL.,

PETITIONERS

MORTGAGE BANKERS ASSOCIATION, ET AL.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

PETITION FOR A WRIT OF CERTIORARI

DONALD B. VERRILLI, JR.

Solicitor General

Counsel of Record

STUART F. DELERY

Assistant Attorney General

EDWIN S. KNEEDLER

Deputy Solicitor General

ANTHONY A. YANG

Assistant to the Solicitor

General

DOUGLAS N. LETTER

ANTHONY J. STEINMEYER

Attorneys

Department of Justice

Washington, D.C. 20530-0001

SupremeCtBriefs@usdoj.gov

(202) 514-2217

Library of Conress

Law Libtary

QUESTION PRESENTED

The Administrative Procedure Act (APA), 5 U.S.C.

551 et seq., generally provides that “notice of proposed

rule making shall be published in the Federal Regis-

ter,” 5 U.S.C. 553(b), and, if such notice is required,

the rulemaking agency must give interested persons

an opportunity to submit written comments, 5 U.S.C.

553(c). The APA further provides that its notice-and-

comment requirement “does not apply * * * to

interpretative rules,” unless notice is otherwise re-

quired by statute. 5 U.S.C. 553(b)(A). No other stat-

ute requires notice in this case. The question present-

ed is:

Whether a federal agency must engage in notice-

and-comment rulemaking before it can significantly

alter an interpretive rule that articulates an interpre-

tation of an agency regulation.

(1)

PARTIES TO THE PROCEEDING

Petitioners are Thomas E. Perez, Secretary of La-

bor; the Department of Labor; and Laura A. Fortman,

Principal Deputy Administrator, Wage and Hour Divi-

sion, Department of Labor.

Respondent Mortgage Bankers Association was

plaintiff-appellant below.

Respondents Beverly Buck, Ryan Henry, and Je-

rome Nickols were intervenors-appellees below.

(ID)

TABLE OF CONTENTS

Page

Sern. csssenieracansensupiniomiminaneateinntainnestniisenienniiianaiatiaidmaiiuiiiel 1

eT cistrnictscancenrnincnstaindtnsitnninennstsiiininntenniininiiimaaaimmainiieiiies 1

Statutory provisions involved ...............siececcessseccessessecserscsseensenees 2

Bt Pcsicerntsnsicnncnnsensannnscnneamncncintinninaeminincemiuninmenisnameddintninntel 2

Reasons for granting the petition...................-ccssescessesserseveeseenens 9

A. The court of appeals erred in holding that an

interpretive rule that alters the agency’s previous

interpretation of a substantive regulation must be

promulgated through notice-and-comment

TTT sisi csiniiiietiteiaeiaeahitainen inten initiiintiinaaetsiniit 10

B. The courts of appeals are divided on the question

Ti icicicinccicilcinnitncinisnninnitaiiiainlinpaaiunitindiisitnininaiiiasiaseais 16

C. Review is warranted to resolve an important and

recurring question of administrative law...................++ 19

SR cinncccmssinenenentiivniciensnniuiaiapstitiaiieseninaissainbiniiitapaatiaitiitamasis 22

Appendix A — Court of appeals opinion (July 22, 2013)....... la

Appendix B — District court opinion (June 6, 2012)........... 13a

Appendix C — Administrator’s Interpretation

RE 49a

Appendix D — Opinion Letter (Sept. 8, 2006)...................... 70a

Appendix E — Court of appeals order denying rehearing

iia HACIITITTiintintsacnncntsiinsniennitansedinnsanaiesianiaial 85a

Appendix F — Statutory provisions .......................sccessesseeees 87a

TABLE OF AUTHORITIES

Cases:

Abraham Lincoln Mem1l Hosp. v. Sebelius,

ee tN ED ciiesitniscintisisetitaitiiparanienneneaneenitini 19

Alaska Prof Hunters Ass’n v. FAA, 177 F.3d 1030

le EE BEE denentnniencnaninsninnnveninninininnnptiinniaaaiaial 8,11, 19

Brooklyn Sav. Bank v. O'Neil, 324 U.S. 697 (1945)............+. 3

Chrysler Corp. v. Brown, 441 U.S. 281 (1979)............... 13, 15

(IIT)

Cases—Continued: Page

Environmental Integrity Project v. EPA, 425 F.3d

a pas MAP, UII ictcticsehehinaeeteimennseeinineniiiiionelianmicin 15

Erringer v. Thompson, 371 F.3d 625 (9th Cir. 2004) ......... 18

FCC v. Fox Television Stations, Inc., 556 U.S. 502

SIs iisicietisheestsiiiiliinadageildiciebdeiabaiaitanibiiaapaiaiiatamneiad 11, 12

Good Samaritan Hosp. v. Shalala, 508 U.S. 402

Sarai icceschesciiilpaiadeiiahitaianiiiapiuaidiieliainieaia Diaseeelielinianiiadassldidalaenieits 14

Hoctor v. United States Dep't of Agric., 82 F.3d 165

STIs SITIITTITTA coisccnsesicsocenvesiinceeinpcieniiniiiniainaeibinlpiasuibianasetnien 14

Leavitt v. Baystate Health Sys., 547 U.S. 1054 (2006).......20

Lincoln v. Vigil, 508 U.S. 182 (1998) ...............scsecceesseeseesees 12

Long Island Care at Home, Ltd. v. Coke, 551 U.S.

Sarr sisccnsedihescetaeeabteiiapnihilianamenianiabiadiiniaiddindeanaiite 12

MetWest Inc. v. Secretary of Labor, 560 F.3d 506

is SI TTI iene ania 7

Miller v. California Speedway Corp., 536 F.3d 1020

IN NEAIINE. SITITTTcssnicspeiennieniesitnbapsiiebiinineniniaiaitaneitiiniiantempiutnieitiands 17, 18

NLRB v. Bell Aerospace Co., 416 U.S. 267 (1974)............... 15

Norton v. Southern Utah Wilderness Alliance,

Be sicsinncttsiantiapenineniinmenitigrniimnneatinnsnenee 13

Paralyzed Veterans of Am. v. D.C. Arena L.P.,

117 F.3d 579 (D.C. Cir. 1997), cert. denied,

ee ST cccinicssiinenstintennicnnsaentianeiniiiiaibiacmnsinniel 6, 10

SBC Inc. v. FCC, 414 F.3d 486 (8d Cir. 2005).................0. 17

Shalala v. Guernsey Mem Hosp., 514 U.S. 87

(ir inssessireersisetaniceiiienscinaiteninsiiimaneapanamaatiasesibimaiiataiiinns 12, 15, 20, 21

Shell Offshore Inc. v. Babbitt, 238 F.3d 622

Sa TT AITTTTIEI cichrhinehiceseierntenrnieridepanineanainiineeneansiasieniiabnataiiinaniinaiee 17

Thomas Jefferson Univ. v. Shalala, 512 U.S. 504

Cases—Continued: Page

Tripoli Rocketry Ass'n v. United States Bureau of

Alcohol, Tobacco, Firearms & Explosives,

Ne 6

Vermont Yankee Nuclear Power Corp. v. NRDC,

ee es I cercncereieenessninnsesedastncimapticensiinnaniis 11, 16, 19

Warder v. Shalala, 149 F.3d 73 (1st Cir. 1998),

cert. denied, 526 U.S. 1064 (1999)................-s-ssssesecseseenseeees 18

Wong Yang Sung v. McGrath, 339 U.S. 33 (1950).............. 16

Woods v. Interstate Realty Co., 337 U.S. 535 (1949) .......... 18

Statutes and regulations:

Administrative Procedure Act, 5 U.S.C. 551

CO, ccccstimiatmmintenene 2, 8, 9, 10, 11, 21

Sn ITE aicssinsstnibintninntidesiininiieeneniinadiaiiamniniamasiediaiael 3, 11

SOEs ITT sinisiichsicchitieiimiasiiteiteiaaticinmceitiaabaaniaiiaints 2,12, 15

ns hcsinitissiccinsiininindinaniticisiigiaaaieaidishintaiaammtall 2, 10, 12

Nicaea iiaialaieibaiaieileadliceinaiaiiaaail 16

ITE hsitisstininisncscisiseiiiienincinenisciaieniiiiiiuidiiiniiaiaiieaiiamauel 16

i SarTTrTTTITtc TTT chiinieniincitenintnincelieaiiaannsiaiaiiiiiaeaibnaai 2, 16, 19

ts UIT cishicsinteiiicesitensinidiniatianniasauniiaiiiineammmnabinaie’ 3,11

a I io ciccricinnternintineitccinsicesblinininoiaia 3, 6, 10, 11

rs ta sosctniesiehintiencesthsecnscintdiptahaeaaanitacaaiapatniaaiattal 3,11

Fair Labor Standards Act of 1938, 29 U.S.C. 201

CGD, cnnetsnmnemnmseseremmenmneiamemnecmnnnel 3

one 3

Fe te Se aenicrnnennnnninicarinnittcnemncanenienintinpacannamat 3

es SE cenrccesemensptennncenemnnenieivionnmnat 3, 11

Portal-to-Portal Act of 1947, 29 U.S.C. 251 et seg. ........... 3,7

I iccccnissiniictneneicsimmcinnniieninieininenemeninmuel 3, 4

eT ss nscsrcneerineateiaininendtiteninmanieeematinl 4

Se: | 20

Statute and regulations—Continued: Page

EE ae aN ee ee RT 20

29 C.F.R.:

iia aaa aaa 4

I keihin i aaa aiid 4

TE scene nanan ea RET 4,7

IT icciicreoniiriaeeieeiiiiaenineiaiigmnininunitel 5

Miscellaneous:

is Se ee et ED cerserrtesscnnenerenstnneneimnenenenesinnnes 4

Final Report of the Attorney General’s Committee

on Administrative Procedure, S. Doc. No. 8, 77th

SE, Fe es GD cctrcscccecccerennenennnesenemenesimenennes 13

Richard W. Murphy, Hunters for Administrative

Common Law, 58 Admin. L. Rev. 917 (2006)................... 16

Richard J. Pierce, Jr., Distinguishing Legislative

Rules from Interpretative Rules, 52 Admin. L. Rev.

Antonin Scalia, Vermont Yankee: The APA, the D.C.

Circuit, and the Supreme Court, 1978 Sup. Ct. Rev.

TT tivsntetniieentreceenatmemmnimmanninbienimmnninens 16

U.S. Dep’t of Justice, Attorney General’s Manual on

the Administrative Procedure Act (1947).................+. 13, 15

U.S. Gov’t Accountability Office, GAO-09-205,

Federal Rulemaking (2009) .........scsssssesesssecsseerssssseceseeessess 21

Wage & Hour Div., U.S. Dep’t of Labor:

Opinion Letter (May 17, 1999), 1999 WL 100240) ......... 4

Opinion Letter (Feb. 16, 2001), 2001 WL 1558764.......... 4

14D Charles Alan Wright et al., Federal Practice

and Procedure (4th ed. 2018)...........ccccccccscccsccscscoccesccccsescees 20

In the Supreme Court of the GAnited States

No.

THOMAS E.. PEREZ, SECRETARY OF LABOR, ET AL.,

PETITIONERS

Vv.

MORTGAGE BANKERS ASSOCIATION, ET AL.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

PETITION FOR A WRIT OF CERTIORARI

The Solicitor General, on behalf of the Secretary of

Labor and the other federal petitioners, respectfully

petitions for a writ of certiorari to review the judg-

ment of the United States Court of Appeals for the

District of Columbia Circuit in this case.

OPINIONS BELOW

The opinion of the court of appeals (App., infra, la-

12a) is reported at 720 F.3d 966. The opinion of the

district court (App., infra, 13a-48a) is reported at 864

F. Supp. 2d 193.

JURISDICTION

The judgment of the court of appeals was entered

on July 2, 2013. A petition for rehearing was denied

on October 2, 2013 (App., infra, 85a-86a). On Decem-

ber 19, 2013, the Chief Justice extended the time with-

in which to file a petition for a writ of certiorari to and

(1)

including January 30, 2014. On January 21, 2014, the

Chief Justice further extended the time to February

28, 2014. The jurisdiction of this Court is invoked

under 28 U.S.C. 1254(1).

STATUTORY PROVISIONS INVOLVED

The pertinent statutory provisions are set forth in

the appendix to the petition. App., infra, 87a-99a.

STATEMENT

1. a. This case concerns whether the Administra-

tive Procedure Act (APA), 5 U.S.C. 551 et seq., re-

quires a federal agency to follow notice-and-comment

rulemaking procedures before it may alter an “inter-

pretive” rule that articulates an interpretation of an

agency regulation.

The APA defines “rule making” as an “agency pro-

cess for formulating, amending, or repealing a rule.”

5 U.S.C. 551(5). The Act further defines “rule” to

encompass a broad range of agency “statement/s]”

serving various functions, including statements that

are “designed to * * * interpret * * * law” as

well as statements that are designed “to implement

* * * or prescribe law.” 5 U.S.C. 551(4). More

specifically, the Act defines “rule” to “mean{[] the

whole or a part of an agency statement of general or

particular applicability and future effect designed to

implement, interpret, or prescribe law or policy or

describing the organization, procedure, or practice

requirements of an agency.” /bid.

Section 4 of the APA, 5 U.S.C. 553, governs the

process of agency rulemaking. Section 4(a) provides

that “[gleneral notice of proposed rule making shall be

published in the Federal Register, unless persons

subject thereto are named and either personally

served or otherwise have actual notice thereof.”

5 U.S.C. 553(b). Section 4(b) further provides that, if

“notice [is] required by this section,” the agency, after

giving such notice, “shall give interested persons an

opportunity to participate in the rule making through

submission of written [comments]” and consider those

comments before promulgating the rule. 5 U.S.C.

553(c).

Section 4, however, provides that the APA’s notice-

and-comment requirement “does not apply” to “inter-

pretative rules, general statements of policy, or rules

of agency organization, procedure, or practice.”

5 U.S.C. 553(b)(A).

b. Congress enacted the Fair Labor Standards Act

of 1938 (FLSA), 29 U.S.C. 201 et seq., to protect work-

ers by establishing federal minimum-wage and over-

time guarantees. See Brooklyn Sav. Bank v. O’Neil,

324 U.S. 697, 706-707 & n.18 (1945); see also 29 U.S.C.

206 (minimum wage), 207 (overtime pay). The FLSA,

however, exempts from its minimum-wage and over-

time requirements “any employee employed in a bona

fide executive, administrative, or professional capacity

* * * or in the capacity of outside salesman (as

such terms are defined and delimited from time to

time by regulations of the Secretary, subject to the

provisions of [5 U.S.C. 551-559]).” 29 U.S.C. 213(a)(1).

Congress contemplated that, in the course of its

administration of the FLSA, the Department of Labor

(Department) would from time to time modify or re-

scind its administrative measures such as regulations,

rulings, and interpretations. See 29 U.S.C. 259(a).

The Portal-to-Portal Act of 1947, 29 U.S.C. 251 et seq.,

accordingly provides that an employer sued for al-

leged FLSA violations “shall [not] be subject to any

liability” for failing “to pay minimum wages or over-

time compensation” under the FLSA if the employer

establishes that its “act or omission complained of was

in good faith in conformity with and in reliance on any

written administrative regulation, order, ruling, ap-

proval, or interpretation, of [the Administrator of the

Department’s Wage and Hour Division],” even if that

agency guidance has since been “modified or rescind-

ed.” 29 U.S.C. 259(a) and (b)(1).

The Department has promulgated regulations us-

ing notice-and-comment rulemaking that define and

delimit the categories of FLSA-exempt employees.

See, e.g., 29 C.F.R. Pt. 541 (1998); 3 Fed. Reg. 2518

(Oct. 20, 1938) (original Part 541 regulations). In

2004, the Department revised those regulations using

notice-and-comment rulemaking. 29 C.F.R. Pt. 541.

The current regulations provide, in pertinent part,

that “an employee whose primary duty is selling fi-

nancial products does not qualify for the administra-

tive exemption.” 29 C.F.R. 541.203(b).

2. This case involves the Department’s interpreta-

tion of its FLSA regulations in the context of mort-

gage-loan officers. In 1999 and 2001, the Wage and

Hour Division issued Opinion Letters in which it in-

terpreted the then-existing regulations and concluded

that mortgage-loan officers are not FLSA-exempt

employees, 2.e., the FLSA’s minimum-wage and over-

time requirements apply to those employees.’

After the Department revised its FLSA regulations

in 2004, respondent Mortgage Bankers Association

(MBA or Association), a national trade association

' See Wage & Hour Div., U.S. Dep’t of Labor, Opinion Letter

(Feb. 16, 2001), available at 2001 WL 1558764; Wage & Hour Div.,

U.S. Dep’t of Labor, Opinion Letter (May 17, 1999), available at

1999 WL 1002401.

representing real-estate-finance companies, requested

an opinion from the Wage and Hour Division on

whether mortgage-loan officers are FLSA exempt.

App., infra, 3a, 20a n.3. In 2006, the Division’s Ad-

ministrator issued a letter opining that mortgage-loan

officers are exempt administrative employees under

those regulations. Jd. at 70a-84a.

In 2010, the Wage and Hour Division revisited the

issue and revised its interpretation of the governing

regulations in an Administrator’s Interpretation.

App., infra, 49a-69a. That Interpretation reanalyzed

provisions of the 2004 regulations and considered

judicial decisions addressing the administrative ex-

emption. /d. at 50a-69a. The Department concluded

that “employees who perform the typical job duties of

a mortgage loan officer, as described” in the Interpre-

tation, “have a primary duty of making sales for their

employers and, therefore, do not qualify” for the ex-

emption for “administrative” employees under the

FLSA’s implementing regulations. App., infra, 49a-

50a, 52a, 69a. At the same time, the Department

withdrew its 2006 Opinion Letter, explaining that the

Letter had been based on an erroneous reading of a

regulation addressing work performed incidental to,

and in conjunction with, an employee’s own sales or ©

solicitations (29 C.F.R. 541.500(b)). App., infra, 59a &

n.3. The Department did not utilize notice-and-

comment rulemaking to issue its 1999, 2001, and 2006

Opinion Letters or its 2010 Administrator’s Interpre-

tation.

3. a. Respondent MBA filed this APA action in

district court to vacate and set aside the 2010 Admin-

istrator’s Interpretation. App., infra, 13a-14a, 28a.

Respondents Buck, Henry, and Nickols (former mort-

gage-loan officers) intervened. 2/13/2012 Order 1-2

(Doc. 25).

MBA argued that the 2010 Administrator’s Inter-

pretation was invalid on two grounds. First, the Asso-

ciation argued that the interpretation was procedural-

ly invalid because APA notice-and-comment rulemak-

ing was required for the agency to be able to express

its revised reading of its regulation in an interpretive

rule. App., infra, 28a. Second, the Association argued

that the interpretation is substantively invalid because

it is inconsistent with the regulations it interprets and,

thus, was “arbitrary, capricious, an abuse of discre-

tion, and otherwise not in accordance with law.” Ibid.

(citation omitted).

The government argued that, as relevant here, the

Administrator’s Interpretation was an “interpretive”

rule and that the APA exempts such “interpretive

rules” from notice-and-comment rulemaking. Gov't

Cross Mot. to Dismiss 14-15 (Doc. 15) (citing 5 U.S.C.

553(b)(A)); see id. at 15 n.8 (“There is no dispute be-

tween the parties that the 2010 [Administrator’s In-

terpetation] is an interpretive rule.”). MBA acknowl-

edged that the government was “correct” that the

2010 Administrator’s Interpretation was an interpre-

tative rule, but argued that its status as an interpreta-

tive rule is “of no moment” because an “‘interpretative

rule[]} * * * still may be subject to notice-and-

comment rulemaking’ under Paralyzed Veterans [of

Am. v. D.C. Arena L.P., 117 F.3d 579 (D.C. Cir. 1997),

cert. denied, 523 U.S. 1003 (1998),] and its progeny.”

MBA Reply in Supp. of Mot. for Summ. J. 7 n.10 (Doc.

17) (quoting Tripoli Rocketry Ass’n v. United States

Bureau of Alcohol, Tobacco, Firearms & Explosives,

337 F. Supp. 2d 1, 12 (D.D.C. 2004)).

b. The district court granted summary judgment to

the government. App., infra, 13a-48a.

First, the district court concluded that the De-

partment did not have to use notice-and-comment

rulemaking to revise its prior interpretation of its

regulations. App., infra, 32a-44a. The district court

explained that the D.C. Circuit’s Paralyzed Veterans

precedents controlled, id. at 32a-37a, but concluded

that they would require notice-and-comment rulemak-

ing only if the affected party had “substantial[ly] and

justifiabl[y] reli[ed] on a [prior] well-established agen-

cy interpretation,” id. at 40a (quoting MetWest Inc. v.

Secretary of Labor, 560 F.3d 506, 511 (D.C. Cir. 2009)

(emphasis omitted)). See id. at 37a-4la. The court

found that the Association had failed to establish such

reliance. Jd. at 4la-44a. The court stated, inter alia,

that the Portal-to-Portal Act’s defense for good-faith

reliance on a prior agency interpretation undermined

the Association’s argument that notice-and-comment

rulemaking was required to protect the reliance inter-

ests of its members. /d. at 43a-44a.

Second, the district court upheld the Administra-

tor’s Interpretation on its merits. App., infra, 44a-

47a. The court concluded that the agency’s interpre-

tation of its FLSA regulations was “persuasive,” find-

ing it “clear” on the face of the regulations that the

Association’s contrary position was based on a mis-

reading of 29 C.F.R. 541.203(b). App., infra, 44a, 46a.

The court accordingly held that the 2010 interpreta-

tion was “not arbitrary, capricious, an abuse of discre-

tion, or otherwise not in accordance with the law.” Jd.

at 47a.

4. a. On appeal, MBA argued only that the 2010

Administrator’s Interpretation was procedurally inva-

lid under Paralyzed Veterans. See MBA C.A. Br. 2,

20-21. The Association abandoned its contention that

the interpretation was arbitrary, capricious, an abuse

of discretion, or otherwise contrary to law. See id. at

1-56; MBA C.A. Reply Br. 1-29.

b. The D.C. Circuit reversed and remanded with

instructions to vacate the 2010 Administrator’s Inter-

pretation. App., infra, la-12a.

The court of appeals explained that, under its Par-

alyzed Veterans cases, “[w]hen an agency has given

its regulation a definitive interpretation, and later

significantly revises that interpretation, the agency

has in effect amended its rule, something it may not

accomplish [under the APA] without notice and com-

ment.” App., infra, 2a (quoting Alaska Prof’l Hunters

Ass’n v. FAA, 177 F.3d 1030, 1034 (D.C. Cir. 1999))

(brackets in original). That conclusion, the ecurt ex-

plained, rests on the “operative assumption” tha: “a

definitive interpretation is so closely intertwined with

the regulation that a significant change to the former

constitutes a repeal or amendment of the latter.” /d.

at 5a n.3.

The court of appeals further concluded that the

relevant analysis under Paralyzed Veterans “contains

just two elements: definitive interpretations (‘defini-

tiveness’) and a significant change (‘significant revi-

sion’).” App., infra, at 5a. The court of appeals thus

rejected the government’s argument that the rule of

Paralyzed Veterans incorporates an element of reli-

ance. Jd. at 6a-12a. The court held that although

reliance can in some contexts be relevant to whether a

prior agency interpretation was sufficiently definitive,

reliance is not itself a distinct requirement under

Paralyzed Veterans. Id. at 9a.

The court of appeals observed that the government

“conceded the existence of two definitive—and con-

flicting—agency interpretations.” App., infra, 3a.

The court accordingly held that, under its Paralyzed

Veterans jurisprudence, the 2010 Administrator In-

terpretation, which significantly revised the agency’s

2006 Opinion Letter, must be vacated. Jbid. The

court emphasized that it took “no position on the mer-

its of [the 2010] interpretation” and stated that the

Department was entitled to “readopt” that interpreta-

tion in the future but must “conduct the required

notice and comment rulemaking” before it does. Jbid.

Finally, the court of appeals recognized that “the

Courts of Appeals are split on the issue” whether

Paralyzed Veterans correctly requires notice-and-

comment rulemaking to modify an interpretive rule.

App., infra, 5a n.3. The court observed, however, that

it was bound by its own precedent and “decline[d] the

government’s invitation to ‘call’ for ‘the full Court [to]

* * * lay the Paralyzed Veterans doctrine to

rest.’” Jd. at 2a n.1 (second brackets in original).

ce. The court of appeals denied respondents Buck,

Henry, and Nickols’ petition for rehearing en banc.

App., infra, 85a-86a.

REASONS FOR GRANTING THE PETITION

This case concerns an important and recurring

question of administrative law: Whether a federal

agency is required to conduct notice-and-comment

rulemaking before it may correct or significantly

revise its own interpretation of a substantive regula-

tion. The D.C. Circuit’s rule that such formal rule-

making is required is contrary to the unambiguous

text of the Administrative Procedure Act and conflicts

with this Court’s teachings on the proper scope of

APA review. Moreover, the D.C. Circuit in this case

eliminated the need for plaintiffs even to show reli-

ance on the prior regulatory interpretation that an

agency seeks to revise. An agency thus must now

undertake notice-and-comment rulemaking simply to

explain to the public that the agency has corrected or

revised its previous legal interpretation of a regula-

tion in some significant way—even if no one has ever

relied on the prior interpretation.

As the D.C. Circuit acknowledged, the courts of

appeals are divided over whether the APA ever re-

quires an agency to use notice-and-comment rulemak-

ing to alter its prior interpretation of a regulation.

App., infra, 5a n.3. The adverse impact of the D.C.

Circuit’s doctrine from Paralyzed Veterans of Ameri-

ca v. D.C. Arena L.P., 117 F.3d 579 (1997), cert. de-

nied, 523 U.S. 1003 (1998), is especially significant

because nearly all federal agencies are subject to suit

in the District of Columbia and because of the promi-

nent role that the D.C. Circuit plays in federal admin-

istrative law as a result. This Court’s review is war-

ranted.

A. The Court Of Appeals Erred In Holding That An In-

terpretive Rule That Alters The Agency’s Previous In-

terpretation Of A Substantive Regulation Must Be

Promulgated Through Notice-And-Comment Rule-

making

This case is controlled by two fundamental rules of

administrative law. First, the APA itself expressly

exempts the formulation, amendment, and repeal of

interpretive rules from the Act’s notice-and-comment

rulemaking provisions. 5 U.S.C. 553(b)(A); see

5 U.S.C. 551(5). Second, the APA “sets forth the full

extent of judicial authority to review executive agency

action for procedural correctness.” FCC v. Fox Tele-

vision Stations, Inc., 556 U.S. 502, 513 (2009) (citing

Vermont Yankee Nuclear Power Corp. v. NRDC, 435

U.S. 519, 545-549 (1978)). The D.C. Circuit’s Para-

lyzed Veterans doctrine, which requires agencies to

engage in notice-and-comment rulemaking to revise

an interpretive rule that construes a substantive

agency regulation, cannot be squared with those prin-

ciples.”

1. Section 4 of the APA generally directs that a

“notice of proposed rule making shall be published in

the Federal Register.” 5 U.S.C. 553(b). If such notice

is required, the agency must also give interested per-

sons “an opportunity to participate in the rule making

through submission of written [comments].” 5 U.S.C.

553(c). Section 4, however, specifies that, unless “no-

tice or hearing is required by statute,” the APA’s

notice-and-comment rulemaking requirement “does

not apply * * * to interpretative rules.” 5 U.S.C.

553(b)(A) (emphasis added).*

The APA’s definition of “rule making” demon-

strates that this exemption from the notice-and-

comment rulemaking requirement applies not only

when an agency formulates an interpretive rule in the

* Although Paralyzed Veterans articulated its notice-and-

comment requirement in dictum, the D.C. Circuit later elevated

that requirement to a holding in Alaska Professional Hunters

Ass'n v. FAA, 177 F.3d 1030 (D.C. Cir. 1999).

* No other statute requires notice in this case. The FLSA vests

the Secretary of Labor with authority to “define[] and delimit[]”

the scope of the minimum-wage and overtime exemption in Sec-

tion 213(a)(1) by issuing “regulations * * * subject to the

provisions of subchapter II of chapter 5 of title 5,” 29 U.S.C.

213(aX{1), ie., subject to the APA’s administrative-procedure

provisions at 5 U.S.C. 551-559.

first instance, but also when it issues a subsequent

interpretive rule that revises or supersedes the first.

Because the Act defines “rule making” to be an “agen-

cy process for formulating, amending, or repealing a

rule,” 5 U.S.C. 551(5) (emphasis addeil), the statutory

provisions in Section 4 that govern “rule making”—

and specifically the exemption for “interpretive rules”

—necessarily apply to any agency process for “formu-

lating, amending, or repealing” (ibid.) any “agency

statement of general or particular applicability and

future effect designed to * * * interpret * * *

law,” 5 U.S.C. 551(4) (defining “rule”). Likewise, the

APA more generally “makes no distinction * * *

between initial agency action and subsequent agency

action undoing or revising that action.” Fox Televi-

sion Stations, Inc., 556 U.S. at 515.

The statutory direction that all “interpretative

rules” are exempt from notice-and-comment rulemak-

ing (unless a statute requires otherwise) is unambigu-

ous. This Court has thus repeatedly made clear that

“{ijnterpretive rules do not require notice and com-

ment.” Shalala v. Guernsey Mem’'l Hosp., 514 U.S.

87, 99 (1995); see also, e.g., Long Island Care at

Home, Ltd. v. Coke, 551 U.S. 158, 173 (2007) (“[AJn

agency need not use [notice-and-comment procedures]

when producing an ‘interpretive’ rule.”); Lincoln v.

Vigil, 508 U.S. 182, 196 (1993) (“The [APA’s] notice-

and-comment requirements apply * * * only toso-

called ‘legislative’ or ‘substantive’ rules; they do not

apply to ‘interpretative rules.’”).

2. The reason for that principle is plain. An “in-

terpretive rule” is a statement “‘issued by an agency

to advise the public of the agency’s construction of the

statutes and rules which it administers.’” Guernsey

Mem Hosp., 514 U.S. at 99 (quoting Chrysler Corp. v.

Brown, 441 U.S. 281, 302 n.31 (1979)). Such state-

ments “do not have the force and effect of law” (ibid.);

they “merely [reflect] the agency’s present belief

concerning the meaning” of the statutes and legisla-

tive rules that do. Final Report of the Attorney Gen-

eral’s Committee on Administrative Procedure, S.

Doc. No. 8, 77th Cong., Ist Sess. 27 (1941) (Final

Report); see U.S. Dep’t of Justice, Attorney General’s

Manual on the Administrative Procedure Act 30 n.3

(1947) (APA Manual) (citing Final Report for defini-

tion of interpretive rules).* And because those state-

ments reflect the agencies’ own views, not binding

legislative rules that would have the force of law,

Congress presumably determined that it would be an

unwarranted encroachment to force agency deci-

sionmakers to dedicate limited agency time and re-

sources to undertake notice-and-comment rulemaking

simply to inform the public about the agency’s views

on the meaning of relevant statutory and regulatory

provisions. Cf. Richard J. Pierce, Jr., Distinguishing

Legislative Rules from Interpretative Rules, 52 Ad-

min. L. Rev. 547, 571 (2000) (Pierce) (“{Slince an in-

terpretative rule does not have the force of law, an

agency does not have to issue a rule that has the force

of law in order to amend a prior interpretative rule.”).

That conclusion carries particular force in the con-

text of a case like this, where an agency has deter-

mined that one of its prior public statements about the

meaning of a regulatory provision is, in fact, errone-

ous. Agencies should be encouraged to announce their

* This Court has repeatedly found the Attorney General’s manu-

al interpreting the APA to be persuasive. See Norton v. Southern

Utah Wilderness Alliance, 542 U.S. 55, 63-64 (2004) (citing cases).

changed views promptly and publicly, rather than

allow the public to be misled by an earlier agency

interpretation. It is “no favor to the public to discour-

age the announcement of agencies’ interpretations by

burdening the interpretive process with cumbersome

formalities.” Hoctor v. United States Dep’t of Agric.,

82 F.3d 165, 167 (7th Cir. 1996) (Posner, C.J.).

The result produced under Paralyzed Veterans al-

so runs counter to this Court’s teachings. The Court

has held that, where an agency has concluded that its

prior “interpretation of its regulation” should be mod-

ified, “the Secretary is not estopped from changing a

view she believes to have been grounded upon a mis-

taken legal interpretation.” Thomas Jefferson Univ.

v. Shalala, 512 U.S. 504, 517 (1994) (quoting Good

Samaritan Hosp. v. Shalala, 508 U.S. 402, 417 (1993))

(citation and brackets omitted). Yet that is what the

Paralyzed Veterans doctrine does. By requiring an

agency to undertake notice-and-comment rulemaking

simply to change its prior interpretation of a substan-

tive regulation, the court of appeals has effectively

required the agency to promulgate a new substantive

regulation using notice-and-comment rulemaking.

3. The “operative assumption” behind the D.C.

Circuit’s Paralyzed Veterans doctrine is “the belief

that a definitive [agency] interpretation is so closely

intertwined with the [substantive] regulation [being

interpreted] that a significant change to the [interpre-

tation] constitutes a repeal or amendment of the [reg-

ulation].” App., infra, 5a n.3; see also id. at 2a (the

changed interpretation “in effect amend[s]” the un-

derlying regulation). That assumption is incorrect.

When an agency issues an interpretive rule, it is-

sues a “statement * * * designed to * * *

interpret * * * law,” 5 U.S.C. 551(4) (emphasis

added), not change or amend it. This Court has thus

determined that an “interpretive rule” reflects “the

agency’s construction of the statutes and rules which

it administers” and, unlike the substantive provisions

being interpreted, “do[es] not have the force and ef-

fect of law.” Guernsey Mem’ Hosp., 514 U.S. at 99;

see Chrysler Corp., 441 U.S. at 302 n.31 (“substantive

rules * * * ‘have the force and effect of law’” but

“‘interpretive rules’ * * * do not”) (quoting APA

Manual 30 n.3). Accordingly, as explained above (pp.

11-12, supra), the APA by its terms defines “rule

making” to include the “amend[ment] or repeal[]” of

an interpretive rule and specifically exempts such

rulemaking from mandatory notice-and-comment

procedures.

The conflict between the APA and the D.C. Cir-

cuit’s Paralyzed Veterans doctrine is also reflected in

the court’s extension of that doctrine to agency adju-

dication. The D.C. Circuit has held that if an agency

adopts an interpretation of one of its regulations in an

agency adjudication (rather than in an interpretive

rule), the agency cannot later alter that interpretation

by interpretive rule without notice-and-comment

rulemaking. See Environmental Integrity Project v.

EPA, 425 F.3d 992, 994-995, 997-998 (2005) (holding

that EPA orders in licensing proceedings were “defin-

itive interpretation[s]” of substantive regulations that

could not be modified by a later interpretive rule ab-

sent notice-and-comment rulemaking). Yet the agen-

cy would be able to modify the same interpretation in

a subsequent adjudication to which the APA’s rule-

making provisions do not apply. See NLRB v. Bell

Aerospace Co., 416 U.S. 267, 292, 294 (1974) (finding it

“plain” that agency may “announc[e] new principles in

an adjudicative proceeding”; rejec.ing view that

“rulemaking was required because * * * [the

agency’s interpretation] would be contrary to its prior

decisions”); see also 5 U.S.C. 551(6) and (7) (agency

“adjudication” involves matters “other than rule mak-

ing”). That anomalous result underscores the artifi-

cial and nonstatutory foundation of the Paralyzed

Veterans doctrine.

4. Section 4 of the APA (5 U.S.C. 553) specifies the

“maximum procedural requirements which Congress

was willing to have the courts impose upon agencies in

conducting rulemaking” proceedings. Vermont Yan-

kee, 435 U.S. at 524. That provision “settled ‘long-

continued and hard-fought contentions, and enacts a

formula upon which opposing social and political forc-

es have come to rest.’” Jd. at 523 (quoting Wong Yang

Sung v. McGrath, 339 U.S. 33, 40 (1950)); see Antonin

Sealia, Vermont Yankee: The APA, the D.C. Circuit,

and the Supreme Court, 1978 Sup. Ct. Rev. 345, 359-

370 (1978). The D.C. Circuit has thus disregarded a

fundamental principle of administrative law by estab-

lishing notice-and-comment requirements for inter-

pretive rules that Congress has expressly exempted.

Cf. Richard W. Murphy, Hunters for Administrative

Common Law, 58 Admin. L. Rev. 917, 918 (2006) (ex-

plaining that “[aJeademic commentary on [the Para-

lyzed Veterans doctrine] has been scathing”; citing

critiques).

B. The Courts Of Appeals Are Divided On The Question

Presented

As the D.C. Circuit recognized, “the Courts of Ap-

peals are split on the [Paralyzed Veterans] issue.”

App., infra, 5a n.3. The Fifth Circuit has joined the

D.C. Circuit in concluding that an agency must con-

duct notice-and-comment rulemaking to alter a prior

interpretive rule construing an agency regulation.

Shell Offshore Inc. v. Babbitt, 238 F.3d 622, 629-630

(5th Cir. 2001).° The First and Ninth Circuits, howev-

er, have held that the APA permits agencies to modify

their interpretive rules without notice and comment.

That division of authority warrants this Court’s re-

view.

In Miller v. California Speedway Corp., 536 F.3d

1020 (9th Cir. 2008), cert. denied, 555 U.S. 1208 (2009),

the Ninth Circuit addressed a challenge to the De-

partment of Justice’s interpretation of a regulation

promulgated under the Americans with Disabilities

Act. The district court in Miller held that the De-

partment had “fundamentai[ly] modififed] its previous

interpretation” of that regulation and, invoking Para-

lyzed Veterans’ analysis, held that the interpretive

change “had to be adopted through notice-and-

comment rulemaking.” Jd. at 1027. The court of ap-

peals reversed with two alternative holdings. The

court first held that the first interpretation of the

regulation was not attributable to the Department and

that the Department’s subsequent interpretation thus

did not reflect a change. /d. at 1031-1032. But as

relevant here, the court of appeals further held that,

“even if the DOJ’s interpretation constituted a change

in {its] understanding of [the regulation)” and that

change was “unanticipated,” the Department was “not

required to proceed by notice and comment.” /d. at

® The Third Circuit has cited the Paralyzed Veterans doctrine

favorably in dictum. SBC inc. v. FCC, 414 F.3d 486, 498, 501 (3d

Cir. 2005) (concluding that agency “did not modify or substantively

change [its] prior interpretation of the regulation”).

1033. The court explained that “an agency can modify

an interpretive rule without notice and comment,” and

the interpretations at issue were “interpretive rules.”

Ibid. (citing and following holding in Erringer v.

Thompson, 371 F.3d 625, 630 (9th Cir. 2004)).

Miller conflicts with the D.C. Circuit’s decision in

this case. By reversing the district court’s adoption of

the Paralyzed Veterans doctrine and broadly holding

that “an agency can modify an interpretive rule with-

out notice and comment,” 536 F.3d at 1033, the Ninth

Circuit has placed itself squarely on the other side of

the conflict. Cf. Woods v. Interstate Realty Co., 337

U.S. 535, 537 (1949) (“[W]Jhere a decision rests on two

or more grounds, none can be relegated to the catego-

ry of obiter dictum.”).

Similarly, the First Circuit in Warder v. Shalala,

149 F.3d 73, 75-79 (1st Cir. 1998), cert. denied, 526

U.S. 1064 (1999), held that an agency was entitled to

change its interpretation of Medicare regulations

without notice-and-comment rulemaking. The agen-

cy’s interpretive rule (HCFAR 96-1) was challenged

on the ground that it “changed [the agency’s] policy”

governing Medicare reimbursement for a device. /d.

at 81. The First Circuit rejected that contention “both

[on] the law and the facts.” Jbid. As relevant here,

the court held that, even if the “later rule [was] incon-

sistent with * * * [an earlier] agency interpreta-

tion,” notice-and-comment rulemaking was “(un]ne-

cessary” to promulgate that interpretive rule. Jd. at

81 (brackets omitted); see id. at 79 (“The APA ex-

empts ‘interpretive rules’ from its notice and comment

procedures.”).

In addition, the Seventh Circuit has stated that the

Paralyzed Veterans doctrine “conflicts with the APA’s

rulemaking provisions * * * and with [Seventh

Circuit] precedent.” Abraham Lincoln Mem'l Hosp.

v. Sebelius, 698 F.3d 536, 560 (7th Cir. 2012). The

court explained that although the D.C. Circuit holds

that “[o]Jnce an agency gives its regulation an inter-

pretation, it can only change that interpretation

* * * through the process of notice and comment

rulemaking,” ibid. (quoting Alaska Prof’l Hunters

Ass’n v. FAA, 177 F.3d 1030, 1033-1034 (D.C. Cir.

1999)) (brackets in original), the APA “exempt{s] all

interpretive rules from notice and comment.” Jbid.

(emphasis added).°

C. Review Is Warranted To Resolve An Important And

Recurring Question Of Administrative Law

This case raises a fundamental and recurring ques-

tion about the structure and meaning of the APA and

the obligations that Congress elected to impose on

administrative agencies. As noted above, this Court

has recognized that the APA’s rulemaking provision

(5 U.S.C. 553) is “a formula upon which opposing

social and political forces * * * c[a]me to rest.”

Vermont Yankee, 435 U.S. at 523. That provision—

including its unqualified exemption for interpretive

rules—thus specifies the “maximum procedural re-

quirements which Congress was willing to have the

courts impose upon agencies” for rulemaking. /d. at

524. Yet the D.C. Circuit has held, in its Paralyzed

® The Seventh Circuit’s Paralyzed Veterans discussion followed

its conclusion that the challenged agency decision “did not consti-

tute a departure from a previous position” but, “[e]ven if” it did,

“the Decision properly qualifies as an adjudication” that did not

require notice and comment. Abraham Lincoln Mem'l Hosp., 698

F.3d at 558. It is therefore not clear that the court’s Paralyzed

Veterans discussion was necessary to its decision.

Veterans doctrine, that an agency, before it can issue

a statement to “advise the public of the agency’s [cur-

rent] construction of” its own regulations, Guernsey

Mem’ Hosp., 514 U.S. at 99 (citation omitted), must

first ask the public for its views using notice-and-

comment rulemaking. And in this case, the D.C. Cir-

cuit has now further held that the doctrine requires

notice-and-comment rulemaking even if no one has

meaningfully relied on the interpretive rule that an

agency seeks to modify.’

The adverse impact of that ruling is particularly

significant because venue lies in the District of

Columbia over APA actions against most federal

agencies. See 28 U.S.C. 1391(e)(1); 14D Charles Alan

Wright et al., Federal Practice and Procedure

§§ 3815-3816, at 331-334, 344-348 (4th ed. 2013); see

also, e.g., 28 U.S.C. 2348. Because of that ever-

present potential for challenge in the D.C. Circuit,

that court’s fundamentally misguided Paralyzed Vet-

erans doctrine can present a formidable in terrorem

barrier for agencies seeking to correct or revise their

’ The government previously argued that the Paralyzed Veter-

ans doctrine was erroneous in a certiorari petition presenting a

different question on which the Court denied a writ of certiorari.

See Pet. at I, 24-25, Leavitt v. Baystate Health Sys., 547 U.S. 1054

(2006) (No. 05-936). The government made that argument in

Baystate because the court of appeals had rested its conclusion

that the government ruling at issue in Baystate had implicitly

conceded that a prior interpretive rule was invalid in part on the

court’s view that, if the prior rule had been valid, then the subse-

quent ruling in Baystate would have been invalid under Paralyzed

Veterans. See id. at 5-6, 18-19, 24-25. Baystate, however, did not

involve an actual application of the Paralyzed Veterans doctrine,

and it thus did not present the question that is now presented for

the Court’s review. See id. at I (question presented).

interpretations of regulations. Many complex gov-

ernment programs are heavily dependent upon inter-

pretive rules to inform the public about the agency’s

understanding of the details of the regulatory regime.

The Medicare program, for instance, has “thousands

of pages of interpretative rules that address myriad

details that are not explicitly resolved by the legisla-

tive” regulations. Pierce, 52 Admin. L. Rev. at 553;

see, e.g., Guernsey Mem’'l Hosp., 514 U.S. at 97-99,

101-102. Under the provisions of the APA that Con-

gress enacted, the agency should be free to revisit its

intepretations expeditiously through new interpretive

rules. Notice-and-comment rulemaking, by contrast,

is a “long and costly” process that “often requires

many years and tens of thousands of person hours to

complete.” Pierce, 52 Admin. L. Rev. at 550-551; see

U.S. Gov’t Accountability Office, GAO-09-205, Federal

Rulemaking 5, 19 (Apr. 2009) (case study finding

average of over four years to complete notice-and-

comment rulemaking and that some “rules that were

not major took nearly as long or longer to be pub-

lished”).

Certiorari is warranted for this Court to review the

D.C. Circuit’s Paralyzed Veterans doctrine, resolve

the circuit conflict on the issue, and restore the free-

dom and procedural framework that Congress incor-

porated in the APA for agencies to interpret the regu-

latory programs they have adopted.

CONCLUSION

The petition for a writ of certiorari should be

granted.

Respectfully submitted.

DONALD B. VERRILLI, JR.

Solicitor General

STUART F.. DELERY

Assistant Attorney General

EDWIN S. KNEEDLER

Deputy Solicitor General

ANTHONY A. YANG

Assistant to the Solicitor

General

DOUGLAS N. LETTER

ANTHONY J. STEINMEYER

Attorneys

FEBRUARY 2014

APPENDIX A

UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

No. 12-5246

MORTGAGE BANKERS ASSOCIATION, APPELLANT

SETH D. HARRIS, SUED IN HIS OFFICIAL CAPACITY, ACTING

SECRETARY OF UNITED STATES

DEPARTMENT OF LABOR, ET AL., APPELLEES

Appeal from the United States District Court

for the District of Columbia

(No. 1:11-cv-00073)

Argued: Mar. 22, 2013

Decided: July 2, 2013

OPINION

Before: TATEL and BROWN, Circuit Judges, and

SENTELLE, Senior Circuit Judge.

Opinion for the Court by Circuit Judge BROWN.

(la)

BROWN, Circuit Judge: The tandem of Paralyzed

Veterans of America v. D.C. Arena L.P., 117 F.3d 579

(D.C. Cir. 1997) and Alaska Professional Hunters

Ass'n v. FAA, 177 F.3d 1030 (D.C. Cir. 1999) (“Alaska

Hunters”) announced an ostensibly straightforward

rule: “When an agency has given its regulation a

definitive interpretation, and later significantly revises

that interpretation, the agency has in effect amended

its rule, something it may not accomplish {under the

APA] without notice and comment.” Alaska Hunters,

177 F.3d at 1034. The only question properly before

this three-judge panel is a narrow one: what is the

role of reliance in this analysis?’ Is it, as the govern-

ment contends, a “separate and independent require-

ment,” Oral Arg. 10:42-10:45, or is it just one of several

factors courts can look to in order to determine

whether an agency’s interpretation qualifies as defini-

tive,” as Mortgage Bankers Association (“MBA”) sug-

gests? We find ourselves in general agreement with

the industry association that there is no discrete reli-

ance element. Reliance is just one part of the defini-

tiveness calculus.

' Bound as we are by Paralyzed Veterans and Alaska Hunters,

we decline the government’s invitation to “call” for “the full Court

{to} * * * lay the Paralyzed Veterans doctrine to rest.”

Letter of Clarification, No. 12-5246 (D.C. Cir. Mar. 25, 2013) (quot-

ing Appellee Br. 47).

* Our case law uses the terms “definitive” and “authoritative” in-

terchangeably. Compare Paralyzed Veterans, 11 F.3d at 586

(“authoritative interpretation”), with Alaska Hunters, 177 F.3d at

1034 (“definitive interpretation”).

Fortunately, this is as far as our inquiry need go.

Having conceded the existence of two definitive—and

conflicting—agency interpretations, the government

acknowledged at oral argument that petitioner “pre-

vail[s} if . . . the only reason [courts] look to reli-

ance is to find out if there is a definitive interpretation.”

Oral Arg. 10:56-11:10. So stipulated, we reverse the

District Court order dismissing MBA’s Motion for

Summary Judgment and remand the case with in-

structions to vacate the 2010 Administrator Interpre-

tation significantly revising the agency’s 2006 Opinion

Letter. If the Department of Labor (“DOL”) wishes

to readopt the later-in-time interpretation, it is free to.

We take no position on the merits of their interpreta-

tion. DOL must, however, conduct the required notice

and comment rulemaking.

Petitioner MBA is a national trade association rep-

resenting over 2,200 real estate finance companies with

more than 280,000 employees nationwide. Mortgage

Bankers Ass’n v. Solis, 864 F. Supp. 2d 193, 197 (D.D.C.

2012). We focus here on the mortgage loan officers

who typically assist prospective borrowers in identify-

ing and then applying for various mortgage offerings.

Though the recent financial crisis has thrust members

of this profession into the forefront of the news, our

concern here is more mundane: the method and man-

ner of their pay.

Under the Fair Labor Standards Act (“FLSA”), 29

U.S.C. § 201 et seg., an old law DOL must adapt to new

circumstances, employers are generally required to pay

overtime wages to employees who work longer than 40

hours per week. See 29 U.S.C. § 207(a). The Act

provides several exceptions to this rule. Those “em-

ployed in a bona fide executive, administrative, or pro-

fessional capacity[,} . . . or in the capacity of out-

side salesman,” for example, are exempt from the

statute’s minimum wage and maximum hour require-

ments. 29 U.S.C. § 213(a)(). Whether mortgage loan

officers qualify for this “administrative exemption” is a

difficult and at times contentious question. So diffi-

cult, in fact, DOL has found itself on both sides of the

debate. In 2006, the agency issued an opinion letter

concluding on the facts presented that mortgage loan

officers with archetypal job duties fell within the ad-

ministrative exemption. Just four years later, in 2010,

Deputy Administrator Nancy J. Leppink issued an

“Administrator’s Interpretation” declaring that “em-

ployees who perform the typical job duties” of the

hypothetical mortgage loan officer “do not qualify as

bona fide administrative employees.” J.A. 259. The

2010 pronouncement “explicitly withdrew the 2006

Opinion Letter.” Mortgage Bankers Ass’n, 864 F.

Supp. 2d at 201.

Citing Paralyzed Veterans and its progeny, MBA

challenged DOL’s decision to change their “defini-

tive interpretation” without first undergoing notice-

and-comment rulemaking as a violation of the APA.

Compl. 7 38. [J.A. 22] The District Court reject-

ted the argument. After assuring itself that Para-

lyzed Veterans remains good law, see Mortgage Ban-

kers Ass’n, 864 F. Supp. 2d at 204-05, the court read

our recent decision in MetWest Inc. v. Secretary of

Labor, 560 F.3d 506 (D.C. Cir. 2009), to require a

showing of “substantial and justifiable reliance on a

well-established agency interpretation.” See id. at

207 (internal quotation marks and emphasis omit-

ted). Although petitioner had argued reliance in

the alternative, the court concluded MBA was una-

ble to “satisfy the standard for demonstrating reli-

ance recognized in MetWest.” Jd. at208. The court

then denied MBA’s Motion for Summary Judgment,

but not before dismissing the association’s substan-

tive challenge to the 2010 interpretation as incon-

sistent with the agency’s 2004 regulation, 29 C.F.R.

§ 541.203(b). The present appeal followed.

On its face, the Paralyzed Veterans analysis con-

tains just two elements: definitive interpretations

(“definitiveness”) and a significant change (“signifi-

cant revision”).? But as with most things doctrinal,

the devil is in the details.

® The doctrine’s operative assumption—the belief that a defini-

tive interpretation is so closely intertwined with the regulation that

a significant change to the former constitutes a repeal or amend-

ment of the latter—is established law in this Circuit, see, e.g.,

Envtl. Integrity Project v. EPA, 425 F.3d 992, 997-98 (D.C. Cir.

2005), but the Courts of Appeals are split on the issue. According

to one recent survey, the Fifth Circuit has adopted our approach

and “the Eighth and Third Circuits have mentioned [it] in dicta,”

but “{t]he First, Second, Fourth, Sixth, Seventh, and Ninth Cir-

cuits agree that changes in interpretations do not require notice

and comment because both the original and current position con-

stitute interpretive rules.” Warshauer v. Solis, 577 F.3d 1330,

Despite its age, few cases discuss Paralyzed Vet-

erans at length.‘ One critical question—and a dis-

positive one here—concerns the role of reliance.

Borrowing heavily from MetWest and Honeywell

International, Inc. v. NRC, 628 F.3d 568 (D.C. Cir.

2010), two recent cases that draw on our Alaska

Hunters decision, DOL suggests that the Paralyzed

Veterans analysis contains an independent third

element: substantial and justified reliance. MBA

takes a different approach to Alaska Hunters alto-

gether. In its view, that case stands only for the

proposition that reliance can elevate an otherwise

non-definitive interpretation into a definitive inter-

pretation; as such, it falls squarely within the ex-

isting definitiveness element. Of the two, we be-

lieve MBA’s approach better explains Alaska Hun-

ters.

1338 (11th Cir. 2009); see also United States v. Magnesium Corp. of

Am., 616 F.3d 1129, 1138-39 (10th Cir. 2010) (noting a slightly dif-

ferent circuit split between the Third, Fifth, and Sixth Circuits on

one hand, and the First and Ninth Circuit on the other).

* It need not reflect poorly on the doctrine that so few of our

cases haven taken up Paralyzed Veteran’s banner—and still fewer

have used its reasoning to invalidate an agency interpretation for

failing to conduct notice and comment rulemaking. See Appellee

Br. 40-41 (counting Alaska Hunters and arguably Environmental

Integrity Project as the lone exceptions). Paralyzed Veterans

may very well serve as a prophylactic that discourages agencies

from attempting to circumvent notice and comment requirements

in the first instance. We are unable to quantify these effects by

reference to case citations alone.

Alaska Hunters is an exceptional case with an

otherwise straightforward premise. In 1963, the

Federal Aviation Administration’s Alaska office (the

“Alaskan Region”) began a thirty year practice of

“uniformly advis[ing] all guides, lodge managers and

guiding services in Alaska that they could meet their

regulatory responsibilities by complying with the

requirements of [14 C.F.R. Part 91] only.” Alaska

Hunters, 177 F.3d at 1035. It was not until 1997

that officials in FAA’s Washington, D.C. head-

quarters formally pushed back against the regional

office’s long-standing interpretation.° Through a

“Notice to Operators” published in the Federal

ment, the agency announced that certain Alaskan

guides would now have to comply with other, more

onerous regulations. Individuals who had “opened

lodges and built up businesses dependent on air-

craft” in reliance on the Alaskan Region’s interpre-

tation promptly brought suit challenging the agen-

cy’s about-face. Jd. at 1035.

In relevant part, FAA argued Paralyzed Veter-

ans was “inapposite” because the Alaskan Region’s

interpretation was not definitive; it “represented

° It is “uncertain” whether the D.C.-based officials had know-

ledge of the Alaskan Region’s interpretive position prior to the

1990s—that is, before FAA consolidated power in its national head-

quarters following a near three-decade-long experiment with a de-

centralized organizational structure “that transferred much au-

thority to regional organizations.” Alaska Hunters, 177 F.3d at

1032.

simply a local enforcement omission, in conflict with

the agency’s policy in the rest of the country.” /d.

at 1034-35. We disagreed. Although a local of-

fice’s interpretation of a regulation or provision of

advice to a regulated party “will not necessarily

constitute an authoritative administrative position,

particularly if the interpretation or advice contra-

dicts the view of the agency as a whole,” the situa-

tion in Alaska Hunters was “quite different.” Jd. at

1035.

For one thing, there was no evidence in the rec-

ord of any conflicting interpretation. The Alaskan

Region uniformly enforced its interpretive position

for thirty years and both FAA and the National

Transportation Safety Board had at some point

referred to it as FAA policy. See id. at 1035. And

even if “FAA as a whole somehow had in mind an

interpretation different from that of its Alaskan Re-

gion, guides and lodge operators in Alaska had no

reason to know this.” Jd. All the regulated parties

had before them was the formal,® uncontradicted,

and uniformly-applied interpretation of a iocal office

—an interpretation Alaskan guide pilots reasonably

relied on for three decades. Such advice might not

necessarily qualify as definitive, but here, we con-

cluded, it “became an authoritative departmental

® “(Tyhe regional office’s position was reflected in official agency

adjudications holding that Alaskan guides need not comply with

commercial pilot standards.” Ass'n of Am. R.R. v. DOT, 198 F.3d

944, 949 (D.C. Cir. 1999).

interpretation, an administrative common law appli-

cable to Alaskan guide pilots” that could not be re-

written without notice and comment rulemaking.

Id.

Alaska Hunters’s takeaway is clear: reliance

is but one factor courts must consider in assess-

ing whether an agency interpretation qualifies as

definitive or authoritative. Or to put matters

more precisely, because regulated entities are un-

likely to substantially—and often cannot be said to

justifiably—rely on agency pronouncements lacking

some or all the hallmarks of a definitive interpreta-

tion, significant reliance functions as a rough proxy

for definitiveness. The converse also holds true.

Agency pronouncements effectively ignored by reg-

ulated entities are unlikely to bear the marks of an

authoritative decision. See Ass’n of Am. R.R., 198

F.3d at 949-50 (finding no definitive interpretation

in part because “[nJothing in th[e] record suggests

that railroads relied on the [agency statements] in

any comparable way” to the Alaska guides).’ This

is more art than science. Courts must weigh the

role reliance plays on a case-by-case basis to ascer-

tain its value.

DOL pushes back against this framework by

treating reliance as a separate and independent

’ Obviously, this is not to suggest any measure of reliance will

automatically render an interpretation definitive.

10a

third element.* That, the agency claims, is exactly

what our MetWest decision did in (1) addressing

reliance only in the alternative, 7.e., after assuming a

definitive interpretation, see MetWest, 560 F.3d at

510-11, and (2) speaking of Alaska Hunters’s “sub-

stantial and justifiable reliance on a well-established

agency interpretation,” id. at 511, a phrase “most

natural{ly] read[]” to distinguish definitiveness and

reliance as “separate requirements,” Appellee Br.

®* The agency never develops the implications of its alternative

vision, but we think two points obvious. First, by dissociating reli-

ance from definitiveness and calling it an independent requirement,

DOL believes courts will have to address the reliance issue in all

cases, including cases like the present in which definitiveness has

been established. Second, DOL assumes the third element would

be satisfied only if the reliance is equal to or greater than that of

Alaska Hunters, a unique case. Meaning, the Paralyzed Veterans

doctrine would only ever apply where the parties can demonstrate

substantial and justified reliance akin to that of the Alaska Guides

—a reliance interest the government describes as “especially

strong” since affected parties uprooted their lives to move to

Alaska to start businesses. Appellee Br. 19; see also MetWest, 628

F.3d at 511; Mortgage Bankers Ass’n, 864 F. Supp. 2d at 207

(“[T}his Court is convinced that MetWest intended to set the bar

for what a plaintiff must establish to satisfy the reliance component

of the Paralyzed Veterans doctrine.”). If adopted, this position ef-

fectively renders Paralyzed Veterans dead letter law by limiting its

application to a most extreme fact pattern—one unlikely to ever be

duplicated.

lla

23-24; see also Mortgage Bankers Ass’n, 864 F.

Supp. 2d at 205-08.°

We do not think this characterization of Met-

West’s dicta could possibly be correct. “Definitive”

is a term of art as used in the Paralyzed Veterans

context. Once a court has classified an agency in-

terpretation as such, it cannot be significantly re-

vised without notice and comment rulemaking. No

intervening decision of this Court ever read Alaska

Hunters to require anything to the contrary, and

that includes Association of American Railroads,

the lone pre-MetWest case DOL cites as having

treated “reliance and definitive interpretation as

two independent requirements.” Appellee Br. 24.”

Whether reliance played a significant role in the

analysis, see, e.g., Alaska Hunters, 177 F.3d at 1035-

36; Ass’n of Am. R.R., 198 F.3d at 950; or took a back

seat where the definitive nature of the interpreta-

tion was treated as self-evident, see Envtl. Integrity

Project, 425 F.3d at 998; Monmouth Med. Ctr. v.

Thompson, 257 F.3d 807, 814 (D.C. Cir. 2001), we

® Because Honeywell unceremoniously adopts MetWest’s lan-

guage and approach, see Honeywell, 568 F.3d at 579-80, we focus

our discussion primarily on MetWest.

these materials, individually or taken together, that comes even

close to the definitive interpretation that triggered notice and com-

ment rulemaking in Alaska Professional Hunters.”); see also

Devon Energy Corp. v. Kempthorne, 551 F.3d 1030, 1041 (D.C. Cir.

2008); Air Transp. Ass’n of Am. v. FAA, 291 F.3d 49, 56-58 (D.C.

Cir. 2002); Envtl. Integrity Project, 425 F.3d at 997-98.

12a

have always considered it as part of the first ele-

ment. In short, we have been too consistent in our

treatment of these so-called agency flip-flops to now

read dictum in MetWest as sub silentio reconfigur-

ing the doctrine in the absence of either a unanimous

Irons footnote or a decision of the en banc court.

Finally, we disagree with the suggestion that the

only way to protect agencies from inadvertently

locking in disfavored, informally promulgated posi-

tions is to impose a separate and independent reli-

ance element. Practically speaking, reliance con-

sidered as part of the definitiveness determination

will more than adequately protect agencies from this

ossification threat. We thus decline DOL’s invita-

tion to spin a third requirement from whole cloth.

Emphatically, that is an issue for the full Court to

take up at its discretion, not this three-judge panel.

Ill

In view of the government’s concession that the

case need go no further than this, we reverse the

District Court order denying MBA’s Motion for

Summary Judgment and remand the case with

instructions to vacate DOL’s 2010 Administrator

Interpretation.

So Ordered.

13a

APPENDIX B

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLUMBIA

Civil Action No. 11-0073 (RBW)

MORTGAGE BANKERS ASSOCIATION, PLAINTIFF

HILDA SOLIS, SECRETARY OF LABOR; NANCY LEPPINK,

ACTING WAGE AND HOUR ADMINISTRATOR; AND THE

UNITED STATES DEPARTMENT OF LABOR, DEFENDANTS

[June 6, 2012]

MEMORANDUM OPINION

The plaintiff, the Mortgage Bankers Association

(“Association”), seeks declaratory and injunctive relief

in this civil lawsuit brought against the defendants,

Hilda Solis, in her official capacity as Secretary of the

United States Department of Labor (“DOL”), Nancy

Leppink, in her official capacity as Deputy Adminis-

trator of the Wage and Hour Division of the DOL, and

the DOL itself, under the Administrative Procedure

Act (“APA”), 5 U.S.C. § 702 (2006). Complaint for

Declaratory and Injunctive Relief (“Compl.”) 1% 1.

Specifically, the plaintiff seeks judicial review of the

l4a

defendants’ issuance of DOL Administrative Interpre-

tation 2010-1 (“2010 AI”), which conflicts with a prior

position taken by the DOL. /d. 19 2, 26-27. Cur-

rently before the Court is the Association’s Motion for

Summary Judgment and the DOL’s Cross Motion to

Dismiss or, in the Alternative, for Summary Judgment.

Upon consideration of the complaint, the parties’ cross-

motions, all memoranda of law and the exhibits sub-

mitted with the motions, and the administrative rec-

ord,’ the Court concludes that it must grant in part and

deny in part the DOL’s cross-motion and deny the

Association’s motion for summary judgment.

' In addition to the documents already identified, the Court con-

sidered the following submissions in reaching its decision: (1) the

Memorandum of Points and Authorities in Support of Plaintiff’s

Motion for Summary Judgment (“P1.’s Mem.”), (2) the Defendants’

Cross-Motion to Dismiss or, in the Alternative, for Summary Judg-

ment (“Defs.’ Mot.”), (3) the Plaintiff’s Reply in Support of its Mo-

tion for Summary Judgment and Opposition to Defendants’ Motion

to Dismiss or in the Alternative for Summary Judgment (“P1.’s Re-

ply”), and (4) the Defendants’ Reply to Plaintiff’s Opposition to De-

fendants’ Cross Motion to Dismiss or, in the Alternative, for Sum-

mary Judgment (“Defs.’ Reply”).

15a

I. BACKGROUND

A. Statutory and Regulatory Framework

This case concerns the Fair Labor Standards Act

(“F LSA” or “Act”), 29 U.S.C. §§ 201-219 (2006), and the

reguiations promulgated by the DOL to implement the

Act. See Defendants’ Cross Motion to Dismiss or, in

the Alternative, for Summary Judgment (“Defs.’ Mot.”)

at 1. Enacted by Congress in 1938, Compl. 9 14, the

FLSA generally requires that covered employers pay

overtime wages to their employees who work more than

40 hours per week, unless they are exempted by the Act

from this requirement. 29 U.S.C. § 207(a)(1). Section

213(a)(1) of the FLSA provides for such an exemption,

stating that “any employee employed in a bona fide

executive, administrative, or professional capacity[,]

. . orin the capacity of outside salesman (as such

terms are defined and delimited from time to time by

regulations of the Secretary[,] . . .)” is exempt

from the “[m]inimum wage and maximum hour re-

quirements” otherwise required by the Act. 29 U.S.C.

§ 213(a)(1).

The Wage and Hour Division of the DOL (“Wage

and Hour Division”) is responsible for “administering

and enforcing the FLSA, and it periodically issues reg-

ulations that define the scope of the FLSA’s exemp-

tions and interpretations of those regulations.” Defs.’

Mot. at 4. After the passage of the FLSA, the Wage

and Hour Division “promulgated regulations defining

and delimiting the FLSA’s exemptions from overtime

pay requirements.” Compl. 1 14. Those regulations

were most recently amended on August 23, 2004. See

16a

Administrative Record (“A.R.”) at 8-78 (Defining and

Delimiting the Exemptions for Executive, Administra-

tive, Professional, Outside Sales and Computer Em-

ployees, 69 Fed. Reg. 22122-19) (Apr. 23, 2004) (codi-

fied at 29 C.F.R. § 541)). As revised, the regulations

state that the administrative exemption of section

213(a)(1) of the FLSA applies to an employee:

(1) Compensated on a salary or fee basis at a rate

of not less than $455 perweek . . .. ;

(2) Whose primary duty is the performance of of-

fice or non-manual work directly related to the

management or general business operations of the

employer or the employer’s customers; and

(3) Whose primary duty includes the exercise of

discretion and independent judgment with respect

to matters of significance.

29 C.F.R. § 541.200(a). The 2004 regulations were ac-

companied by a preamble “Summary,” which explained

that the administrative “exemption is intended to be

limited to those employees whose duties relate to the

administrative as distinguished from the production

operations of a business.” 69 Fed. Reg. 22122, 22141

(internal quotation marks omitted). The 2004 regula-

tions also provide examples that illustrate how the ad-

ministrative duties exemption can be applied to em-

ployees in various occupations, including the following

example regarding the financial services industry:

Employees in the financial services industry gen-

erally meet the duties requirements for the admin-

istrative exemption if their duties include work

17a

such as collecting and analyzing information re-

garding the customer’s income, assets, investments

or debts; determining which financial products best

meet the customer’s needs and financial circum-

stances; advising the customer regarding the ad-

vantages and disadvantages of different financial

products; and marketing, servicing or promoting

the employer’s financial products. However, an

employee whose primary duty is selling financial

products does not qualify for the administrative

exemption.

29 C.F.R. § 541.203(b) (entitled “Administrative ex-

emption examples”).

B. Factual and Procedural Background

1. Pre-2004 Interpretation of the Administrative

Exemption

The following facts are not in dispute and are taken

from either the Association’s complaint or the admini-

strative record filed in this case.

The plaintiff is a national trade association that

represents the real estate finance industry. Compl.

17. The Association “has over 2,200 member compa-

nies, including all elements of real estate finance:

mortgage companies, mortgage brokers, commercial

banks, thrifts, life insurance companies, and others in

the mortgage lending field.” Jd. These companies

employ over 280,000 individuals throughout the United

States. Id. The Association’s primary goals are “to

ensure the continued strength of the nation’s residen-

tial and commercial real estate market, to expand home

18a

ownership and extend access to affordable housing to

all Americans.” /d.

From as early as 1964, and until March 24, 2010, the

DOL announced its interpretation of the FLSA

through the issuance of “{o]pinion {lJetters.” Jd. 1 15.

These opinion letters were written in response to in-

quiries from private parties seeking guidance about the

application of the FLSA to their business activities.

Id. Access to the opinion letters was available through

several avenues, including, in recent years, electronic

legal research databases and the DOL’s own website.

See id. And as the plaintiff correctly points out, the

District of Columbia Circuit has held that “DOL Opin-

ion Letters . . . constitute final agency action

subject to judicial review.” Jd. 1% 16 (citing Nat'l

Automatic Laundry & Cleaning Council v. Shultz, 443

F.2d 689, 701-02 (D.C. Cir. 1971) (holding that although

the opinion letters lack formality, they are intended as

a “deliberative determination of the agency’s position”

and thus are subject to judicial review)).

The administrative record in this case contains two

opinion letters issued by the DOL prior to the 2004

amendment of its regulations. The first, dated July

23, 1997, “<iseussed whether a wholesale salesman is

exempt from the FLSA’s overtime requirements.

A.R. at 1-3 (Opinion Letter, 1997 WL 970727 (DOL

WAGE-HOUR)). This opinion letter concluded that

“[t}he decisions of wholesale salesmen typically do not

involve matters of policy or significant importance, but

are limited to routine day-to-day operational matters.”

Id. at 2-3. While the Wage and Hour Division did not

come to an ultimate conclusion on the exemption ques-

19a

tion, the opinion letter suggested that wholesale sales-

men are not covered by the administrative exemption.”

Id. The second pre-2004 opinion letter found in the

administrative record, dated May 17, 1999, determined

that “loan officers are engaged in carrying out the

employer’s day-to-day activities rather than in deter-

mining the overall course and policies of the business”

and were therefore non-exempt employees entitled to

overtime. See id. at 5 (Opinion Letter, 1999 WL

1002401 (DOL WAGE-HOUR) (“1999 Opinion Let-

ter”)).

Effective August 23, 2004, the DOL amended its

regulations interpreting the wage and hour require-

ments set forth by the FLSA. Compl.121. As noted

earlier, the amended regulations, as they pertain to the

financial service industry, provide:

Employees in the financial services industry gener-

ally meet the duties requirements for the adminis-

trative exemption if their duties include work such

as collecting and analyzing information regarding

the customer’s income, assets, investments or

debts; determining which financial products best

* If the party does not provide the DOL with sufficient facts re-

garding the nature of their inquiry, the DOL will not provide an

ultimate conclusion; rather, it will state what set of facts would

need to exist in order for the employee to be exempt. See gener-

ally Defs.’ Mot. at 11-12 (citing A.R. at 87-93 (Opinion Letter

FLSA2006-31 (“2006 Opinion Letter”))) (providing an opinion that

an employee would be exempt if the assumptions provided by the

requestor and other relevant facts are true).

20a

meet the customer’s needs and financial circum-

stances; advising the customer regarding the ad-

vantages and disadvantages of different financial

products; and marketing, servicing or promoting

the employer’s financial products. However, an

employee whose primary duty is selling financial

products does not qualify for the administrative ex-

emption.

Id. (citing 29 C.F.R. § 541.203(b)). And as already

noted, the amended regulations included a preamble,

id. 1 22, which makes it clear that “many financial

services employees qualify as exempt administrative

employees, even if they are involved in some selling to

consumers.” 69 Fed. Reg. at 22146.

2. The 2006 Opinion Letter

On September 8, 2006, the DOL issued an opinion

letter to the Association (“2006 Opinion Letter”), see

A.R. at 87-93 (Opinion Letter FLSA2006-31 (“2006

Opinion Letter”)), at the Association’s request. Defs.’

Mot. at 11 n.6.* In requesting the letter, the Associa-

tion asked the DOL to assume that the mortgage loan

officers who were the subject of the letter spent less

than fifty percent of their working time on “customer-

specific persuasive sales activity.” Jd. at 11-12 (in-

ternal quotation marks and citation omitted). The

* Generally, the DOL does not release the name of the requestor

for an opinion letter. Defs.’ Mot.. at 11 n.6. However, the Asso-

ciation has acknowledged that it requested the 2006 opinion letter.

Id.

2la

2006 Opinion Letter began by reminding the Associa-

tion that an employee’s exempt status is “determined

by analyzing each particular employee’s actual job

duties and compensation under the applicable regula-

tions.” A.R. at 87 (2006 Opinion Letter).

The Association also asked whether the DOL’s

analysis of the administrative exemption was altered by

the 2004 regulations. Jd. at 88-89. In response, the

DOL noted that “[bJecause the criteria in the duties

test for the administrative exemption in the 2004 re-

vised final regulations are substantially the same as

under the prior rule, the outcome of this opinion would

be essentially identical under either version of the reg-

ulations.” Jd. at 89 (citation omitted).

The 2006 Opinion Letter reinforced that the 2004

revised regulations made the administrative exception

applicable to employees when their employment satis-

fied the following three components:

(1) Compensated on a salary or fee basis at a rate

of not less than $455 perweek . . ._ , exclusive

of board, lodging or other facilities;

(2) Whose primary duty is the performance of of-

fice or non-manual work directly related to the

management or general business operations of the

employer or the employer’s customers; and

(3) Whose primary duty includes the exercise of

discretion and independent judgment with respect

to matters of significance.

Id. (citation omitted). With regard to the second

prong of this test, the letter defined “[wJork that is

22a

‘directly related to the management or general busi-

ness operations’ of the employer . . . as ‘work

directly related to assisting with the running or ser-

vicing of the business, as distinguished, for example,

from working on a manufacturing production line or

selling a product in a retail or service establishment.’”

Id. (citation omitted). As to the third component of the

test, the term “primary duty” is defined in the letter as

“the principal, main, major or most important duty that

the employee performs.” Jd. (quoting 29 C.F.R.

§ 541.700(a)). The letter explained that the amount of

time an employee spends performing exempt work is a

factor to consider in assessing the applicability of the

exemption, but time alone “is not the sole test.” Id.

(quoting 29 C.F.R. § 541.700(b)).

The 2006 Opinion Letter further noted that although

employees whose primary duty involves sales cannot

qualify for the administrative exemption, many finan-

cial services employees could and had been found to fall

under this exemption. Jd. at 90 (citing 29 C.F.R.

§ 541.700(b)). Accordingly, the DOL concluded that

the loan officers who were the subject of the 2006

Opinion Letter

ha[d] a primary duty other than sales, as their work

include[d] collecting and analyzing a customer’s fi-

nancial information, advising the customer about

the risks and benefits of various mortgage loan al-

ternatives in light of their individual financial cir-

cumstances, and advising the customer about ave-

nues to obtain a more advantageous loan program.

23a

Id. at 90-91. The letter concluded that “the use of

software programs or tools to assess risk and to narrow

the scope of products available to the customer does not

necessarily disqualify the employees from the admin-

istrative exemption for lack of discretion and indepen-

dent judgment.” Jd. at 91. Finally, the letter noted

that its “opinion [was] based exclusively on the facts

and circumstances described in [the Association’s] re-

quest and is given based on [the Association’s] repre-

senation, express or implied, that [the Association]

ha[d] provided a full and fair description of all the facts

and circumstances that would be pertinent to [the

DOL/’s] consideration of the question presented.” Id.

at 93.

According to the Association, relying on the 2006

Opinion Letter, many members of the financial services

industry, including many of the Association’s members,

classified mortgage loan officers as exempt employees.

Compl. 1 24. Thus, mortgage loan officers were not

compensated with overtime pay. /d. 1 25. Rather,

the members of the Association ensured that their

mortgage loan officers were well compensated through

other means, like competitive salaries, bonuses, and

commissions. /d.

3. The 2010 Administrative Interpretation

On March 24, 2010, the DOL, “sua sponte,” issued an

Administrative Interpretation, the 2010 AI, expressly

withdrawing the 2006 Opinion Letter. /d.126. Nan-

cy Leppink, Acting Administrator of the Wage and

Hour Division, issued the 2010 AI. See A.R. at 102

(U.S. Department of Labor, Administrator’s Interpre-

24a

tation No. 2010-01 (“Administrator’s Interpretation

No. 2010-01”)). The 2010 AI focuses on “[w]hether the

primary duty of employees who perform the typical job

duties of a mortgage loan officer is office or non-manual

work directly related to the management or general

business operations of their employer or their em-

ployer’s customers.” Jd. at 103. The 2010 AI expres-

sed that to qualify for the exemption, an employee’s

“(wjork {must be] directly related to management or

general business operations of an employer[, which]

includes work in functional areas such as accounting,

budgeting, quality control, purchasing, advertising, re-

search, human resources, labor relations, and similar

areas.” Jd. (citation omitted). In essence, the 2010

AI states that the administrative exemption was de-

signed for “employees whose work involves servicing

the business itself[.]” Jd. at 104.

The 2010 AI relies on a District of Minnesota deci-

sion, Casas v. Conseco Finance Corp., No. Civ. 00-1512,

2002 WL 507059 (D. Minn. March 31, 2002) in addition

to several other cases, as support for its position that

mortgage loan officers are non-exempt employees. I/d.

at 105. In Casas, loan originators asserted they were

entitled to overtime compensation from the defendants

under the FLSA, requiring the court to decide whether

the plaintiffs were exempt from FLSA overtime pay

provisions. The court found that because “Conseco’s

primary business purpose [was] to design, create and

sell home lending products,” the mortgage loan offic-

ers’ primary duty was to sell those lending products on

a day-to-day basis, not “‘the running of [the] business

[itself] or determining its overall course or policies.”

25a

Casas, 2002 WL 507059, at *9 (citation omitted) (alter-

ations in original). Relying on the ruling in Casas, the

2010 AI reasons that “because Conseco’s loan officers’

duties were ‘selling loans directly to individual cus-

tomers, one loan at a time,’” the administrative ex-

emption did not apply to them. A.R. at 105 (Adminis-

trator’s Interpretation No. 2010-01) (internal citation

omitted). The 2010 AI further notes that the 2004

amended regulations examined the difference between

mortgage loan officers who spend the majority of their

time selling mortgage products to consumers, like the

Casas plaintiffs, as compared to those who “promot[e]

the employer’s financial products generally, decid[e] on

an advertising budget and techniques, run[] an office,

hir[e] staff and set[] their pay, service[] existing cus-

tomers .. . , and advis[e] customers.” Jd. at 105

(citing 69 Fed. Reg. at 22145-46). The 2010 AI con-

cluded that in order for mortgage loan officers to be

properly classified as exempt employees, their primary

duties must be administrative in nature. /d. at 105.

Relying on the facts that a significant portion of

mortgage loan officers’ compensation is composed of

commissions from sales, that their job performance is

evaluated based on their sales volume, and that much of

the non-sales work performed by the officers is com-

pleted in furtherance of their sales duties, the 2010 AI

concluded “that a mortgage loan officer’s primary duty

is making sales.” Jd. at 106-07. And because their

primary duty is making sales, the 2010 AI further con-

cludes that “mortgage loan officers perform the pro-

duction[, not the administrative,] work of their em-

ployers.” Jd. at 107.

26a

After concluding that the work of mortgage loan of-

ficers is not related to the general business operation of

their employers, the 2010 AI considered another factor

that could provide the basis for finding that mortgage

loan officers are subject to the administrative exemp-

tion. Jd. at 108. The AI states that “(t]he adminis-

trative exemption can also apply if the employee’s pri-

mary duty is directly related to the management or

general business operations of the employer’s custom-

ers.” Jd. In making this assessment, the 2010 Al

notes that “it is necessary to focus on the identity of the

customer.” Jd. The 2010 AI finds that “work for an

employer’s customers does not qualify for the admin-

istrative exemption where the customers are individu-

als seeking advice for their personal needs, such as

people seeking mortgages for their homes.” I/d.

However, it recognizes that a mortgage loan officer

“might qualify under the administrative exemption’ if

the customer that the officer is working with “is a

business seeking advice about, for example, a mortgage

to purchase land for a new manufacturing plant, to buy

a building for office space, or to acquire a warehouse for

storage of finished goods.” Jd. Nevertheless, the

2010 AI concludes that the typical mortgage loan of-

ficers’ “primary duty is making sales for the employer

{to homeowners], and because homeowners do not have

management or general business operations, a typical

mortgage loan officer’s primary duty is not related to

the management or general business operations of the

employer’s customers.” Id. at 109.

Finally, the 2010 AI took exception with the 2006

Opinion Letter’s apparent assumption “that the exam-

27a

ple provided in 29 C.F.R. § 541.203(b) creates an al-

ternative standard for the administrative exemption for

employees in the financial services industry.” /d.

Rather, the 2010 AI states that 29 C.F.R. § 541.203(b)

merely illustrates an example of an employee who

might otherwise qualify for the exemption based on

“the requirements set forth in 29 C.F.R. § 541.200.”

Id. Thus, the 2010 AI clarifies that “the administra-

tive exemption is only applicable to employees that

meet the requirements set forth in 29 C.F.R.

§ 541.200.” Jd. In providing this clarification, the

2010 AI states, “[t]he fact example at 29 C.F.R.

§ 541.203(b) is not an alternative test, and its guidance

cannot result in it ‘swallowing’ the requirements of 29

C.F.R. § 541.200." Jd.

In summation, the DOL through the issuance of the

2010 AI explicitly withdrew the 2006 Opinion Letter

“[blecause of its misleading assumption and selective

and narrow analysis[.]” Jd. Before taking this action,

the DOL did not utilize the APA’s notice and comment

process. Compl. 4% 32-33.

Following the issuance of the 2010 AI, the Associa-

tion filed its Complaint in this case on January 12, 2011,

* The 2010 AI also “expressly withdrew . . . 2001 Opinion

Letter.” Pl.’s Mem. at 13; Defs.’ Mot. at 14 (“(TJhe Wage and

Hour Division withdrew the 2001 Opinion Letter as inconsistent

with the analysis in the 2010 AI, inasmuch as it had erroneously

concluded that mortgage loan officers performed work that was

directly related to the management or general business operations

of the employer or the employer’s customers.”).

28a

asserting that the DOL violated the APA by issuing the

2010 AI. /d. 11 36-52. First, the Association argues

that “[o]nce an agency gives its regulation an inter-

pretation, it can only change that interpretation as it

would formally modify the regulation itself: through

the process of notice and comment rulemaking.” /d.

4 36 (citing Paralyzed Veterans of Am. v. D.C. Arena,

117 F.3d 579, 586 (D.C. Cir. 1997)). Second, the Asso-

ciation argues that “[bJecause the AI conflicts with

existing DOL regulations, and because those regula-

tions have been afforded the force of law by courts,

DOL’s issuance of the 2010 AI is arbitrary, capricious,

an abuse of discretion, and otherwise not in accordance

with law.” Jd.9150. The Association seeks to have the

2010 AI “[vJacat{[ed] and set aside” and the defendants

“{ejnjoin{ed] and restrainfed] . . . from enforcing,

applying, orimplementing .. . the AI.” Jd. at12

(Prayer for Relief).°

The Association filed its Motion for Summary Judg-

ment simultaneously with the Complaint. In response,

the DOL has filed a Cross Motion to Dismiss, or, in the

Alternative, Motion for Summary Judgment.°

® The Association also seeks an award of its litigation costs and

attorney’s fees. These requests are not addressed in this opinion.

® In resolving these motions, the Court also considered the mem-

orandum of law submitted on behalf of the three intervenors, Ryan

Henry, Beverly Buck, and Jerome Nichols.

29a

II. STANDARD OF REVIEW

The DOL has moved for dismissal under Federal

Rule of Civil Procedure Rule 12(b)6), and alternatively

moves for summary judgment under Rule 56. Rule

12(d) provides that “[i]f, on a motion under Rule

12(b)(6) . . . matters outside the pleadings are

presented to and not excluded by the court, the motion

must be treated as one for summary judgment under

Rule 56. [And if the motion is considered under Rule

56, ajll parties must be given a reasonable opportunity

to present all the material that is pertinent to the

motion.” Fed. R. Civ. P. 12(d). Here, because both

parties ave presented materials outside the pleadings

(namely, the administrative record) for the Court to

consider in adjudicating their motions, the Court deems

it appropriate to treat both submissions as motions for

summary judgment. Sec Marshall Cnty. Health Care.

Auth. v. Shalala, 988 F.2d 1221, 1226 & n.5 (D.C. Cir.

1993) (noting that a district court considering a Rule

12(b)(6) motion “can consult the [administrative] record

to answer the legal question[s] before the court,” but

that “(i]t is probably the better practice for a district

court always to convert to summary judgment”).

“Summary judgment is the proper mechanism for

deciding, as a matter of law, whether an agency action

is supported by the administrative record and consis-

tent with the APA standard of review.” Loma Linda

Univ. Med. Ctr. v. Sebelius, 684 F. Supp. 2d 42, 52

(D.D.C. 2010) (citing Stuttering Found. of Am. v.

Springer, 498 F. Supp. 2d 203, 207 (D.D.C. 2007)); see

also Richards v. INS, 554 F.2d 1173, 1177 & n.28 (D.C.

Cir. 1977). However, due to the limited role of a court

30a

in reviewing the administrative record, the typical

summary judgment standards set forth in Rule 56(c)

are not applicable. Stuttering, 498 F. Supp. 2d at 207

(citation omitted). Rather, “[uJnder the APA, it is the

role of the agency to resolve factual issues to arrive at a

decision that is supported by the administrative record,

whereas ‘the function of the district court is to deter-

mine whether or not as a matter of law the evidence in

the administrative record permitted the agency to

make the decision it did.’” Jd. (quoting Occidental

Eng’g Co. v. INS, 753 F.2d 766, 769-70 (9th Cir. 1985)).

A reviewing court will “hold unlawful and set aside

agency action, findings, and conclusions found to be

arbitrary, capricious, an abuse of discretion, or

otherwise not in accordance with the law.” Ludlow v.

Mabus, 793 F. Supp. 2d 352, 354 (D.D.C. 2011) (quoting

5 U.S.C. § 706(2)(A) (2006)). In Motor Vehicle Man-

ufacturers Ass'n of U.S. v. State Farm Mutual Auto-

mobile Insurance Co., the Supreme Court explained

the “arbitrary and capricious” review by noting that

“an agency rule would be arbitrary and capricious if the

agency has relied on factors which Congress has not

intended it to consider, entirely failed to consider an

important aspect of the problem, offered an explanation

for its decision that runs counter to the evidence before

the agency, or is so implausible that it could not be

ascribed to a difference in view or the product of agency

expertise.” 463 U.S. 29, 43 (1983). However, the

“standard of review is a narrow one.” Citizens to Pres.

Overton Park, Inc. v. Volpe, 401 U.S. 402, 416 (1971).

“The court is not empowered to substitute its judgment

for that of the agency.” Jd. “(T]he party challenging

3la

an agency’s action as arbitrary and capricious bears the

burden of proof,” San Luis Obispo Mothers for Peace v.

U.S. Nuclear Regulatory Comm'n, 789 F.2d 26, 37

(D.C. Cir. 1986), and the APA directs a reviewing court

to “review the whole record or those parts of it cited by

a party” in making this assessment, 5 U.S.C. § 706.

lil. ANALYSIS

The plaintiff seeks relief based on two distinct the-

ories. First, relying on Paralyzed Veterans, 117 F.3d

at 586, the plaintiff argues that once an agency issues

an authoritative interpretation of its own regulation, it

must utilize the notice and comment process if it de-

sires to modify that interpretation. Compl. 1 36.

Second, the plaintiff argues that the 2010 AI does not

comport with the 2004 regulations and is therefore

“arbitrary, capricious, an abused [sic] of discretion, and

otherwise not in accordance with law.” Compl. 1% 50.

The Court will analyze each argument in turn.”

7 The Court notes that the plaintiff contends, and, in fact, takes

the position that the 2010 AI is an “interpretation of [the Agency’s}

own regulation[], as it was signed by the Administrator of the Wage

and Hour Division, published on DOL’s website, and held out to

employees as guidance for complying with the FLSA.” Pls.’ Mem.

at 1. The defendants do not take exception with this position, in-

deed, they endorse it. Specifically the defendants state, “the 2010

interpretation corrected a short-lived 2006 issuance,” Defs.’ Mem.

at 1 (emphasis added), and further concedes that it cannot be

construed as a legislative rule, see id. at 14-16, 16 n.9 (stating that

the 2010 AI is an interpretive rule as opposed to [sic] substantive

rule, and therefore, notice and comment is not necessary). The

It is well established that there is “no barrier to an

agency altering its initial interpretation to adopt an-

other reasonable interpretation—even one that repre-

sents a new policy response generated by a different

administration.” Paralyzed Veterans, 117 F.3d at 586

(citing Chevron U.S.A., Inc. v. Natural Res. Def.

Council, Inc., 467 U.S. 837, 863 (1984)). However, the

District of Columbia Circuit has held that “[oJnce an

agency gives its regulation an interpretation, it can

only change that interpretation as it would formally

modify the regulation itself: through the process of

notice and comment rulemaking.” /d. at 586; Transp.

Workers Union of Am. v. Transp. Sec. Admin., 492

F.3d 471, 475 (D.C. Cir. 2007) (“[A]n agency cannot

significantly change its position, cannot flip-flop, even

between two interpretive rules, without prior notice

and comment.”).

The District of Columbia Circuit had the opportu-

nity to reexamine its holding in Paralyzed Veterans in

Alaska Professional Hunters Ass’n v. FAA, 177 F.3d

1030, 1033-34 (D.C. Cir. 1999). Alaska Professional

Hunters concerned an interpretation by the Federal

Aviation Administration (“FAA”) that several provi-

sions of its regulations that “applied to (among others)

‘commercial operator{s]’” did not “govern guide pilots

whose flights were incidental to their guiding business

Court agrees that the 2010 AI is an interpretive rule and will

accordingly conduct its analysis from that perspective.

33a

and were not billed separately.” Jd. at 1031. The

FAA’s position was based on its reading of the Civil

Aeronautics Board’s decision in Administrator v.

Marshall, 39 C.A.B. 948 (1963). Jd. “Although the

[agency] never set forth its interpretation of [the sev-

eral regulations at issue] in a written statement,” the

parties “agree[d] that [the] FAA personnel in Alaska

consistently followed the interpretation in official ad-

vice to guides and guide services.” /d. at 1031-32.

In January 1998, the FAA reversed course and

published a “Notice to Operators” that “required the[]

guide pilots to abide by FAA regulations applicable to

commercial air operations.” Jd. at 1030. Drawing on

its decision in Paralyzed Veterans, 117 F.3d at 586, the

Circuit found that this modification of the FAA’s long-

standing policy exempting the guide pilots from the

FAA regulations mandated the use of notice and com-

ment rulemaking. /d. at 1035-36. The Circuit con-

cluded that “current doubts about the wisdom of the

regulatory system followed in Alaska for more than

thirty years does not justify disregarding the requisite

procedures for changing that system.” Jd. at 1035.

1. Is Paralyzed Veterans still good law?

The defendants argue that two Supreme Court cases

conflict with Paralyzed Veterans and Alaska Profes-

sional Hunters. Defs.’ Mot. at 15-17. First, they

argue that Paralyzed Veterans cannot be reconciled

with the holding in Vermont Yankee Nuclear Power

Corp. v. Natural Resources Defense Council, Inc., 435

U.S. 519, 524 (1978). Defs.’ Mot. at 15-17. In Ver-

mont Yankee, the Supreme Court reiterated its previ-

34a

ous conclusion “that generally speaking,” the APA’s

notice and comment requirements “established the

maximum procedural requirements which Congress

was willing to have the courts impose upon agencies in

conducting rulemaking procedures.” Vermont Yan-

kee, 485 U.S. at 524. The Supreme Court further

stated that “[a]gencies are free to grant additional

procedural rights in the exercise of their discretion, but

reviewing courts are generally not free to impose

[additional procedural requirements] if the agencies

have not chosen to grant them.” Jd. (emphasis added).

The defendants argue that this limitation imposed on

courts by Vermont Yankee conflicts with the require-

ments imposed by Paralyzed Veterans; namely, the

requirement that an agency must employ the notice and

comment process if they wish to change a prior inter-

pretation of their own regulations, Defs.’ Mot. at 16-17,

since the Supreme Court observed that only in “ex-

tremely rare” circumstances may courts impose “pro-

cedures beyond those required by the statute,” Ver-

mont Yankee, 435 U.S. at 524; see Defs.’ Mot. at 16-17.

This Court is “obligated to follow controlling [C]ir-

cuit precedent until either [the Circuit], sitting en banc,

or the Supreme Court, overrule it.” United States v.

Torres, 115 F.3d 1033, 1036 (D.C. Cir. 1997). Thus,

even if this Court “disagree[d] with circuit precedent”

its “obligation” to follow such precedent would not be

relieved. Jd. Moreover, having been decided nearly

twenty years before Paralyzed Victims, the District of

Columbia Circuit was presumably aware of the exist-

ence of Vermont Yankee when it authored its opinion in

Paralyzed Veterans. And this Court is not prepared

35a

to find that the Circuit disregarded Supreme Court

precedent when it decided Paralyzed Victims.

The defendants are correct in stating that seven

courts of appeals have held that the notice and com-

ment provisions found in section 553 of the APA do not

apply to interpretative rules. Defendants’ Reply to

Plaintiff’s Opposition to Defendants’ Cross Motion to

Dismiss or, in the Alternative, for Summary Judgment

(“Defs.’ Reply”) at 9. However, this Circuit, in decid-

ing Paralyzed Veterans, Alaska Professional Hunters,

and other cases that have addressed the same subject,

see, e.g., Kelley v. EPA, 15 F.3d 1100, 1108 (D.C. Cir.

1994); Am. Mining Cong. v. MSHA, 995 F.2d 1106,

1109 (D.C. Cir. 1993), has ruled that if an interpretation

of a statute or rule “itself carries the force and effect of

law,” Paralyzed Veterans, 117 F.3d at 588 (quotation

marks and citations omitted), the agency is required to

use notice and comment procedures. And this Court

had the occasion to apply Paralyzed Veterans in a case

with similarities to this case. See Tripoli Rocketry

Ass’n v. Bureau of Alcohol, Tobacco, Firearms &

Explosives, 337 F. Supp. 2d. 1, 138 (D.D.C. 2004), rev’d

on other grounds, 437 F.3d 75 (D.C. Cir. 2006) (Walton,

J.) (“{Bjefore the [agency] could alter[] its earlier

interpretation of the [regulation], it was required to

undertake notice-and-comment rulemaking as required

by the APA[.]”). Thus, this Court cannot, and will not,

find that Vermont Yankee commands that it refuse to

follow a Circuit case that was decided two decades

later, and has remained good law in this Circuit for

almost fifteen years.

36a

Second, the DOL argues that Paralyzed Veterans

and Alaska Professional Hunters were overturned by

the recent Supreme Court decision in FCC v. Fox Tele-

vision Stations, Inc., 556 U.S. 502 (2009). The DOL

relies on language from Fox Television, stating that the

APA “makes no distinction . . . between initial

agency action and subsequent agency action undoing or

revising that action.” Defs.’ Mot. at 15 (quoting Fox

Television, 556 U.S. at 515). Fox Television con-

cerned two television live broadcasts during which

expletives were used, resulting in the Federal Com-

munication Commission’s (“FCC”) issuance of two

“{njotices of [a]pparent [liability” based on the FCC’s

finding that the two occurrences were “actionably

indecent.” 556 U.S. at 508-512. Prior to the commis-

sion of these two incidents, the FCC had permitted

networks to broadcast “fleeting” expletives without

punishment. Jd. The FCC reversed course with re-

gard to the two incidents in question, finding that the

broadcasts were indecent, even though both contained

only “fleeting” expletives. Jd. at 512, 530. The Sec-

ond Circuit found that the FCC’s decision changing its

policy was not in compliance with the APA due, in part,

to its failure to provide an adequate reason for the

change. Jd. at 513-514; see 5 U.S.C. § 706(2)(A). On

review of that ruling, the Supreme Court rejected the

Second Circuit’s position, “find[ing] no basis in the

[APA] or in [its] opinions for a requirement that all

agency change be subjected to more searching review.”

Fox Television, 556 U.S. at 514.

The language in Fox Television which the defend-

ants contend invalidates Paralyzed Veterans, when

37a

considered in conjunction with the entire majority

opinion in Fox Television, implicates the APA’s arbi-

trary and capricious review, not its notice and comment

process. In fact, the Supreme Court made perfectly

clear the question it was addressing, holding that “we

find the [FCC’s] orders neither arbitrary nor capri-

cious.” Jd. at 530. So what the defendants are seek-

ing to do is have this Court expand the reach of Fox

Television beyond the question the Supreme Court

actually addressed. That, this Court cannot do, as the

Fox Television decision has no bearing on whether an

agency must employ the notice and comment process

before changing its policies. The answer to that ques-

tion requires this Court to look to Paralyzed Veterans

and its progeny, in the absence of en banc Circuit

authority or Supreme Court repudiation of those deci-

sions. Torres, 115 F.3d at 1036. Neither has oc-

curred, so Paralyzed Veterans and its line of cases

remains controlling authority in this Circuit.

2. The Paralyzed Veterans Doctrine and Alaska

Professional Hunters Rationale

Having determined that Paralyzed Veterans re-

mains controlling authority in this Circuit, the Court

must now turn its attention to the exceptions to Para-

lyzed Veterans, which the defendants contend have

been recognized by the Circuit and are relied upon by

the defendants in this litigation. As the alternative

position to their argument that this Court should not

follow Paralyzed Victims, the defendants argue that

these two purported exceptions to the applicability of

Paralyzed Veterans weigh in favor of granting them

summary judgment. First, they contend that MetWest

38a

Inc. v. Secretary of Labor, 560 F.3d 506 (D.C. Cir.

2009), alleviates the requirement of utilizing notice and

comment when a party did not “substantially and jus-

tifiably” rely upon an earlier agency interpretation.

Defs.’ Mot. at 22-26. Second, the defendants argue

that the “invalid prior interpretation” exception pur-

portedly recognized in Monmouth Med. Cir. v.

Thompson, 257 F.3d 807 (D.C. Cir. 2001), applies here.

Id. at 18-22.

The MetWest case raised the question of whether

MetWest could “be held liable for violating a regulation

governing the removal of needles from equipment used

to extract blood.” 560 F.3d at 507-508. Dating back

to 1991 when the needle removal regulation was adop-

ted, the Occupation, Safety and Health Administration

(“OSHA”) “declined to enforce [the regulation] against

employers who supplied their employees with reusable

blood tube holaers.” Jd. at 508-09. In October 2003,

OSHA changed its policy through the issuance of a

“guidance document,” which stated that the use of

reusable blood holders “likely violated” the regulation.

Id. at 509. MetWest brought suit following the

change, arguing that the agency was required to em-

ploy notice and comment rulemaking before altering its

interpretation of the needle removal regulation. /d.

The Circuit in MetWest reiterated that its holding in

Alaska Professional Hunters was “that an agency’s

practice of advising affected entities—in a prior agency

adjudication and the consistent advice of agency offi-

cials over a 30-year period—that a regulation did not

apply to them established ‘an authoritative depart-

mental interpretation’ that could not be changed with-

39a

out notice and comment.” Jd. at 511 (citation omit-

ted). The MetWest court emphasized that “[a] fun-

damental rationale of Alaska Professional Hunters

was the affected parties’ substantial and justifiable

reliance on a well-established agency interpretation.”

Id. (emphasis added). The Circuit noted that “[t]his is

a crucial part of the analysis” and that “[{t]o ignore it is

to misunderstand Alaska Professional Hunters to

mean that an agency’s initial interpretation, once in-

formally adopted, freezes the state of agency law, which

cannot subsequently be altered without notice-and-

comment rule-making.” Jd. at 511 n.4 (citations and

internal quotation marks omitted). And in Alaska

Professional Hunters, notice and comment rulemaking

was deemed necessary before an interpretation of a

regulation could be changed, because, in that case,

people had moved to Alaska and started businesses

with the understanding that an agency’s regulations

did not apply to an essential component of their opera-

tions due to the position the agency had taken over a

30-year period. Jd. at 511 (citing Alaska Professional

Hunters, 177 F.3d at 1035 (alterations in original)).

Concluding that “[tJhe situation [in MetWest was] not

comparable” to the situation in Alaska Professional

Hunters, MetWest’s challenge to the Agency action

was rejected because “OSHA never established an

authoritative interpretation of its regulation on which

MetWest justifiably relied to its detriment.” J/d.

8 The MetWest opinion was authored by Judge Raymond Ran-

dolph, who also authored the Alaska Professional Hunters opinion.

40a

The plaintiff takes exception to the defendants’

claim that MetWest limits the applicability of Para-

lyzed Veterans to cases where a “party’s reliance upon

a prior interpretation [of an agency’s regulation] was

both substantial and justifiable.” Plaintiff’s Reply in

Support of its Motion for Summary Judgment and

Opposition to Defendants’ Motion to Dismiss or in the

Alternative for Summary Judgment (“Pl.’s Reply”) at

15 (internal quotation marks omitted). The plaintiff

argues that “some new reliance exception to Paralyzed

Veterans” was not created by MetWest because “Met-

West’s discussion of substantial and justifiable reliance

was in the content of assessing whether an informal

interpretation by [OSHA] could even be an authorita-

tive departmental interpretation[.]” Jd. (internal quo-

tation marks omitted).

While it is true that the court in MetWest noted that

the agency “never established an authoritative inter-

pretation of its regulation on which MetWest justifiably

relied to its detriment,” the court’s holding was not

grounded solely on that fact. MetWest, 560 F.3d at

511. Rather, the ruling of the circuit was also based on

the assessment of whether there had been “substantial

and justifiable reliance on a well-established agency

interpretation” by MetWest, which was essential to

imposing the notice and comment obligation on the

agency. J/d. (emphasis added). So regardless of

whether MetWest carved out an exception to Paralyzed

Veterans or just clarified what the court intended to

convey when it said in Alaska Professional Hunters

that the plaintiffs there had “relied” on the agency’s

initial interpretation, 177 F.3d at 1035, this Court is

Ala

convinced that MetWest intended to set the bar for

what a plaintiff must establish to satisfy the reliance

component of the Paralyzed Veterans doctrine.

The plaintiff argues alternatively that even if Met-

West did add a substantial and justifiable reliance

component to the Paralyzed Veterans doctrine, they

“quite plainly relied, substantially and justifiably so, on

the 2006 Opinion Letter.” Pl.’s Reply at 17. The As-

sociation relies in part upon the Portal-to-Portal Act of

1947 for this position, id. at 17-25, which gives em-

ployers a complete defense to liability if they rely in

good faith on the opinion of the Administrator of the

Wage and Hour Division. This Act states that

no employer shall be subject to any liability or pun-

ishment for or on account of the failure of the em-

ployer to pay . . . overtime compensation un-

der the [FLSA], if he pleads and proves that the act

or omission complained of was in good faith in con-

formity with and in reliance on any written admin-

istrative regulation, order, ruling, approval, or in-

terpretation.

29 U.S.C. § 259(a) (2006). In a footnote, the plaintiff

points to a number of other trade associations that have

been sued since the issuance of the 2010 AI, and pur-

portedly relied upon the 2006 Opinion Letter as a

defense under 29 U.S.C. § 259(a). Pl.’s Reply at 19

n.26. And the plaintiff takes exception to what it

claims is the defendants’ position that reliance must

equate to circumstances analogous to those in Alaska

Professional Hunters, opining that “[i]t would thus be

quite odd to read the APA as requiring notice and

42a

comment only where an industry can demonstrate it

will be put out of business.” Jd. at 20. In opposition,

the defendants argue that “[tJhe contrast between

Alaska Professional Hunters and the present matter is

stark.” Defs.’ Reply at 5. They note that in Alaska

Professional Hunters, “people uprooted their lives,

moved across the country, and spent 30 years building

up an entire industry in particularly substantial and

justifiable reliance on an agency interpretation.” /d.

They further posit that it was precisely this reliance

that “stirred the [District of Columbia] Circuit to act.”

Id. The defendants opine that “at most [the Associa-

tion] and its members operated under the misappre-

hension that mortgage loan officers were administra-

tively exempt for four years, and structured their pay

systems accordingly, before [the] DOL corrected th[e]

error.” Id.

The Court agrees with the defendants. As noted

above, the MetWest court stressed that a core tenant of

the Alaska Professional Hunters decision was “sub-

stantial and justifiable reliance on a well-established

agency interpretation.” MetWest, 560 F.3d at 511.

The interpretation allegedly relied upon by the Asso-

ciation and its members here was only in effect for a

period of four years, from 2006 to 2010. See A.R. 87-93

(2006 Opinion Letter). Prior to that, the DOL had

taken the position that mortgage loan officers were not

exempt employees, and were therefore entitled to

overtime pay. See, e.g., A.R. 4-5 (1999 Opinion Letter).

Unlike the plaintiffs in Alaskan Professional Hunters,

here the Association does not allege that any of its

members uprooted their families and moved to a new

43a

location in search of business opportunities. PI.’s

Reply at 23. Rather, in the words of the Association

itself, employees of financial service firms have merely

“become accustomed to the freedom to control their

own hours and breaks.” Jd. While the Court appre-

ciates that having to keep accurate time records may

impose an additional burden on the Association’s mem-

bers and their employees, the loss of the freedom to

control one’s work hours and break times is not the

kind of “substantial and justifiable reliance” that Alas-

kan Professional Hunters had in mind, especially when

such reliance was short lived given the many years that

the parties had previously relied upon the interpreta-

tion that mortgage loan officers were not covered by

the administrative exemption.

Further, the argument that the Association makes

under the Portal-to-Portal Act actually weakens its

overall position. See Pl.’s Reply at 17-18. As the

Association points out, the Portal-to-Portal Act pro-

vides that, if the employer “proves that the [failure to

pay overtime] was in good faith in conformity with and

in reliance on any written administrative . . in-

terpretation,” then the employer “shall [not] be subject

to any liability or punishment.” 29 U.S.C. § 259(a).

Thus, assuming this provision applies, the plaintiff

could not be said to have relied upon the prior inter-

pretation to its detriment, as its members will not be

liable for any damages resulting from the prior inter-

pretation due to their good faith reliance. Jd. While

the Court need not reach that conclusion, it is at least

worth nothing [sic] that the Association’s invocation of

the Portal-to-Portal Act undermines its position that it

44a

“substantial[ly] and justifiabl[ly]” relied upon the 2006

Opinion Letter to the level required by the Circuit in

MetWest, 560 F.3d at 511.

Having concluded that the association has failed to

satisfy the standard for demonstrating reliance recog-

nized in MetWest, the Court need not address the

defendants’ additional argument that notice and com-

ment was not required for the 2010 AI based on the

Circuit’s decision in Monmouth, 257 F.3d at 807.

B. Is the 2010 AI Inconsistent with the DOL’s 2004

Regulations?

The plaintiff argues that even if the 2010 AI was

lawfully adopted, it is “inconsistent with the plain lan-

guage of 29 C.F.R. § 541.203(b),” Memorandum of

Points and Authorities in Support of Plaintiff's Motion

for Summary Judgment (“Pl.’s Mem.”) at 26, and thus

“St is arbitrary, capricious, and contrary to law,” id. at

3. In essence, the plaintiff argues that the work per-

formed by mortgage loan officers discussed in the 2010

AI are identical to the job duties discussed in 29 C.F .R.

§ 541.203(b), which provides examples of job duties that

are exempt from the FLSA’s overtime pay require-

ment. PIl.’s Mem. at 26-27. 29 C.F.R. § 541.203(b)

contemplates that an employee who “collect{[s] and

analyz[es] information regarding the customer’s in-

come, assets, investments or debts,” “determin(es]

which financial products best meet the customer’s

needs and financial circumstances,” and “advis[es] the

customer regarding the advantages and disadvantages

of different financial products” might be found exempt

under the administrative exemption. In its memo-

45a

randum submitted in support of its motion, the plaintiff

notes that very similar language was used in the 2010

AI, but that in the 2010 AI, the DOL reached a different

result in finding mortgage loan officers non-exempt

from the FLSA’s overtime requirement. PI.’s Mem. at

26-27.

The DOL does not dispute that the language found

in the two documents is similar. Defs.’ Reply at 15.

However, it contends that the job duties found in 29

C.F.R. § 541.203(b) are merely intended to provide ex-

amples of when a financial services employee might be

exempt under the administrative exception. Jd. The

defendants argue that by “[alpplying the general ad-

ministrative duties test in § 541.200(a), in conjunction

with the financial services example in § 541.203(b),” the

2010 AI came to the conclusion that the mortgage loan

officers in question were not exempt from the FLSA’s

overtime pay requirement. Jd. (citing A.R. 105-108

(Administrator’s Interpretation No. 2010-01)).°

® The defendants have offered supplemental authority—Lewis v.

Huntington National Bank, No. C211CV0058, 2012 WL 765077

(S.D. Ohio Mar. 12, 2012)—as additional support for their position

that the 2010 AI is not arbitrary and capricious. See Defendants’

Notice of Supplemental Authority. Although the case is distin-

guishable from this case for a variety of reasons, the Southern

District of Ohio did find that “because the [2010 AI] applies the test

set forth in § 541.200(a), consistently with the example contained in

§ 541.203(b), there can be no serious argument that [the 2010 AI]

was either erroneous or inconsistent with the 2004 revised regula-

tions.” Lewis, No. C211CV0058, 2012 WL 765077 at 32 (S.D. Ohio

Mar. 12, 2012).

46a

The Court finds the DOL’s argument persuasive.

The administrative exemption of 29 C.F.R. § 541.200,

entitled “General rule for administrative employees,”

provides in part that an “employee employed in a bona

fide administrative capacity” is one “[w]Jhose primary

duty is the performance of office or non-manual work

directly related to the management or general business

operations of the employer or the employer’s custom-

ers.” 29 C.F.R. § 541.200(a)(2). The language relied

upon by the plaintiff is found in 29 C.F.R. § 541.203(b),

which is entitled “Administrative exemption examples,”

and it provides, in part, that “[e]mployees in the finan-

cial services industry generally meet the duties re-

quirements for the administrative exemption.

However, an employee whose primary duty is selling

financial products does not qualify for the administra-

tive exemption.” 29 C.F.R. § 541.203(b) (emphasis

added). On its face, and considering the title of the

provision, it is clear that § 541.203(b) was intended to

provide examples, not an alternative test for the ap-

plicability of the administrative exception. Jd. Thus,

while financial services employees who perform the

duties listed in § 541.203(b) are “generally” able to

qualify for the administrative exemption, the DOL is

still tasked with determining whether specific em-

ployees’ “primary duty is selling financial products.”

Id. If so, the employee “does not qualify for the ad-

ministrative exemption.” Jd. Given the DOL’s rea-

soning for why the exemption does not apply here, the

Court must find that the 2010 AI is not inconsistent

with the 2004 regulations; thus, the 2010 AI is not

4ia

arbitrary, capricious, an abuse of discretion, or other-

wise not in accordance with the law.””

IV. CONCLUSION

The Association has failed to satisfy the Paralyzed

Veterans doctrine of substantial and justifiable reli-

ance, which was also recognized in MetWest; thus, both

their arguments as to reliance and as to notice and

comment procedures must fail. Further, § 541.203(b)

was not intended to serve as an alternative test for the

applicability of the administrative exception. As such,

the 2010 AI is not inconsistent with the 2004 regula-

tions and is not arbitrary, capricious, an abuse of dis-

cretion, or otherwise not in accordance with the law.

Accordingly, the Court must grant in part and deny in

part the Defendants’ Cross-motion to Dismiss or, in the

Alternative for Summary Judgment and deny the

Plaintiff’s Motion for Summary Judgment.

” The Court is aware that there is currently a dispute between

the defendants and the intervenors as to whether the 2010 AI ap-

plies both prospectively and retroactively. In resolving this case,

however, the Court need not reach a conclusion on that issue, as the

intervenors, the plaintiff, and the defendants acknowledge. See

Intervenors’ Memorandum of Points and Authorities in Opposition

to Plaintiff's Motion for Summary Judgment and in Support of

Defendants’ Motion to Dismiss at 31-32 n.12; Defendants’ Reply to

Intervenors’ Memorandum in Opposition to Plaintiff’s Motion for

Summary Judgment and in Support of Defendants’ Motion to

Dismiss at 1; Plaintiff's Reply in Support of its Motion for Sum-

mary Judgment (Response to Intervenors filed on March 14, 2012)

at 3. The Court agrees with the parties and, therefore, declines to

address the issue.

SO ORDERED.”

REGGIE B. WALTON

United States District Judge

" The Court will issue an Order contemporaneously with this

Memorandum Opinion.

49a

APPENDIX C

U.S. Department of Labor [LOGO OMITTED]

Wage and Hour Division

Washington, DC 20210

Administrator’s Interpretation No. 2010-1

March 24, 2010

Issued by DEPUTY ADMINISTRATOR NANCY J.

LEPPINK

SUBJECT: Application of the Administrative Ex-

emption under Section 13(a)(1) of the Fair Labor

Standards Act, 29 U.S.C. § 213(a)(1), to Employees

who Perform the Typical Job Duties of a Mortgage

Loan Officer.

Based on the Wage and Hour Division’s significant

enforcement experience in the application of the ad-

ministrative exemption, a careful analysis of the appli-

cable statutory and regulatory provisions and a thor-

ough review of the case law that has continued to de-

velop on the exemption, the Administrator is issuing

this interpretation to provide needed guidance on this

important and frequently litigated area of the law.

Based on the following analysis it is the Administra-

tor’s interpretation that employees who perform the

typical job duties of a mortgage loan officer, as de-

scribed below, do not qualify as bona fide administra-

50a

tive employees exempt under section 13(a)(1) of the

Fair Labor Standards Act, 29 U.S.C. § 213(a)(1).

ical Job Duties of Mo Loan ers

The financial services industry assigns a variety of job

titles to employees who perform the typical job duties

of a mortgage loan officer. Those job titles include

mortgage loan representative, mortgage loan consult-

ant, and mortgage loan originator. For purposes of

this interpretation the job title of mortgage loan of-

ficer will be used. However, as the regulations make

clear, a job title does not determine whether an em-

ployee is exempt. The employee’s actual job duties

and compensation determine whether the employee is

exempt or nonexempt. 29 C.F.R. § 541.2.’

Facts found during Wage and Hour Division investiga-

tions and the facts set out in the case law establish that

the following are typical mortgage loan officer job

duties: Mortgage loan officers receive internal leads

and contact potential customers or receive contacts

' This Administrator’s Interpretation applies to employees who

spend the majority of their time working inside their employer’s

place of business, including employees who work in offices located

in their homes, rather than mortgage loan officers who are custom-

arily and regularly engaged away from their employer’s place of

business. It also applies to employees who do not spend the maj-

ority of their time engaging in “cold-calling”, contacting potential

customers who have not in some manner expressed an interest in

obtaining information about a mortgage loan. However, because

many of the duties of all mortgage loan officers are similar, cases

arising in these other contexts are referred to for guidance and

cited in this interpretation.

5la

from customers generated by direct mail or other mar-

keting activity Mortgage loan officers collect requi-

red financial information from customers they contact

or who contact them, including information about in-

come, employment history, assets, investments, home

ownership, debts, credit history, prior bankruptcies,

judgments, and liens. They also run credit reports.

Mortgage loan officers enter the collected financial

information into a computer program that identifies

which loan products may be offered to customers

based on the financial information provided. They

then assess the loan products identified and discuss

with the customers the terms and conditions of partic-

ular loans, trying to match the customers’ needs with

one of the company’s loan products. Mortgage loan

officers also compile customer documents for for-

warding to an underwriter or loan processor, and may

finalize documents for closings. See, e.g., Yanni v.

Red Brick Mortgage, 2008 WL 4619772, at *1 (S.D.

Ohio 2008); Pontius v. Delta Financial Corp., 2007

WL 1496692, at *2 (W.D. Pa. 2007); Geer v. Challenge

Financial Investors Corp., 2007 WL 2010957 (D. Kan.

2007), at *2; Chao v. First National Lending Corp.,

516 F. Supp. 2d 895, 904 (N.D. Ohio 2006), aff'd, 249

Fed. App. 441 (6th Cir. 2007); Epps v. Oak Street

Mortgage LLC, 2006 WL 1460273, at *4 (M.D. Fla.

2006); Rogers v. Savings First Mortgage, LLC, 362

F. Supp. 2d 624, 627 (D. Md. 2005); Casas v. Conseco

Finance Corp., 2002 WL 507059, at *1 (D. Minn. 2002).

Exemptions from minimum wage and overtime re-

quirements under the FLSA “are to be narrowly con-

strued against the employers seeking to assert them

52a

and their application limited to those establishments

plainly and unmistakably within their terms and spir-

it.” Arnold v. Ben Kanowsky, Inc., 361 U.S. 388, 392

(1960). To fall within the meaning of an “employee

employed in a bona fide administrative capacity” an

employee’s job duties and compensation must meet all

of the following tests:

1. The employee must be compensated on a salary

or fee basis as defined in the regulations at a

rate not less than $455 per week;

2. The employee’s primary duty must be the per-

formance of office or non-manual work directly

related to the management or general business

operations of the employer or the employer’s

customers; and

3. The employee’s primary duty must include the

exercise of discretion and independent judgment

with respect to matters of significance. 29

C.F.R. § 541.200.

This interpretation focuses on the application of the

second test to employees who perform the typical jobs

duties of a mortgage loan officer:

Whether the primary duty of employees who per-

form the typical job duties of a mortgage loan of-

ficer is office or non-manual work directly related to

the management or general business operations of

their employer or their employer’s customers.

53a

Duty is Work Directly Rel to th -

agement and General Business Operations of the Em-

ployer.

An employee’s primary duty is “the principal, main,

major or most important duty that the employee per-

forms.” 29 C.F.R. § 541.700(a). To be exempt, a

mortgage loan officer’s primary duty must be “the

performance of office or non-manual work directly

related to the management or general business opera-

tions of the employer or the employer’s customers.”

29 C.F.R. § 541.200(a)(2). In turn, to be work directly

related to the management or general business opera-

tions of the employer, the work must be “directly re-

lated to assisting with the running or servicing of

the business, as distinguished, for example, from

working on a manufacturing production line or selling

a product in a retail or service establishment.” 29

C.F.R. § 541.201(a). Work directly related to man-

agement or general business operations of an employ-

er includes work in functional areas such as account-

ing, budgeting, quality control, purchasing, advertis-

ing, research, human resources, labor relations, and

similar areas. 29 C.F.R. § 541.201(b).

Thus, the administrative exemption is “limited to those

employees whose primary duty relates ‘to the admin-

istrative as distinguished from the production opera-

tions of a business.” 69 Fed. Reg. 22122, 22141

(April 23, 2004), quoting the 1949 Weiss Report. In

other words, “it relates to employees whose work in-

volves servicing the business itself—employees who

‘ean be described as staff rather than line employees.’”

Id., quoting the 1940 Stein Report.

54a

This “production versus administrative” dichotomy is

intended to distinguish “between work related to the

goods and services which constitute the business’

marketplace offerings and work which contributes to

‘running the business itself.’” Bothell v. Phase Met-

rics, Inc., 299 F.3d 1120, 1127 (9th Cir. 2002), quoting

Bratt v. County of Los Angeles, 912 F.2d 1066, 1070

(9th Cir. 1990); see Davis v. J.P. Morgan Chase & Co.,

587 F.3d 529, 535 (2nd Cir. 2009) (“{[WJe have drawn an

important distinction between employees directly

producing the good or service that is the primary out-

put of a business and employees performing general

administrative work applicable to the running of any

business.”); Dalheim v. KDFW-TV, 918 F.2d 1220,

1230 (5th Cir. 1990) (the dichotomy distinguishes be-

tween “those employees whose primary duty is admin-

istering the business affairs of the enterprise from

those whose primary duty is producing the commodity

or commodities, whether goods or services, that the

enterprise exists to produce and market”); Wage and

Hour Opinion Letter FLSA2005-21 (Aug. 19, 2005)

(same). Thus, the dichotomy is “a relevant and useful

tool in appropriate cases to identify employees who

should be excluded from the exemption.” 69 Fed.

Reg. at 22141. Moreover, the dichotomy is “determina-

tive if the work ‘falls squarely on the production side of

the line.’” Jd., quoting Bothell v. Phase Metrics, Inc.,

299 F.3d at 1127; see Wage and Hour Opinion Letter

FLSA2006-45 (Dec. 21, 2006) (copy editors working for

a marketing firm that promotes the sale of books, who

read and correct the firm’s marketing promotional ma-

terials, fall squarely on the production side of the line

50a

and, therefore, are not exempt); Wage and Hour Opin-

ion Letter FLSA2005-21 (Aug. 19, 2005) (background

investigators working for a company that contracts

with the government to conduct security clearance in-

vestigations of potential government employees per-

form the day-to-day production work of their employer

and, therefore, are not exempt).

Work does not qualify as administrative simply be-

cause it does not fall squarely on the production side of

the line. As the court stated in Martin v. Indiana

Michigan Power Co., 381 F.3d 574, 582 (6th Cir. 2004),

while production work cannot be administrative, there

is no “absolute dichotomy under which all work must

either be classified as production or administrative.”

The court rejected the company’s argument that its

information technology support specialists were ad-

ministrative employees because they performed trou-

bleshooting on computers on individual employees’

desks and were not directly involved with the nuclear

power plant equipment that “produced” electricity.

Otherwise, the court asserted, employees such as “the

janitorial staff, the security guards, the cooks in the

cafeteria, and various other workers” would be viewed

as doing administrative work. J/d.; see Schaefer v.

Indiana Michigan Power Co., 358 F.3d 394, 402-03

(6th Cir. 2004) (employee who was primarily responsi-

ble for shipments of radioactive materials and waste

away from the plant, setting up shipments with the

transporter and waste management facility, determin-

ing the type of packaging to be used, preparing mani-

fests, inspecting containers, etc., is not engaged in ad-

ministrative work simply because he is engaged in an

56a

activity collateral to the principal business purpose of

producing electricity; duties must be related to servic-

ing the business itself to be administrative).

The decision in Martin v. Cooper Electric Supply Co.,

940 F.2d 896 (38d Cir. 1991), cert. denied, 503 U.S. 936

(1992), in which the Third Circuit evaluated the status

of inside salespersons who sold electrical products for

their employer, is instructive. The court found that

such inside salespersons were production workers who

did not qualify for the administrative exemption be-

cause the company’s primary business purpose was to

sell electrical products. The court concluded that the

salespersons did not “service” the business simply

because they engaged in negotiations and represented

the employer in their sales efforts, because such nego-

tiations over the price and other terms of the sale “are

‘part and parcel’ of the activity of ‘producing sales’.”

Id. at 904. Accordingly, any such duties undertaken

“in the course of ordinary selling do not constitute

administrative-type ‘servicing’ of Cooper’s wholesale

business . . . These activities are only routine

aspects of sales p.vduction.” Id. at 905 (emphasis in

original); see Wage and Hour Opinion Letter of July

23, 1997, 1997 WL 970727 (although “marketing activ-

ity geared to furthering a company’s overall sales

effort,” such as performing public relations or adver-

tising or designing a company’s overall sales campaign,

is administrative work, engaging in “ordinary day-in-

day-out selling activity directed at making specific

sales” is not).

The court in Casas v. Conseco applied these principles

to mortgage loan officers and held that they were

57a

“production rather than administrative employees.

Conseco’s primary business purpose is to design, cre-

ate and sell home lending products. As loan origina-

tors making direct contact with customers, it is plain-

tiffs’ primary duty to sell these lending products on a

day-to-day basis.” 2002 WL 507059, at *9. The

court concluded that the loan officers were unlike the

exempt marketing representatives in Reich v. John

Alden Life Ins. Co., 126 F.3d 1 (1st Cir. 1997). The

representatives in John Alden were engaged in more

than routine selling efforts focused on particular sales

transactions; their marketing efforts were aimed at

independent insurance agents and were directed more

broadly toward promoting and increasing the compa-

ny’s sales generally. However, because Conseco’s

loan officers’ duties were “selling loans directly to

individual customers, one loan at a time,” 2002 WL

507059, at *9, the court held that the administrative

exemption did not apply. Accord Wong v. HSBC

Mortgage Corp., 2008 WL 753889, at *7 (N.D. Cal.

2008) (granting summary judgment to plaintiffs with

regard to the administrative exemption because “de-

fendants have not identified any evidence to support a

finding that plaintiffs’ primary duty is something other

than sales”). The preamble to the 2004 Final Rule

distinguished between Casas and John Alden (and

other insurance industry cases), emphasizing the dif-

ference between employees who have a primary duty

of sales and employees who spend the majority of their

time on a variety of duties such as promoting the em-

ployer’s financial products generally, deciding on an

advertising budget and techniques, running an office,

58a

hiring staff and setting their pay, servicing existing

customers (by providing insurance claims service), and

advising customers. 69 Fed. Reg. at 22145-46; see

Pontius v. Delta Financial Corp., 2007 WL 1496692, at

*8 (denying defendant’s motion for summary judgment

on the administrative exemption, stating that plain-

tiff’s evidence indicated that the loan officers’ primary

duty is to generate loan sales, rather than assisting in

the administrative operations, and that they have

duties “flatly distinguishable from those of the insur-

ance industry employees” in the cases discussed in the

preamble).

The case law and regulatory distinction between ser-

vicing the business and routine sales work requires an

examination of whether an employee who performs the

typical job duties of a mortgage loan officer has the

primary duty of making sales. The regulations imple-

menting the section 13(a)(1) exemption for “outside”

sales employees identify some of the factors that

should be considered in determining whether an em-

ployee’s primary duty is making sales. The regula-

tions state that among the factors to be considered in

determining whether an employee has a primary duty

of making outside sales are: the employee’s job de-

scription; the employer’s qualifications for hire; sales

training; method of payment; and proportion of earn-

ings directly attributable to sales. 29 C.F.R.

§ 541.504(b); see Olivo v. GMAC Mortgage Corp., 374

F. Supp. 2d 545, 550 (E.D. Mich. 2004) (relevant fac-

ors in evaluating whether an employee has a primary

duty of outside sales include whether the employee

solicits customers, receives sales training, is compen-

59a

sated by commission, is labeled a salesman, is held to

a production standard, and has freedom from super-

vision); Belton v. Premium Mortgage, Inc., 2006

WL 561489, at *2 (W.D. Mo. 2006) (similar fac-

tors). Moreover, in determining whether an em-

ployee’s primary duty is making sales, the work per-

formed incidental to sales should be [sic] also be con-

sidered sales work. See Pontius v. Delta Financial

Corp., 2007 WL 1496692, at *9 and n.20 (loan officers

compile and analyze potential customers’ financial data

because “doing so is necessary to evaluate the cus-

tomers’ qualifications for a loan, 7.e., to make a sale.”

They are not analyzing the information to provide

advice to the customer, which the customer could take

and use elsewhere. Rather, the loan officers are per-

forming “screening for the benefit of the employer,

rather than servicing for the benefit of the customer.”)

(emphasis in original); see also 29 C.F.R. § 541.500(b)

(“work performed incidental to and in conjunction with

the employee’s own outside sales or solicitations, in-

cluding incidental deliveries and collections, shall be

regarded as exempt outside sales work. Other work

that furthers the employee’s sales efforts also shall be

regarded as exempt work including, for example,

writing sales reports, updating or revising the em-

ployee’s sales or display catalogue, planning itineraries

and attending sales conferences”).* Applying these

* Of course, section 13(a)(1) only exempts “outside” salesmen.

* Because work performed incidental to and in conjunction with

the employee’s own sales or solicitations is considered exempt sales

work, the Administrator rejects the September 8, 2006 Wage and

60a

factors to the job duties mortgage loan officers typi-

cally perform leads to the conclusion that they have a

primary duty of making sales.

Further, in addition to the job duties described above,

the facts set out in the case law demonstrate that his-

torically mortgage loan officers were often compen-

sated entirely by commissions, and that today many

mortgage loan officers continue to be paid primarily by

commissions, sometimes with a base wage, salary, or

draw against the commissions. The commissions are

based upon sales that are completed (7¢., loans that

actually close), with the commission amount typically

based upon the value of the loan. See, e.g., Under-

wood v. NMC Mortgage Corp., 2009 WL 1269465, at *1

(D. Kan. 2009) (repayable draw against commissions of

$1,400 per month until early 2005; afterwards a mini-

mum salary of $1,000 per month plus commissions);

Henry v. Quicken Loans Inc., 2009 WL 596180, at *10

(E.D. Mich. 2009) (minimum base salary plus commis-

sions); McCaffrey v. Mortgage Sources Corp., 2009 WL

2778085, at **2-4 (D. Kan. 2009) (commissions only);

Yanni v. Red Brick Mortgage, 2008 WL 4619772, at

**1-3 (commissions only, based on loans that closed);

Pontius v. Delta Financial Corp., 2007 WL 1496692, at

*2 (base salary plus commissions, with commissions

earned subject to off-set for failure to meet a minimum

Hour Opinion Letter FLSA2006-31’s inappropriately narrow def-

inition of sales as including only “customer-specific persuasive sales

activity,” which is the time that a loan officer spends directly en-

gaged in selling mortgage loan products to customers.

6la

sales goal in a prior pay period); Saunders v. Ace

Mortgage Funding, Inc., 2007 WL 1190985, at **2-3

(D. Minn. 2007) (commissions only until June 2005,

with a minimum guarantee treated as a draw against

future commissions after that); Chao v. First National

Lending Corp., 516 F. Supp. 2d 895, 904-05 (commis-

sions only, based on loans that closed). Such payment

methods support the conclusion that a mortgage loan

officer’s primary duty is sales.

In addition, employers often train their mortgage loan

officers in sales techniques and evaluate their perfor-

mance on the basis of their sales volume, factors that

also are relevant to the analysis of mortgage loan

officers’ primary duty. For example, in Epps v. Oak

Street Mortgage LLC, 2006 WL 1460273, at *5, loan

officers were required to meet a production goal of

closing three loans per month, and were evaluated

using a form that focused in part on whether they met

their sales requirements. They were required to

work on Saturday if they did not meet their sales re-

quirements, and numerous loan officers were disci-

plined or terminated for failing to meet their sales

requirements, as were their managers. See Pontius

v. Delta Financial Corp., 2007 WL 1496692, at *2

(such employees “are hired, trained, earn commissions,

and are otherwise successful in their positions, on the

basis of their sales performance”); Belton v. Premium

Mortgage, Inc., 2006 WL 561489, at *1 (employees

“were trained as salespeople in order to learn the

mortgage business and to increase their individual

sales efforts”); Casas v. Conseco Finance Corp., 2002

WL 507059, at *9 (numerous separation notices

62a

showed that their “performance was measured largely

according to their sale production”). These factors

also support the conclusion that a mortgage loan of-

ficer’s primary duty is making sales.

Moreover, many employers defending against FLSA

lawsuits brought by mortgage loan officers argue that

the employees are exempt under section 13(a)(1) as

outside sales employees. In these cases, the issue is

whether the mortgage loan officers are outside sales-

people or inside salespeople, but the employer con-

cedes their primary duty is sales (a required element

of this exemption). Thus, mortgage companies’ own

defenses are consistent with the conclusion that a loan

officer’s primary duty is sales.°

* See McCaffrey v. Mortgage Sources Corp., 2009 WL 2778085, at

*4; In re Wells Fargo Home Mortgage Overtime Pay Litigation,

527 F. Supp. 2d 1053, 1066 (N.D. Cal. 2007); Vinole v. Countrywide

Home Loans, Inc., 246 F.R.D. 637, 640 (S.D. Cal. 2007); Chao v.

First National Lending Corp., 516 F. Supp. 2d at 900; Geer v.

Challenge Financial Investors Corp., 2005 WL 26480, at **2-3;

Belton v. Premium Mortgage, Inc., 2006 WL 561489, at *1; Olivo v.

GMAC Mortgage Corp., 374 F. Supp. 2d at 549-50; Casas v. Con-

seco Finance Corp., 2002 WL 507059, at **10-11.

® Some employers have argued that loan officers are exempt

under section 7(i), 29 U.S.C. § 207(i), as commissioned employees of

a retail or service establishment who receive more than half their

earnings from commissions. In these cases, the primary issue is

whether the employer qualifies as a retail or service establishment.

See Underwood v. NMC Mortgage Corp., 2009 WL 1269465, at

**2-3; Wong v. HSBC Mortgage Corp., 2008 WL 753889, at **7-8;

In re Wells Fargo Home Mortgage Overtime Pay Litigation, 527

F. Supp. 2d at 1066; Pontius v. Delta Financial Corp., 2007 WL

63a

Finally, courts have repeatedly found that mortgage

loan officers who work inside their employer’s place of

business have a primary duty of sales. See Chao v.

First National Lending Corp., 516 F. Supp. 2d at 901

(“(t]here is no question that the primary purpose of

loan officers employed by FNL is to make sales or

obtain orders or contract for services.”); Barnett v.

Washington Mutual Bank, 2004 WL 1753400, at *7

(N.D. Cal. 2004) (mortgage loan officers working at a

nationwide call center “were engaged primarily in

selling a product, namely, home mortgages”); Casas v.

Conseco Finance Corp., 2002 WL 507059, at *9 (“[a]s

loan originators making direct contact with customers,

it is plaintiffs’ primary duty to sell these lending pro-

ducts on a day-to-day basis.”). Indeed, the Adminis-

trator is not aware of any court that has found that

mortgage loan officers—working either inside or out-

side—have a primary duty other than sales.

Thus, a careful examination of the law as applied to the

mortgage loan officers’ duties demonstrates that their

primary duty is making sales and, therefore, mortgage

loan officers perform the production work of their em-

ployers. Work such as collecting financial informa-

tion from customers, entering it into the computer pro-

gram to determine what particular loan products

1496692, at *3; Vinole v. Countrywide Home Loans, Inc., 246

F.R.D. at 640; Gatto v. Mortgage Specialists of Illinois, Inc., 442 F.

Supp. 2d at 536-42; Barnett v. Washington Mutual Bank, 2004 WL

1753400, at **2-6; Casas v. Conseco Finance Corp., 2002 WL

507059, at **3-5. This defense also is consistent with an employee

having a primary duty of sales.

64a

might be available to that customer, and explaining the

terms of the available options and the pros and cons of

each option, so that a sale can be made, constitutes the

production work of an employer engaged in selling or

brokering mortgage loan products. Such duties do

not relate to the internal management or general bus-

iness operations of the company; they do not involve

servicing the business itself by providing advice re-

garding internal operations, unlike the duties of em

ployees working in, for example, a firm’s human r

sources department, accounting department, or re-

search department. The typical job duties of a mort-

gage loan officer comprise a financial services busi-

ness’ marketplace offerings, the selling of loan prod-

ucts. Their duties involve the day-to-day carrying out

of the employer’s business and, thus, fall squarely on

the production side of the business.

ork Related M ment or Busines

Operations of mployer’s Customers

The administrative exemption can also apply if the em-

ployee’s primary duty is directly related to the man-

agement or general business operations of the em-

ployer’s customers. “Thus, for example, employees

acting as advisers or consultants to their employer’s

clients or customers (as tax experts or financial con-

sultants, for example) may be exempt.” 29 C.F.R.

§ 541.201(c).

To determine whether a mortgage loan officer’s duties

are directly related to the management or general bus-

iness operations of the employer’s customers, it is nec-

essary to focus on the identity of the customer. As

65a

the preamble to the final rule explained in addressing

the provision that advisers and consultants could qual-

ify for the administrative exemption based upon their

work for the employer’s customers:

Nothing in the existing or final regulations pre-

cludes the exemption because the customer is an in-

dividual, rather than a business, as long as the work

relates to management or general business opera-

tions. As stated by commenter Smith, the exemp-

tion does not apply when the individual’s ‘business’

is purely personal, but providing expert advice to a

small business owner or a sole proprietor regarding

management and general business operations, for

example, is an administrative function

This provision is meant to place work done for a

client or customer on the same footing as work done

for the employer directly, regardless of whether the

client is a sole proprietor or a Fortune 500 compa-

ny, as long as the work relates to ‘management or

general business operations.’

69 Fed. Reg. at 22142.

Thus, work for an employer’s customers does not qual-

ify for the administrative exemption where the cus-

tomers are individuals seeking advice for their person-

al needs, such as people seeking mortgages for their

homes. Individuals acting in a purely personal ca-

pacity do not have “management or general business

operations” within the meaning of this exemption.

However, if the customer is a business seeking advice

about, for example, a mortgage to purchase land for a

new manufacturing plant, to buy a building for office

66a

space, or to acquire a warehouse for storage of finished

goods, the advice regarding such decisions might qual-

ify under the administrative exemption.’ See Bratt v.

County of Los Angeles, 912 F.2d at 1070 (stating, with

regard to employees like stock brokers and insurance

claims agents, “[t]o the extent that these employees

primarily serve as general financial advisors or as con-

sultants on the proper way to conduct a business, e.g.,

advising businesses how to increase financial produc-

tivity or reduce insured risks, these employees pro-

perly would qualify for exemption under this regula-

tion.”); Talbott v. Lakeview Center, Inc., 2008 WL

4525012, at *5, n.5 (N.D. Fla. 2008) (in context of firm

that provides foster care and child protective services,

provision pertaining to the employer’s customers is not

“relevant because even if Lakeview’s foster clients are

‘customers,’ they do not have ‘general business opera-

tions.’”).”

° Of course the salary test and the test that the primary duty

requires the exercise of discretion and independent judgment with

respect to matters of significance must also be met.

" See also Wage and Hour Opinion Letter FLSA2007-7 (Feb. 8,

2007) (case managers working for a service provider for individuals

with disabilities are performing the day-to-day production work of

their employer and are not “providing administrative services

to the employer’s customers as contemplated in 29 C.F.R.

§ 541.201(c)”); Wage and Hour Opinion Letter FLSA2005-30 (Ang.

29, 2005) (same); Wage and Hour Opinion Letter FLSA2005-21

(Aug. 19, 2005) (background investigators of private firm that con-

ducts security clearance investigations of potential hires for gov-

ernment agencies could be viewed as performing work related to

67a

Based on the above analysis of the typical mortgage

loan officer’s duties and conclusion that his or her pri-

mary duty is making sales for the employer, and be-

cause homeowners do not have management or general

business operations, a typical mortgage loan officer’s

primary duty is not related to the management or

general business operations of the employer’s custom-

ers.

A plicati £29 C.F.R. § 541.203(b)

Wage and Hour Opinion Letter FLSA2006-31 (Sept. 8,

2006) appears to assume that the example provided in

29 C.F.R. § 541.203(b) creates an alternative standard

for the administrative exemption for employees in the

financial services industry. That regulation states:

Employees in the financial services industry gener-

ally meet the duties requirements for the adminis-

trative exemption if their duties include work such

as collecting and analyzing information regarding

the customer’s income, assets, investments or

debts; determining which financial products best

meet the customer’s needs and financial circum-

stances; advising the customer regarding the ad-

vantages and disadvantages of different financial

products; and marketing, servicing or promoting

the employer’s financial products. However, an

employee whose primary duty is selling financial

the management or general business operations of the employer’s

customers).

68a

products does not qualify for the administrative

exemption.

29 C.F.R. § 541.203(b) (emphasis added).’ Contrary

to the assumption in Opinion Letter FLSA 2006-31,

the administrative exemption is only applicable to

employees that meet the requirements set forth in 29°

C.F.R. § 541.200. The regulation at 29 C.F.R.

§ 541.203(b) merely provides an example to help dis-

tinguish between those employees in the financial

services industry whose primary duty is related to the

management or general operations of the employer’s

customers and those whose primary duty is selling the

employer’s financial products. The fact example at

29 C.F.R. § 541.203(b) is not an alternative test, and its

guidance cannot result in it “swallowing” the require-

ments of 29 C.F.R. § 541.200.

As discussed above, mortgage loan officers typically

have the primary duty of making sales on behalf of

their employer; as such, their primary duty is not

directly related to the management or general busi-

ness operations of their employer or their employer’s

customers. Because of its misleading assumption and

selective and narrow analysis, Opinion Letter

FLSA2006-31 does not comport with this interpretive

* The case law and the Department’s enforcement experience

indicate that the duty listed last, pertaining to general promotion

work for the employer, is a minor aspect of a typical loan officer’s

job. Moreover, to the extent that such promotion work is per-

formed incidental to and in conjunction with an employee’s own

sales or solicitations, it is sales work. See 29 C.F.R. § 541.503(a).

69a

guidance and is withdrawn. Similarly, an Opinion

Letter dated February 16, 2001, 2001 WL 1558764,

also is withdrawn as inconsistent with this analysis.

Conclusion

Based upon a thorough analysis of the relevant factors,

the Administrator has determined that mortgage loan

officers who perform the typical duties described

above have a primary duty of making sales for their

employers and, therefore, do not qualify as bona fide

administrative employees exempt under section

13(a)(1) of the Fair Labor Standards Act, 29 U.S.C.

§ 213(a)(1).

70a

APPENDIX D

[SEAL OMITTED]

U.S. Department of Labor

Employment Standards Administration

Wage and Hour Division

Washington, D.C. 20210

FLSA2006-31

September 8, 2006

Dear Name’:

This is in response to your request for an opinion con-

cerning the application of the administrative exemp-

tion under section 13(a)(1) of the Fair Labor Standards

Act (FLSA), 29 U.S.C. § 213(a)(1) (copy enclosed),

and the implementing regulations at 29 C.F.R. Part

541 (copy enclosed), to certain employees employed as

mortgage loan officers. Based on the analysis below,

it is our opinion that the mortgage loan officers you

describe are exempt administrative employees.

You state that, in the industry, other job titles for re-

ferring to mortgage loan officers include “mortgage

loan representatives,” “mortgage loan consultants,”

“mortgage loan originators,” “mortgage bankers,” and

similar titles. Our response collectively refers to all

such employees as “mortgage loan officers.” Please

note, however, that an employee’s exempt status is not

determined based on job title or job classification;

rather, it is determined by an

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