ALGENON L. MARBLEY, District Judge.
This matter is before the Court on "Defendant's Motion for Partial Summary Judgment and Memorandum in Opposition to Plaintiffs' Motion for Conditional Certification, Expedited Discovery and Court Supervised Notice to Potential Opt-In Plaintiffs Pursuant to 29 U.S.C. 216(B)." (Doc. 36.) This Court ruled on "Plaintiffs' Motion for Conditional Class Certification, Expedited Discovery and Court-Supervised Notice to Potential Opt-In Plaintiffs Pursuant to 29 U.S.C. § 216(b)," (Doc. 30), in an Opinion and Order filed on May 23, 2011, 789 F.Supp.2d 863 (S.D.Ohio 2011) (Doc. 45). The scope of this Opinion and Order, therefore, is limited and addresses only Defendant's Motion for Partial Summary Judgment. The Court heard oral argument from the parties on January 25, 2012. For the reasons that follow, Defendant's Motion for Partial Summary Judgment is
Plaintiffs are current or former Mortgage Loan Officers ("MLOs") employed by Defendant The Huntington National Bank ("Huntington" or "Defendant") during the time period from January 2008 to the present.
The majority of MLOs who are Plaintiffs in this lawsuit work in-house at Huntington. A MLO at Huntington is required to have a General Education Development (GED) or high school education, but does not have to complete any pre-certification or in-service training prior to beginning work. According to deposition testimony and declarations obtained from various Huntington employees who are or were employed as MLOs, or supervise or work with MLOs, the typical duties of an MLO include talking with customers, identifying loan products for those customers, and entering information into a computer program which helps the MLO determine whether a particular customer pre-qualifies or qualifies for a particular loan. The computer program also directs the MLO to additional documentation that must be collected to substantiate the loan. A number of MLOs stated in their declarations that their primary job duty is selling residential
MLOs do not have underwriting authority or authority provisionally to approve mortgages. Some MLOs stated in their declarations that they do not have the authority to offer lower interest rates on their own, and that they are unable to waive or to discount required applications fees. In the event fees are not collected, MLOs will be subject to having those fees deducted from their compensation. MLOs are evaluated on their ability to produce mortgage sales, productivity, customer satisfaction, and timeliness related to complying with deadlines. If MLOs are unable to meet certain production goals, they will be subject to a Performance Improvement Plan, and can eventually be terminated.
Huntington pays the majority of its MLOs according to its Production Commission and Incentive Compensation Plan ("Plan"). Huntington pays those MLOs who work out of Huntington's corporate offices under its Production Commission and Incentive Compensation Plus Salary Plan ("Salary Plan"). All MLOs are paid under one of these two plans. MLOs paid under the Plan receive only commission earned for loans closed, and MLOs paid under the Salary Plan receive a combination of commission and salary. Huntington pays its MLOs in bimonthly draws that it offsets against the employee's commission earnings, which are paid only after a mortgage closes.
Plaintiffs challenge two of Huntington's wage practices. First, although a number of MLOs have stated in their declarations that they sometimes work more than forty hours per week,
Plaintiff Tom Lewis filed a three-count complaint on January 18, 2011. (Doc. 1.) Plaintiff then filed two amended complaints, the first adding Plaintiff Matthew Coulter, and the second removing several named defendants and replacing them with Huntington only. (Doc. 15 & 26.) The Second Amended Complaint, filed on
Plaintiffs filed a "Motion for Conditional Class Certification, Expedited Discovery and Court-Supervised Notice to Potential Opt-In Plaintiffs Pursuant to 29 U.S.C. § 216(b)" in March of 2011, (Doc. 30), and Defendant filed its opposition to that motion and Motion for Partial Summary Judgment thereafter, (Doc. 36). Plaintiffs also filed an "Emergency Motion for Protective Order, Cease and Desist Order, the Immediate Granting of Plaintiffs' Motion for Court Supervised Notice, Sanctions, and Corrective Actions" in May of 2011. (Doc. 40.) This Court granted in part and denied in part both of Plaintiffs' motions in its May 23, 2011 Opinion and Order. (Doc. 45.) It authorized Plaintiffs to proceed collectively pursuant to 29 U.S.C. § 216(b),
In their Motion for Partial Summary Judgment, Defendant moves the Court to: (1) dismiss Plaintiffs' overtime compensation claims under the FLSA and Ohio Wage Act
The FLSA generally requires covered employers to pay minimum wages and overtime compensation for hours of work exceeding 40 in a workweek at a rate of one and one-half times an employee's regular rate of pay. 29 U.S.C. §§ 206(a), 207(a)(1). Exempt from the minimum wage and overtime compensation provisions of the FLSA, however, is any employee who is "employed in a bona fide ... administrative ... capacity." 29 U.S.C. § 213(a)(1). Any employees that qualify as administratively exempt, therefore, are not entitled to overtime compensation under the FLSA.
The Wage and Hour Division ("WHD") of the Department of Labor ("DOL") administers and enforces the FLSA, and issues regulations and interpretations of those regulations. In 2004, the WHD revised its regulations governing administratively exempt employees under the FLSA. 29 C.F.R. §§ 541.200-541.204. Moreover, the WHD has issued three Opinion Letters and one Administrator's Interpretation total — two issued prior to the regulation revisions and two after — interpreting its regulations to determine the status of MLOs under the administrative exemption.
In May of 1999, the WHD issued an Opinion Letter in response to a request regarding the exempt status of MLO under § 213(a)(1). Opinion Letter, 1999 WL 1002401, 1999 DOLWH LEXIS 54 (Dep't of Labor May 17, 1999) ("1999 Opinion Letter"). The MLOs employed by the requestor of the Opinion Letter were responsible for developing new business for their employer by contacting prospective borrowers and referral sources; evaluating the borrowers' financial situation and providing a pre-qualification letter; consulting with borrowers to obtain the best loan package available; working with lenders in selecting loan programs for borrowers; consulting with borrowers regarding desirability of locking in a given interest rate; assisting the borrowers in preparing a loan application; presenting and obtaining borrowers' signatures; submitting loan applications to the central office; and consulting with loan processors or borrowers to resolve any problems. Id. at *1-2. The MLOs were subject to minimal supervision by branch managers. Id. at *2.
Based on the information provided, a member of the Office of Enforcement Policy, Fair Labor Standards Team
A letter was filed in response to the 1999 Opinion Letter, requesting that the WHD reconsider its finding in the 1999 Opinion Letter that MLOs were not exempt "in light of the advisory duties they perform on behalf of their employer's customers." Opinion Letter, 2001 WL 1558764, 2001 DOLWH LEXIS 5, at *1 (Dep't of Labor Feb. 16, 2001) ("2001 Opinion Letter"). Specifically, the response letter pointed out that the MLOs worked with borrowers to create loan packages that best met the goals of the borrowers while complying with various lender requirements. Id. The MLOs selected from a wide range of loan packages and supervised the processing of the transaction until closing. Id. In order for the MLO to perform these duties, the employer explained, the MLO had to understand a customer's credit history and financial goals. Id.
A member of the Fair Labor Standards Team found that while it agreed the primary duties of the MLOs were the performance of office or nonmanual work directly related to management policies or general business operations, MLOs were not exercising the necessary discretion and independent judgment to be considered administratively exempt. Id. at *2-3. The WHD explained that it appeared that the MLOs were "using their skill and knowledge in applying techniques, procedures, and/or specific standards (such as loan-to-value rations and debt ratios) in choosing already established loan packages," and such tasks did not demonstrate the requisite exercise of discretion and independent judgment to categorize the MLOs as administratively exempt. Id.
The revisions to the regulations addressing administratively exempt employees under the FLSA became effective on August 23, 2004. Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees, 69 Fed.Reg. 22122 (Apr. 23, 2004) (to be codified at 29 C.F.R. pt. 541) (hereinafter "Defining the Exemptions"). Under the revised 29 C.F.R. § 541.200, an administratively exempt employee under the FLSA is one who is:
An employee exercises discretion and independent judgment when he or she compares and evaluates possible courses of conduct, and acts or makes a decision after considering various possibilities. 29 C.F.R. § 541.202(a). Whether an employee is exercising discretion and judgment is a fact-specific inquiry. 29 C.F.R. § 541.202(b). Nevertheless, factors to consider are whether the employee:
Id. The exercise of discretion and independent judgment does not include "clerical or secretarial work, recording or tabulating data, or performing other mechanical, repetitive, recurrent or routine work." 29 C.F.R. § 541.202(e).
Finally, § 541.203 was added as a new provision to the regulations in 2004 that provides "administrative exemption examples." Of import here is subsection (b), which provides:
29 C.F.R. § 541.203(b) (emphasis added).
The preamble to the 2004 revised regulations explains that § 541.203(b) is consistent with case law that distinguishes between exempt and nonexempt financial service employees based on the primary duty they perform. Defining the Exemptions, 69 Fed.Reg. at 22146. Prior to the regulatory revisions, federal courts had
The WHD issued another Opinion Letter in 2006, this time signed by the WHD Administrator himself, addressing whether certain MLOs were administratively exempt from the minimum wage and overtime compensation provisions of the FLSA. Opinion Letter, 2006 WL 2792445, 2006 DOLWH LEXIS 42, at *1, 19 (Dep't of Labor Sept. 8, 2006) ("2006 Opinion Letter"). This time, however, the WHD found that the MLOs qualified under the exemption. Id. at *12-19.
The MLOs at issue in the 2006 Opinion Letter worked with employer's customers to assist them in identifying and securing mortgage loans. Id. at *4. The MLOs did this by responding to on customer leads; collecting and analyzing customer financial information; assessing customer financial circumstances to determine if the customer would qualify for a loan; and advising the customer about the risks and benefits of the loan alternatives. Id. Some of the MLOs used technological tools to assist in communicating a loan prequalification, loan pre-approval, or qualified loan approval. Id. at *5. The MLOs sales activities were described as "customer-specific persuasive sales activity, such as encouraging an individual potential customer to do business with his or her employer's mortgage banking company rather than a competitor, or to consider the possibility of a mortgage loan if they have not expressed prior interest." Id.
Based on this description of MLO job duties provided, the WHD concluded that the MLOs had "a primary duty other than sales, as their work includes collecting and analyzing a customer's financial information, advising the customer about the risks and benefits of various mortgage loan alternatives in light of their individual financial circumstances, and advising the customer about avenues to obtain a more
In March of 2010, the WHD issued an Administrator's Interpretation regarding the application of the administrative exemption to employees who perform the typical job duties of a MLO. Administrator's Interpretation No. 2010-1, 2010 WL 1822423, 2010 DOLWH LEXIS 1, at *1 (March 24, 2010) ("2010-1 AI"). The WHD found that the primary duty of a MLO is making sales on behalf of his or her employer, which is not directly related to the management or general business operations of the employer or the employer's customers, and therefore, MLOs did not meet the requirements under the administrative exemption. Id. at *30. The WHD withdrew the 2006 Opinion Letter "[b]ecause of its misleading assumption and selective and narrow analysis." Id. The 2001 Opinion Letter was also withdrawn because the member of the Fair Labor Standards Team had concluded, incorrectly, that the primary duties of the MLO were office and nonmanual work directly related to management policies or generally business operations (even though the ultimate conclusion of the Opinion Letter was that MLOs were not administratively exempt). Id.
The WHD examined federal case law to determine the typical job duties of an MLO, and found that those duties included the following:
Id. at *3-4. The WHD explained that the "case law and regulatory distinction between servicing 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." Id. at *13. MLOs typical job duties indicate, the WHD reasoned, their primary duty is making sales. Id. at *15-16. The
Summary judgment is proper if "there is no genuine dispute as to any material fact." Fed.R.Civ.P. 56(a). But "summary judgment will not lie if the ... evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). In considering a motion for summary judgment, a court must construe the evidence in the light most favorable to the non-moving party. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).
The movant therefore has the initial burden of establishing that there is no genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Barnhart v. Pickrel, Schaeffer & Ebeling Co., 12 F.3d 1382, 1388-89 (6th Cir.1993). The central inquiry is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson, 477 U.S. at 251-52, 106 S.Ct. 2505. If the moving party meets its burden, then the non-moving party is under an affirmative duty to point out specific facts in the record, which create a genuine issue of material fact. Fulson v. City of Columbus, 801 F.Supp. 1, 4 (S.D.Ohio 1992). The non-moving party may not rest merely on allegations or denials in its own pleadings, see Celotex, 477 U.S. at 324, 106 S.Ct. 2548, but must present "significant probative evidence" to show that there is more than "some metaphysical doubt as to the material facts." Moore v. Philip Morris Cos., Inc., 8 F.3d 335, 340 (6th Cir.1993).
"[A]t the summary judgment stage the judge's function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson, 477 U.S. at 249, 106 S.Ct. 2505. Moreover, a district court is not required to sift through the entire record to drum up facts that might support the nonmoving party's claim. InterRoyal Corp. v. Sponseller, 889 F.2d 108, 111 (6th Cir.1989). Instead, the court may rely on the evidence called to its attention by the parties. Id.
Huntington asserts that it has established an affirmative good faith defense under the Portal-to-Portal Pay Act and, consequently, should be awarded summary judgment on Plaintiffs' overtime compensation claims. Once an employer establishes this good faith defense, Huntington contends, it has "absolute immunity from paying unpaid overtime compensation, liquidated damages, court costs, or attorney's fees for FLSA violations." (Doc. 32) (citing Schneider v. City of Springfield, 102 F.Supp.2d 827, 832 (S.D.Ohio 1999); Marshall v. Baptist Hosp., Inc., 668 F.2d 234,
The Portal-to-Portal Pay Act states, in pertinent part, that:
See 29 U.S.C. § 259(a). Subsection (b)(1) includes the Administrator of the WHD of the DOL. 29 U.S.C. § 259(b)(1). If an employer can prove this affirmative defense, it will act as a bar to "the action or proceeding, notwithstanding that after such act or omission, such administrative regulation, order, ruling, approval, interpretation, practice, or enforcement policy is modified or rescinded or is determined by judicial authority to be invalid or of no legal effect." 29 U.S.C. § 259(a).
To establish a good faith affirmative defense under § 259, an employer must show that it acted in: (1) reliance on; and (2) conformity with a WHD regulation, Opinion Letter, or Administrator's Interpretation; and (3) in good faith. 29 U.S.C. § 259(a); Frank v. McQuigg, 950 F.2d 590, 598 (9th Cir.1991); Hultgren v. Cnty. of Lancaster, Neb., 913 F.2d 498, 507 (8th Cir.1990); see Schneider, 102 F.Supp.2d at 832. This Circuit has explained that in close cases, courts should consider "the reasonableness of the employer's actions in light of the administrative interpretation in question." Marshall, 668 F.2d at 238. But this Court is also mindful that federal courts have noted that the "burden of proof is a heavy one, since a defense under § 259 would act as a bar to this proceeding, thereby absolving [the defendant] of liability and penalties for any past FLSA violations." See, e.g., Figas v. Horsehead Corp., Civil Action No. 06-1344, 2008 WL 4170043, at *21 (W.D.Pa. Sept. 3, 2008).
Defendant contends that material facts establish the merits of its affirmative defense, while Plaintiffs argue genuine issues of material fact exist as to whether Huntington has met its burden with respect to each element of the defense. This Court finds, for reasons explained at greater length below, that genuine issues of material fact exist as to whether Huntington relied on the 2006 Opinion Letter and whether Huntington conformed to the 2006 Opinion Letter.
Huntington argues that it relied upon the 2004 regulations and 2006 Opinion Letter
Houck consulted with both internal and external experts in drawing her conclusion that MLOs were exempt from the minimum wage and overtime compensation provision of the FLSA. For example, she consulted with Robert Nussbaum, a Compensation Manager, and Bob Davis, an attorney who was "intimately involved with the formulation of the financial services example in the 2004 regulations." Id. Houck also conducted an audit in 2005 of the MLO position with Nussbaum and the Corporate Human Resources Manager, Shirley Graham, in which she considered the job description and training provided to MLOs, and had discussions with the "Mortgage Group manager, and individuals who directly managed the MLOs, individuals who reported to the MLOs and individuals who worked in collaboration with the MLOs, to assess the MLOs' job duties." Id. at 7. Houck also gave a presentation to the MLOs' managers regarding the administrative exemption and financial services industry example in the 2004 revised regulations after the audit was completed. After the 2006 Opinion Letter was released, Houck consulted with attorneys who were familiar with the Letter and the Mortgage Retail Division Manager "to discuss and assess the MLOs' job duties in light of the 2006 Opinion Letter." Id. at 8.
Plaintiffs argue that Huntington has not established that it actually relied on the 2006 Opinion Letter in either formulating or maintaining its policy of exempting MLOs, and therefore, cannot sustain its burden on summary judgment. Houck testified that Huntington always classified the MLOs as exempt, despite the 1999 and 2001 Opinion Letters. Plaintiffs contend that this demonstrates that there is a genuine issue of material fact as to whether Huntington actually relied upon the 2004 revised regulations (specifically the new provision, 29 C.F.R. § 541.203) and 2006 Opinion Letter. (Doc. 100) (citing Figas, 2008 WL 4170043, at *22 (finding defendant arguing it had an affirmative defense under § 259 was not entitled to summary judgment where the policies it had predated the DOL's Opinion Letters upon which it claimed to have relied); In re Cargill Meat Solutions Wage and Hour Litig., 632 F.Supp.2d 368, 392 (M.D.Pa.2008) ("Cargill at no time changed its payment/non-payment policy at the Hazelton Plant since its inception in January of 2002. At the very least, there is a genuine question of material fact as to whether Cargill acted in good faith in relying on the June 6, 2002 opinion letter.")). Plaintiffs conceded at the summary judgment hearing, however, that Huntington had a right to rely on the 2006 Opinion Letter.
Huntington relies on Quinn v. New York State Electric and Gas Corporation, 621 F.Supp. 1086, 1091 (N.D.N.Y.1985), to support its argument that an employer should be granted summary judgment where the employer establishes that it relied on a regulation in maintaining a policy established before the regulation was promulgated. In Quinn, an employee brought an action under the Age Discrimination in Employment Act ("ADEA") against its employer seeking relief from the employer's policy of age discrimination in selection of employees for positions in its training program. 621 F.Supp. at 1088. The employer argued it relied in good faith on a regulation that exempted bona fide apprenticeship
The Court concluded that the defendant employer had established, "as a matter of law, the defendant relied on the regulation allowing an exemption from ADEA provisions for bona fide apprenticeship programs when it continued to maintain the maximum age limit for entry into [the apprenticeship program]." Id. at 1091. The defendant was aware of the regulations and consulted the regulations to ensure compliance. Id. at 1090. Notably, however, the 1969 regulation was the first of its kind, and it had never been preceded by a conflicting regulation.
In Figas, the case Plaintiffs rely on to counter Huntington's position, employees of a zinc processing facility brought a FLSA action against their employer that had a practice of not paying the employees for the time they spent donning and doffing their protective clothing, showering, and walking to and from the locker rooms. 2008 WL 4170043, at *1-2. The employer argued that it had an affirmative defense under § 259 because it had relied on two Opinion Letters from 2007. Id. at *22. But the court held the employer could not establish its affirmative defense at the summary judgment stage because its practice of not compensating its employers for their donning, doffing, and washing time predated the 2007 Opinion Letters, and the employer's practice of nonpayment was contrary to, rather than in accordance with, the applicable DOL rulings for much of its history. Id.
This Court finds that Huntington is unable to satisfy the first element of its § 259 affirmative defense at the summary judgment stage. Huntington's policy of treating MLOs as exempt predated the 2006 Opinion Letter. And prior to the 2006 Opinion Letter, the 1999 and 2001 Opinion Letters categorized MLOs as not exempt.
Even if Huntington was able to establish the first element of its affirmative defense under the Portal-to-Portal Pay Act at the summary judgment stage, this Court would nevertheless be unable to award summary judgment because Huntington has not proven the second element of its defense: conformity. To demonstrate conformity with a WHD Opinion Letter, an employer must prove that "its actions actually conformed with the letter" and that the "circumstances described in the opinion letter" match the employer's own "actual circumstances." Hultgren, 913 F.2d at 507; Frank, 950 F.2d at 598. The conflicting evidence presented by the parties, as to the typical duties of the MLOs, indicates that there is a genuine issue of material fact as to whether the duties of MLOs at Huntington matched the duties of the MLOs described in the 2006 Opinion Letter.
Absent from Huntington's briefs are facts indicating Houck had a discussion with a MLO regarding his or her primary job duties — rather than a MLO supervisor, manager, etc. — during the time period that she was evaluating whether Huntington's MLOs were exempt under the 2004 revised regulations and 2006 Opinion Letter. Defendant's reply brief contains facts detailing how Houck met with "individuals who directly managed the MLOs, individuals who reported to the MLOs and individuals who worked in collaboration with the MLOs" to assess whether the exemption applied. (Doc. 111.) Yet, as Plaintiffs point out, it appears Huntington's "`audit' failed to interview, either individually or in a group setting, a single MLO," and "[n]o MLOs were talked to about what they perceived their primary duties were and no one in management observed any MLOs doing their job so as to independently confirm that the actual performance of the job by an MLO was consistent with the either the [sic] CFR or the Opinion Letter." (Doc. 100, p. 36, 36 n. 49.) Defendant also fails to articulate what exactly Houck determined the typical duties of an MLO at Huntington were as a result of her audit and various discussions with management and supervisors.
Plaintiffs, on the other hand, have recounted lengthy testimony from actual MLOs describing their duties at Huntington, and a reasonable trier of fact could determine that those duties did not qualify the MLOs as administratively exempt under the relevant 2004 revised regulations and the 2006 Opinion Letter. A reasonable jury could conclude that Huntington has not demonstrated conformity with the 2006 Opinion Letter because it has failed to show that the circumstances described in the Opinion Letter actually match the circumstances at Huntington.
For example, the MLOs at issue in the 2006 Opinion Letter collected and analyzed customer financial information and advised the customers about the risks and benefits of loan alternatives. 2006 Opinion Letter, at *4. Plaintiffs have provided evidence that MLOs at Huntington did not perform these types of duties. Rather, Plaintiffs support the following statements with extensive declaration testimony from the MLOs at Huntington: (1) MLOs do not provide any services to customers beyond those necessary to sell mortgages, (Doc. 100 at 31-34); (2) MLOs are not required by Huntington to determine the best financial product for the customers, id. at 34; and (3) Huntington does not have any policies,
Defendant relies on Marshall to support its argument that it acted in conformity with the 2006 Opinion Letter. (Doc. 111) (citing 668 F.2d 234).
While the regulation itself was somewhat ambiguous given a conflict between the first and second sentences, it was clear that the hospital was acting in conformity with the second sentence of the regulation when it categorized its X-ray students as exempt in reliance on the regulation. Id. at 238 ("One sentence, the first, suggests that the administrative agency retains discretion to judge medical training programs on a case by case basis. The next sentence then provides a specific rule that eliminates agency discretion in cases involving nurses and X-ray technicians. The two sentences would be inconsistent unless the second sentence is read as an exception to the first."). The issue in Marshall did not involve making a determination as to the typical duties of an X-ray students, or whether the students at issue could be categorized as X-ray students under the regulation, but whether the actual regulation clearly exempted X-ray students. Id. Here, the 2006 Opinion Letter is not ambiguous as to whether the MLOs discussed in the 2006 Opinion Letter were exempt. The issue is whether Huntington was conforming to the Letter, and if Huntington's actual circumstances matched the circumstances described in the Letter.
Huntington may, ultimately, be able to persuade a finder of fact that it actually relied upon and acted in conformity with the 2006 Opinion Letter, and is thus entitled to a good faith affirmative defense under the Portal-to-Portal Pay Act, but it has not met its burden at this stage of the litigation. Huntington's Motion for Partial Summary Judgment is
Huntington argues that this Court should set aside the 2010-1 AI because it
Defendant relies on Paralyzed Veterans of America v. D.C. Arena, to support its contention that "[o]nce 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." Id. (citing 117 F.3d 579, 586 (D.C.Cir.1997)); see also Alaska Prof'l Hunters Ass'n v. FAA, 177 F.3d 1030, 1034 (D.C.Cir.1999) ("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 without notice and comment."). Huntington contends that the Sixth Circuit adopted the reasoning of these D.C. cases in Dismas Charities, Inc. v. U.S. Dep't. of Justice, 401 F.3d 666, 679 (6th Cir.2005). The 2006 Opinion letter was a formal, written pronouncement of the WHD's interpretation of its regulations because, Huntington argues, it was "published via legal research tools and on its website for purposes of providing compliance guidance." Id. In the 2010-1 AI, the WHD expressly withdrew its 2001 and 2006 Opinion letters, and admitted that because the 2010-1 AI "unambiguously represents a change in the [WHD's] interpretation of its administrative exemption regulations," applies only prospectively. See 2010-1 AI.
Plaintiffs counter that Defendant's argument has no merit. No notice and comment period is required where, as here, the WHD issued an interpretation of an existing regulation, in contrast to promulgating a new regulation. The APA expressly exempts interpretive rules from the notice and comment requirements. (Doc. 100) (citing 5 U.S.C. § 553(b)(A)). Huntington also argues that the Sixth Circuit has drawn distinctions between the interpretative rules that substantively create law and interpretive rules that merely clarify or explain existing law. Id. (citing Dismas Charities, 401 F.3d at 679 ("The rulemaking requirements of § 553 of the APA do not apply to `interpretative rules.'"); First Nat. Bank of Lexington, Tenn. v. Sanders, 946 F.2d 1185, 1188-89 (6th Cir.1991) ("For purposes of the APA, substantive rules are rules that create law.... [i]nterpretative rules merely clarify or explain existing law or regulations and go to what the administrative officer thinks the statute or regulation means") (internal quotations omitted)).
Plaintiffs rely on case law from the First, Second, Fourth, Seventh, and Ninth Circuits, finding that changes in agency interpretations do not require notice and comment because both the original and current positions constitute interpretive rules. Plaintiffs also cite one case from the Eastern District of Michigan in which the court explicitly rejected the argument that the 2010-1 AI was improperly-promulgated "rulemaking" under the APA. See Biggs v. Quicken Loans, Inc., Case No. 10-cv-11928, 2011 WL 5244819 (E.D.Mich. Mar. 21, 2011).
(Doc. 112.)
The party that challenges an agency's action as arbitrary and capricious bears the burden of proof. City of Olmsted Falls, Ohio v. Federal Aviation Admin., 292 F.3d 261, 271 (D.C.Cir.2002). Whether an agency has complied with the APA's notice and comment requirements is a question of law for the courts, and if a court finds noncompliance, vacating the agency action is the standard remedy. Am. Bioscience, Inc. v. Thompson, 269 F.3d 1077, 1083 (D.C.Cir.2001).
There are two statutes at issue here. First, Huntington urges this Court to set aside the 2010-1 AI using its powers under 5 U.S.C. § 706(2)(A), which provides, in pertinent part, that a court shall "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 law." Second, Huntington argues that this Court should do so because the 2010-1 AI impermissibly reverses the DOL's prior definite interpretation set forth in the 2006 Opinion Letter without holding a notice and comment period as required under 5 U.S.C. § 553. Section 553(b) states that "[g]eneral notice of proposed rule making shall be published in the Federal Register," but explicitly notes that this requirement does not apply "to interpretative rules, general statements of policy, or rules of agency organization, procedure, or practice," § 553(b)(A).
This Court cannot ignore the plain language of § 553(b)(A), the Supreme Court case law, specifically Guernsey, and Sixth Circuit case law, and, therefore, declines Defendant's invitation to set aside the 2010-1 AI. See Guernsey, 514 U.S. at 99, 115 S.Ct. 1232 ("Interpretative rules do not require notice and comment"); Friedrich v. Sec'y of Health and Human Servs., 894 F.2d 829, 830-32 (6th Cir.1990) (holding rules that apply the language of a legal enactment to specific facts are interpretive rules exempt from the APA's notice and comment requirement); St. Francis Health Care Centre v. Shalala, 205 F.3d 937, 947 (6th Cir.2000) (finding that a Medicare manual provision that set forth a new formula for exemptions to Medicare reimbursement caps was interpretive and "creates no new law," and therefore exempt from the notice and comment requirements); Dismas Charities, 401 F.3d at 670 (finding two Bureau of Prisons memoranda were exempt from the notice and comment requirements of the APA because they were interpretive, rather than legislative).
This Court finds Huntington's reliance on Dismas Charities unavailing. The Sixth Circuit, relying on Alaska Prof'l Hunters, drew a distinction between an agency interpretation of a statute and a regulation. 401 F.3d at 682. The Circuit explained:
Id. (emphasis in original). However, the Sixth Circuit drew this distinction in dicta. The Dismas Charities court also made clear that notice and comment "will often" be required before the interpretation of a regulation was modified. Id. The court did not state that notice and comment would be required every time an agency modifies its interpretation of a regulation. Rather, sometimes, notice and comment might be necessary.
Huntington has failed to demonstrate that the 2010-1 AI was "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A). This Court finds that it was well-within WHD's discretion to issue Opinion Letters and Administrator's Interpretations of the FLSA Regulations. Accordingly, Defendant's Motion for Partial Summary Judgment is
Huntington contends that the 2010-1 AI should be set aside because it is inconsistent with the plain language of 29 C.F.R. § 541.203(b). Huntington argues that while the same MLO duties are discussed in § 541.203(b) and the 2010-1 AI, the 2010-1 AI concludes those duties are non-exempt sales activities, while § 541.203(b) reaches the opposite conclusion. The preamble to the 2004 revised regulations and the case law cited therein, Defendant argues, is inconsistent with the 2010-1 AI. (Doc. 36) (citing Defining the Exemptions, 69 Fed.Reg. at 22146 ("many financial services employees qualify as exempt administrative employees, even if they are involved in some selling to customers");
Plaintiffs counter that the plain language of § 541.203(b) is not contrary to the 2010-1 AI, noting that § 541.203(b) "merely provides an example of how the administrative duties test in § 541.200(a) may be applied to financial service employees; it does not provide an alternative test." (Doc. 100.) The 2010-1 AI applies the test set forth in § 541.200(a), consistently with the example contained in § 541.203(b), and consequently, there can be no serious argument that 2010-1 AI was either erroneous or inconsistent with the 2004 revised regulations. Plaintiffs also contend that Defendant's argument related the WHD's reliance in the 2010-1 AI on 29 C.F.R. §§ 541.500, 541.503 has no merit. WHD merely consulted the "outside sales exemption in determining whether an employee's primary duty is making sales," id., and Huntington provides no persuasive argument as to why this would make the WHD's determination in the 2010-1 AI arbitrary and capricious. In its Statement of Interest, the United States agrees with Plaintiffs.
An agency's interpretation of its own regulation is controlling unless it is "plainly erroneous or inconsistent with the regulation." Auer v. Robbins, 519 U.S. 452, 461, 117 S.Ct. 905, 137 L.Ed.2d 79 (1997) (internal quotation marks omitted); Chase Bank USA, N.A. v. McCoy, ___ U.S. ___, 131 S.Ct. 871, 880-82, 178 L.Ed.2d 716 (2011). Such an interpretation is binding unless an "alternative reading is compelled by the regulation's plain language or by other indications of the Secretary's intent at the time of the regulation's promulgation." Gardebring v. Jenkins, 485 U.S. 415, 430, 108 S.Ct. 1306, 99 L.Ed.2d 515 (1988). Again, the party that challenges an agency's action as arbitrary and capricious bears the burden of proof. City of Olmsted, 292 F.3d at 271.
Huntington has not met its burden of establishing the 2010-1 AI is "plainly erroneous or inconsistent with the regulation." Auer, 519 U.S. at 461, 117 S.Ct. 905. Section 541.203(b) provides examples of how the administrative duties test in § 541.200(a) may be applied to financial service employees, rather than an alternative test, and lists duties an exempt employee would normally perform, and further lists one duty, having a primary duty of sales, that disqualifies an employee from being categorized as administratively exempt. As explained above, the preamble to the 2004 revised regulations explains that § 541.203(b) is consistent with the existing case law. The qualifying duties reflect the responsibilities of the financial service employees in three insurance cases, John Alden, Hogan, and Wilshin, and the disqualifying duty reflects the primary duty of loan originators in the Casas case. Defining the Exemptions, 69 Fed. Reg. at 22146. The WHD discussed and analyzed these cases, and others, in the 2010-1 AI. This Court concludes that because the 2010-1 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 2010-1 AI was either erroneous or inconsistent with the 2004 revised regulations. Finally, this Court also finds that it is of no import that the WHD consulted 29 C.F.R. §§ 541.500, 541.503 to help make a determination regarding
Therefore, Defendant's Motion for Partial Summary Judgment is
For the foregoing reasons, Defendant's Motion for Partial Summary Judgment is
While this Court does find this distinction relevant, it does not change the fact that at the time Huntington established its policy of treating MLOs as administratively exempt, the only interpretations from the WHD categorized MLOs as administratively exempt. This fact supports the Court's conclusion that there is, indeed, a genuine issues of fact regarding whether the Defendant did in fact rely on the WHD's interpretation, or whether it established its policy without taking into consideration the existing WHD interpretations.
