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How effective is credit rescoring?

National Mortgage Professional
Mar 13, 2006

Loan officers: Can they truly be considered exempt?Ari KarenFLSA, exempt and non-exempt, wage and hour laws, DOL Unless employees meet an exemption to the Fair Labor Standards Act (FLSA), they will be subject to wage and hour laws requiring the payment of minimum wage, overtime and record keeping. There are several exemptions under the FLSA, one of which is referred to as the administrative exemption. One of the several components of the administrative exemption requires that the employee's primary duty be the performance of work related to the management or general business operations of the employer or the employer's customers that require independent discretion and judgment of matters of significance to the business. It is this portion of the administrative exemption that causes great confusion and often leads to the misclassification of employees. An employer familiar with the exemption can prepare focused job descriptions, employment contracts and other job structures consistent with the requirements of the exemption. Such actions can prevent and/or minimize any audit by the U.S. Department of Labor, even in cases where the exempt classification is not without doubt. As such, it is imperative that mortgage brokers understand the range of functions that may render a loan officer exempt versus nonexempt. For example, loan officers who merely make cold calls or take applications over the Internet will normally not meet the exemption. However, loan officers who oversee the loan approval process, educate and advise customers about a variety of loan products, negotiate pricing, have discretion to reject applications, participate in marketing and mentor junior loan officers may very well be considered exempt if all other aspects of the administrative test are met. As long as the employer can show that the loan officers' duties are primarily focused on such matters, the administrative exemption may be applicable. Often, there is a large gray area between exempt and non-exempt employment within which a business may operate. There are certain factors that have a significant impact on an auditor's assessment of the classification. For instance, the number of levels of supervision can have a significant impact on the determination. Indeed, the greater the levels of supervision above a loan officer, the more difficult an exemption will be to justify. Even one level of supervision between a loan officer and the branch manager could prove fatal to the exempt classification. On the other hand, a loan officer who mentors or oversees junior loan officers should have a much easier time justifying the exemption. Another example of an issue that tends to undermine classification applies to the detailed level of controls placed on how the loan officer does his job. Although an employer is free to direct and control his staff, the greater the minutiae of control over how the job is done, the less likely it is that that employee is to be considered exempt. By way of example, many mortgage brokers require loan officers to make a certain minimum of calls per day to sell loans. Beyond the fact that making sales calls tends to not be considered exempt work, the fact that the employer is dictating the manner in which the employee chooses to sell loans undermines the demonstration that the employee works with significant discretion and is free to use his judgment. In those cases that fall in the gray area between exempt and non-exempt, it is the implicit authority and confidence placed in the loan officer by the employer that will often make the difference. The greater the trust placed in the loan officer, the greater the amount of autonomy provided and the better the chance the loan officer will be considered exempt. Conversely, loan officers who merely execute instructions but do not make independent decisions are likely to be considered non-exempt. Mortgage brokers also must understand that just as important as what loan officers do is how their job is described. Brokers must remember that auditors and judges often lack intimate familiarity with the industry and will thus focus on the language and terminology used to describe a job. For example, a job description focusing on specific duties such as obtaining credit scores, obtaining financial documents and filling out application forms will not support an exemption. Conversely, job descriptions highlighting the fact that loan officers oversee the entire loan process and supervise the collection, analysis and dissemination of supporting information will support an exempt classification. Hence, it is not only important how a job is structured, but also the manner in which the position is described. Mortgage brokers who wish to use the administrative sales exemption are encouraged to retain the services of an attorney experienced in the area of wage and hour laws who can best assess whether a job meets all of the requirements for exempt status, how it could be structured as exempt and how to properly support the exemption through employment contracts and job descriptions. Such consultation should involve only minimal cost, and its rewards and avoidance of liability can prove to be significant. Ari Karen is a partner with Krupin O'Brien LLC, a national law firm that represents employers in labor relations and employment law. He may be reached at [email protected]
Published
Mar 13, 2006
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