The United States Department of Labor (DOL) Wage & Hour Division has announced in their Administrator's Interpretation No. 2010-1 that commissioned loan officers will now be granted overtime pay. The DOL interprets the application of the Fair Labor Standard Act's (FLSA) administrative exemption to loan officers, finding that "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 business operations of their employer or their employer's customers."
This ruling is a departure from past DOL statements regarding loan officers' eligibility for overtime pay, and specifically withdraws the DOL's Sept. 8, 2006 Opinion Letter, which held that loan officers could be exempt from overtime pay under the administrative exemption.
After an analysis of the applicable statutory and regulatory provisions and a thorough review of the case law that has continued to develop on the exemption, the DOL Administrator issued its interpretation to provide needed guidance on the issue.
The DOL's interpretation that employees who perform the typical job duties of a mortgage loan officer 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).
DOL's investigations and the facts established that the following are typical of a mortgage loan officers job duties:
►Mortgage loan officers receive internal leads and contact potential customers or receive contacts from customers generated by direct mail or other marketing activity.
►Mortgage loan officers collect required financial information from customers they contact or who contact them, including information about income, employment history, assets, investments, homeownership, 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 particular loans, trying to match the customers’ needs with one of the company’s loan products.
►Mortgage loan officers also compile customer documents for forwarding to an underwriter or loan processor, and may finalize documents for closings.
Exemptions from minimum wage and overtime requirements under the FLSA “are to be narrowly construed against the employers seeking to assert them and their application limited to those establishments plainly and unmistakably within their terms and spirit.” 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:
►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;
►The employee’s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and
►The employee’s primary duty must include the exercise of discretion and independent judgment with respect to matters of significance.
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 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 employer’s customers.
Primary duty is work directly related to the management and general business operations of the employer. An employee’s primary duty is “the principal, main, major or most important duty that the employee performs.” 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 operations of the employer or the employer’s customers.” To be work directly related to the management or general business operations of the employer, the work must be defined as “directly related 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.” Work directly related to management or general business operations of an employer includes work in functional areas such as accounting, budgeting, quality control, purchasing, advertising, research, human resources, labor relations, and similar areas.
For more information, visit www.dol.gov.