The Supreme Court Decides The DOL’s Interpretation Regarding Pay for Mortgage Loan Officers

This short article first starred in the July 2015 dilemma of the Minnesota Bankers Association’s month-to-month publication.

The U.S. Supreme Court has decided that the federal Department of Labor’s (DOL’s) March 24, 2010, Administrator’s Interpretation that home loan officers typically should be compensated as nonexempt employees underneath the federal Fair work guidelines Act (FLSA) is enforceable. (Perez v. Mortgage Bankers Ass’n). Which means that, unless an exception applies, mortgage (as well as other) loan officers must, like all employees that are nonexempt keep an occasion record of them all worked, receive at least minimal wage for almost any hour worked, and start to become paid overtime for several hours worked over 40 in a work week. The 2010 Administrator’s Interpretation withdrew and reversed the DOL’s early in the day 2006 Opinion Letter developing the DOL’s position in those days that home loan (as well as other) loan officers typically had been precisely compensated as “administrative exempt” workers, maybe not subject to the timekeeping, minimal wage and overtime requirements of nonexempt workers.

The Supreme Court’s Choice

Following a launch of the 2010 Administrator’s Interpretation, a few challenges that are legal. The certainly one of many significance was at the D.C. Circuit (the home loan Bankers Ass’n case that fundamentally went along to the Supreme Court). In July 2013, the D.C. Circuit granted summary judgment into the Mortgage Bankers Association (MBA) and held that the 2010 Administrator’s Interpretation ended up being invalid as the DOL hadn’t followed the note-and-comment procedures of this Administrative that is federal Procedure for reversing its 2006 viewpoint.

The situation went along to the Supreme Court on that problem alone (rather than the problem of if the DOL’s Interpretation that home mortgage officers must certanly be compensated as nonexempt employees ended up being proper), as well as on March 9, 2015, the Supreme Court unanimously overruled the D.C. Circuit. This ruling implies that the 2010 Administrator’s Interpretation stands—mortgage (along with other) loan officers typically have to be compensated as nonexempt employees.

“Exempt” and “Nonexempt” – What’s the Difference?

The employee must be paid on a salary or fee basis (currently equaling no less than $455 per week) and the employee’s primary job duty must be the performance of nonmanual work that is directly related to the management or general business operations of the employer or the employer’s customers to be an “administrative exempt” employee under the FLSA.

Per the governing regulations, work associated with “management or business that is general” is work linked to assisting in operating or servicing the business enterprise, rather than work linked to manufacturing or selling a product. These include solutions like the after:

  • Tax, finance, accounting, budgeting, auditing, insurance
  • Quality control, purchasing, procurement
  • Marketing, advertising
  • Research
  • Security and health
  • Personnel management, hr, worker advantages, work relations, public relations, federal federal government relations
  • Computer system, internet and database management
  • Appropriate and regulatory conformity, and
  • Comparable tasks

In addition, an “administrative exempt” employee’s primary responsibility must through the workout of “discretion and separate judgment with regards to things of importance. ” This requirement is demonstrated because of the authority to produce significant decisions and perform major jobs or functions. Things to consider include the immediate following:

  • Whether or not the worker has authority to formulate, impact, interpret, or implement administration policies or running practices
  • Whether or not the worker carries down assignments that are major performing the operations of this company
  • Whether or not the employee executes work that affects company operations up to a degree that is substantial regardless of if the employee’s assignments are associated with procedure of a specific portion of this company
  • If the worker has authority to commit the manager in issues which have significant impact that is financial
  • Perhaps the worker has authority to waive or deviate from founded policies and procedures without prior approval
  • Or perhaps a worker has authority to negotiate and bind the business on significant things
  • Or perhaps a worker provides assessment or professional advice to administration
  • Whether or not the worker is taking part in preparing long- or business that is short-term
  • Whether or not the worker investigates and resolves issues of importance on the behalf of administration
  • Perhaps the worker represents the business in managing complaints, arbitrating disputes or resolving grievances

“Administrative exempt” workers should have the authority in order to make a separate choice, however their choices or suggestions might be evaluated at a greater degree. The exercise of discernment and separate judgment must be much more than making use of ability in using well-established methods, procedures or particular criteria described in manuals or other sources. The workout of discernment and separate judgment will not add clerical or secretarial work, recording or tabulating information, or performing other technical, repeated, recurrent or work that is routine.

The 2010 Administrator’s Interpretation determined that the principal duties of home mortgage officers typically weren’t compared to an “administrative exempt” employee but alternatively compared to a nonexempt inside product sales worker (in other words., a manufacturing worker) whoever task would be to make product product sales with respect to their employer in line with the following factual summary for the job that is primary and spend in accordance with real estate loan officers:

  • They solicit clients,
  • They get product sales training,
  • They frequently are paid by payment but may get some base or even a draw against commissions, and
  • These are typically held up to a manufacturing standard on the product product product sales of loan services and products.

The Possible Exclusion

The 2010 Administrator’s Interpretation acknowledged that home loan (as well as other) loan officers can be precisely categorized and compensated as administrative exempt workers in certain instances but as long as their main responsibility is straight pertaining to the administration or basic company operations of these company or their employer’s customers and meet most of the other demands for an administrative employee that is exempt. Simply put, creating sales to individual customers searching for mortgages and advice because of their purchase of one’s own houses will not qualify as administrative exempt work. But, if the client is a company and, as an example, is looking for advice about a home loan to get land for a unique manufacturing facility or other company function, the commercial loan officer might qualify as an administrative exempt employee in the event that officer were making choices associated with the typical company operations for the company client. Banks along with other companies must give consideration to very carefully, nevertheless, if they want their commercial loan officers become decisions that are making issues of importance straight pertaining to the customer’s business.


Pursuant into the 2010 Administrator’s Interpretation, banking institutions as well as other entities should review the classification that is exempt/nonexempt of their home loan (along with other) loan officers, both consumer and commercial, and discover whether any reclassification has to occur for appropriate conformity. Seeing lawyer with this review and decision-making is highly encouraged.

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