DOL Determines that Mortgage Loan Officers are Not Exempt from Overtime

By | April 6th, 2010 | General

As perhaps a sign of the increasing authority being asserted by the Department of Labor under the Obama Administration, the Department withdrew two previous Opinion Letters and issued an Administrator’s Interpretation, concluding that a typical mortgage loan officer is not exempt from the overtime and minimum wage provisions of the Fair Labor Standards Act (FLSA).

Under the FLSA, employees must be paid at least the minimum wage for all hours worked and an overtime premium for hours worked in excess of forty. There are certain exemptions to these requirements, which are to be narrowly construed. One such exemption is the administrative exemption, which applies to employees performing office or non-manual work directly related to the management or general business of the employer (or its clients), whose primary duty requires the exercise of discretion and independent judgment on matters of significant and who are paid on a salary basis the minimum of $455 per week.

The main focus of the DOL’s analysis was on whether mortgage loan officers perform work “directly related to the management or general business operations of their employers or their employers’ customers.” The DOL concluded that they do not. The DOL concluded that the mortgage loan officers are primarily involved in the sale of home mortgages to individual customers. Because the sale of mortgages is a, if not the primary, service offered by mortgage companies and financial instittuions, mortgage loan officers are directly involved in the “production” side of a company’s business, rather than the “administrative” side, which would involve servicing the business itself and other activites relating to the internal management or general business operations of the company.

The DOL also rejected the argument that mortgage loan officers’ primary duty relates to the management or general business operations of their employer’s customers. Because mortgage loan officers’ customers are individuals seeking advice for their personal needs, rather than management or business operations of their companies, loan officers’ primary duty cannot related to the individual’s “business”. Note that the DOL acknowledged that if the customers were businesses seeking mortgages for new buildings, expansions, etc., the advice might be covered under the administrative exemption because it related to the customer’s business operations.

This administrative interpretation is significant not only for employers of mortgage loan officers, but also for employers generally with employees that they have classified as exempt under the administrative function. In making this determination, the DOL withdrew several prior interpretations issued under the Bush administration, signaling the shift in ideology within the Department. The analysis, however, suggests that the “production versus administrative” dichotomy is something of increasing significance to the DOL. Therefore, employers should be cautious about (1) assuming that highly paid employees, even if paid on salary, are exempt from overtime pay, and (2) not paying enough attention to whether the primary duty of an employee who they believe is exempt under the administrataive exemption is related to the services or products offered in the marketplace or “running the business” itself. Only those in the latter category are eligible for the administrative exemption.

If you have any questions about classifying employees as exempt or non-exempt, or the DOL’s current Administrative Interpretation, contact the Employers Legal Resource Center at 405-702-9797.

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