Financial institutions could unwittingly be violating the Fair Labor Standards Act, 29 U.S.C. §201 et seq., by failing to pay mortgage loan officers overtime compensation. In a March 2010 decision, the United States Department of Labor (DOL) determined that most mortgage loan officers are not exempt from the overtime provisions of the Fair Labor Standards Act (FLSA).
In Administrator’s Interpretation No. 2010-1, the DOL found that mortgage loan officers do not constitute bona fide administrative employees exempt from overtime under FLSA. In reaching its conclusion, the DOL analyzed job duties and compensation associated with mortgage loan representatives, mortgage loan consultants and mortgage loan originators (collectively referred to as “mortgage loan officers” by the DOL).
An employee is exempt from FLSA’s overtime provisions under the bona fide administrative employee exception if the following tests are met:
- The employee must be compensated on a salary or fee basis 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. (See Part 29 of the Federal Code of Regulations, Section 541.200).
The DOL found that mortgage loan officers do not satisfy the second test because their primary job duties are not related to the management or general business operations of their employer. Rather, the DOL found that mortgage loan officers’ duties, while office or non-manual in nature, are primarily focused on making sales for their employer. In support of its conclusion, the DOL noted that the services provided by mortgage loan officers to customers are offered in pursuit of a mortgage sale, and further noted that mortgage loan officers are commonly paid commissions based on the number of sales they complete.
While the DOL’s determination in AI 2010-1 is likely to face multiple challenges in the court system, employers should determine whether they need to implement overtime policies addressing employees who do not meet the above test, and whether they need to compensate mortgage loan officers for back overtime compensation owed to them. Failure to do so may expose employers to lawsuits in which their employees are entitled to recover double the amount of overtime compensation owed to them and their attorney’s fees in bringing the action.
Business Counselor, "June 2011 Business Counselor," 6/15/2011