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

PorBia Correa

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

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

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

The U.S. Supreme Court has determined that the federal Department of Labor’s (DOL’s) March 24, 2010, Administrator’s Interpretation that home mortgage officers typically must certanly 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 exclusion is applicable, home loan (as well as other) loan officers must, like all nonexempt employees, keep a period record of them all worked, receive at least minimal wage for each and every hour worked, and get paid overtime for many 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 (along with other) loan officers typically had been correctly compensated as “administrative exempt” workers, maybe perhaps perhaps not at the mercy of the timekeeping, minimal wage and overtime requirements of nonexempt workers.

The Supreme Court’s Choice

After the launch of the 2010 Administrator’s Interpretation, several 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 to your Mortgage Bankers Association (MBA) and held that the 2010 Administrator’s Interpretation had been invalid considering that the DOL had not followed the note-and-comment procedures associated with the Administrative that is federal Procedure for reversing its 2006 viewpoint.

The truth went along to the Supreme Court on that presssing problem alone (rather than the problem of whether or not the DOL’s Interpretation that home loan 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 ensures 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 general business operations” is work pertaining to assisting in operating or servicing the company, rather than work linked to manufacturing or offering a product. These include solutions for instance the after:

  • Tax, fund, accounting, budgeting, auditing, insurance
  • Quality control, buying, procurement
  • Marketing, advertising
  • Research
  • Health and safety
  • Personnel administration, hr, worker advantages, work relations, pr, federal government relations
  • Computer system, database and internet management
  • Appropriate and regulatory compliance, and
  • Comparable tasks

In addition, an “administrative exempt” employee’s primary responsibility must through the workout of “discretion and separate judgment pertaining to things of importance. ” This requirement is demonstrated by the authority in order to make decisions that are significant perform major tasks or functions. Things to consider include the annotated following:

  • Whether or not the worker has authority to formulate, influence, interpret, or implement administration policies or running practices
  • Perhaps the worker carries away assignments that south dakota payday loans are major performing the operations regarding the company
  • If the employee performs work that affects company operations to a significant level, no matter if the employee’s assignments are pertaining to operation of a specific segment of this company
  • Whether or not the worker has authority to commit the manager in things which have significant economic effect
  • Perhaps the worker has authority to waive or deviate from founded policies and procedures without prior approval
  • If the worker has authority to negotiate and bind the ongoing business on significant issues
  • If the worker provides consultation or professional advice to administration
  • Whether or not the worker is tangled up in preparing long- or business that is short-term
  • If the worker investigates and resolves issues of importance on the part of administration
  • Perhaps the worker represents the organization in handling complaints, arbitrating disputes or resolving grievances

“Administrative exempt” workers must-have the authority to produce a separate option, however their choices or guidelines are evaluated at a greater level. The exercise of discernment and judgment that is independent become more than making use of ability in using well-established strategies, procedures or certain criteria described in manuals or any other sources. The exercise of discernment and separate judgment doesn’t add clerical or secretarial work, recording or tabulating information, or doing other technical, repeated, recurrent or work that is routine.

The 2010 Administrator’s Interpretation determined that the main duties of home mortgage officers typically are not compared to an “administrative exempt” employee but instead compared to a nonexempt inside product product sales worker (i.e., a production worker) whoever task would be to make product product sales on the part of their employer in line with the following factual summary associated with job that is primary and spend in accordance with home loan officers:

  • They solicit customers,
  • They receive product product sales training,
  • They often times are paid by payment but may get some base or a draw against commissions, and
  • They truly are held up to a manufacturing standard on the product product product sales of loan items.

The Possible Exclusion

The 2010 Administrator’s Interpretation acknowledged that home loan (as well as other) loan officers could be precisely categorized and compensated as administrative exempt workers in a few circumstances but as long as their primary responsibility is straight associated with the administration or basic company operations of these company or their employer’s customers and meet most of the other needs for an administrative employee that is exempt. Or in other words, creating sales to specific customers seeking mortgages and advice with regards to their purchase of these very own houses will not qualify as administrative exempt work. But, in the event that client is a company and, as an example, is looking for advice about a home loan to shop for land for a fresh manufacturing plant or any other company function, the commercial loan officer might qualify as an administrative exempt employee in the event that officer had been making choices associated with the overall company operations associated with company client. Banks along with other companies must start thinking about very carefully, nonetheless, if they want their commercial loan officers to be decisions that are making things of importance straight pertaining to the customer’s company.


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

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Bia Correa administrator

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