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 informative article first starred in the July 2015 dilemma of the Minnesota Bankers Association’s monthly newsletter.

The U.S. Supreme Court has determined that the federal Department of Labor’s (DOL’s) March 24, 2010, Administrator’s Interpretation that home loan officers typically needs to be compensated as nonexempt employees under the federal Fair work Standards Act (FLSA) is enforceable. (Perez v. Mortgage Bankers Ass’n). Which means that, unless an exclusion is applicable, home loan (along payday loans rhode island with other) loan officers must, like all employees that are nonexempt keep an occasion record of them all worked, receive at least minimal wage for each and every hour worked, and start to become 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 (and other) loan officers typically had been correctly compensated as “administrative exempt” workers, maybe 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, a few legal challenges took place. The certainly one of most 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 the Mortgage Bankers Association (MBA) and held that the 2010 Administrator’s Interpretation ended up being invalid since the DOL hadn’t followed the note-and-comment procedures associated with the federal Administrative Procedure Act for reversing its 2006 viewpoint.

The truth decided to go to the Supreme Court on that problem alone (and never 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 (as well as other) loan officers typically should be compensated as nonexempt employees.

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

To be an “administrative exempt” employee beneath the FLSA, the worker needs to be compensated on an income or cost foundation (presently equaling a minimum of $455 weekly) plus the employee’s main task responsibility should be the performance of nonmanual work that is straight associated with the administration or basic business operations associated with the manager or even the employer’s clients.

Per the governing regulations, work associated with “management or general business operations” is work linked to assisting in running or servicing the business enterprise, rather than work linked to manufacturing or offering a product. These include solutions for instance the after:

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

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

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

“Administrative exempt” workers should have the authority to help make a separate choice, however their choices or guidelines can be evaluated at an increased degree. The workout of discernment and separate judgment must be much more than the application of ability in using well-established practices, procedures or certain requirements described in manuals or any other sources. The exercise of discretion and independent judgment will not 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 alternatively compared to a nonexempt inside product product sales worker (i.e., a manufacturing worker) whoever work would be to make product sales with respect to their employer in line with the following factual summary regarding the main work duties and spend in accordance with home loan officers:

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

The Possible Exclusion

The 2010 Administrator’s Interpretation acknowledged that home loan (along with other) loan officers might be precisely classified and compensated as administrative exempt workers in a few circumstances but only when their main responsibility is directly associated with the administration or basic business operations of the boss or their employer’s customers and meet all the other needs for an administrative employee that is exempt. This means, creating sales to specific customers looking for mortgages and advice with their purchase of one’s own houses doesn’t qualify as administrative work that is exempt. But, in the event that client is a company and, as an example, is seeking advice about a home loan to acquire land for a brand new manufacturing facility or any other company purpose, the commercial loan officer might qualify as an administrative exempt employee in the event that officer had been making decisions associated with the overall company operations associated with business consumer. Banking institutions as well as other companies must think about carefully, but, if they want their commercial loan officers become making choices on things of importance straight associated with the customer’s company.


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

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