April 2010
www.polsinelli.com
n March 24, 2010, the United States Department of Labor (“DOL”) withdrew two prior opinion letters regarding the exempt status of mortgage loan officers under the administrative exemption, and announced that the DOL no longer considers mortgage loan officers as bona fide administrative employees under 29 U.S.C. § 213 (a)(1) of the Fair Labor Standards Act (“FLSA”), thus making them non-exempt employees entitled to overtime.
The DOL’s abrupt change in position on this issue will significantly impact mortgage lenders, financial institutions, and other employers in the financial service sector that have relied upon the DOL’s prior determinations regarding the application of the administrative exemption to mortgage loan officers.
The FLSA requires covered employers to pay employees overtime at a rate of one and a half times the employee’s regular rate of pay for all
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For more information on this topic, contact: Joseph T. Porter Jr. 314.552.6828 Kenneth H. Suelthaus 314.889.7001 W. Terrence Kilroy 816.374.0533 Anthony J. Romano 816.360.4251 Robert J. Hingula 816.572.4469
hours worked in excess of 40 hours per week. However, this requirement is subject to a number of exceptions including exemptions for white collar executive, administrative, and professional employees. Under the FLSA, in order to qualify for the administrative exemption, an
employee must:
1. Be compensated on a salary or fee basis at a rate not less than $450 per week, exclusive of board, lodging, or other facilities; 2. As his or her primary duty, perform office or non-manual
work directly related to the management or general business operations of the employer or the employer’s customers; and 3. As his or her primary duty, exercise discretion and
independent judgment with respect to matters of significance.
In the DOL’s March 2010 Administrator’s Interpretation, the DOL focused exclusively on the second factor. Specifically, the DOL focused on the “production versus administrative” dichotomy and determined that mortgage loan officers are production workers whose primary duty is making sales, as opposed to administrative workers whose work is directly related to the management or general business operations of their employer or their employer’s customers.
The DOL relied on the following factors in reaching its conclusion:
▪ Mortgage loan officers are trained primarily in sales techniques and are evaluated on the basis
of their sales volume.
▪ The “typical” mortgage loan officer’s primary job duties included collecting financial
information from customers, entering the information into a computer program to determine particular loan products that might be available to the customer, and explaining the terms, advantages, and disadvantages of the available options to customers so that a sale could be made.
▪ Mortgage loan officers are paid primarily by commissions.
▪ Courts have repeatedly held that mortgage loan officers that work at their employer’s place of
business have a primary duty of sales.
Because the DOL found that the second prong of the test was not satisfied, it did not analyze whether loan officers met the other two prongs of the administrative exemption.
Despite the blanket approach in the new DOL Administrator’s Interpretation, it is important to recognize that overtime exemptions require a fact-intensive, individual analysis. The Administrator’s Interpretation makes numerous assumptions about the “typical” duties of a mortgage loan officer, which may or may not be applicable industry-wide.
It is important to note that in finding the administrative exemption inapplicable to the “typical” mortgage loan officer, the DOL did not preclude the application of other FLSA exemptions to this group of employees. For example, the DOL noted that many employers rely on the outside sales exemption for mortgage loan officers, and stated that this exemption may apply to mortgage loan officers depending on the factual circumstances. Furthermore, the exemption for highly compensated employees may apply to mortgage loan officers. In the end, each loan officer’s duties and responsibilities will have to be individually analyzed to determine whether they fall under alternate exemptions under the FLSA.
Finally, as an additional side note, employers must still ensure that their mortgage loan officers are receiving the applicable minimum wage for all hours worked. Simply paying mortgage loan officers a “salary” or solely on a commission basis will not comply with the FLSA if the employee’s hourly rate calculates to an amount below the applicable state or federal minimum wage requirements. Employers must closely track all aspects of their mortgage loan officers’ wages and hours to ensure that the employer’s pay practices are fully compliant with the FLSA and any applicable state wage and hour laws.
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If you have any questions about these changes or how they might impact you or your organization, please contact:
▪ Joe Porter | 314.552.6828 | jporter@polsinelli.com
▪ Ken Suelthaus | 314.889.7001 | ksuelthaus@polsinelli.com
▪ Terry Kilroy | 816.374.0533 | tkilroy@polsinelli.com
▪ Tony Romano | 816.360.4251 | aromano@polsinelli.com
▪ Robert Hingula | 816.572.4469 | rhingula@polsinelli.com
The Labor and Employment practice group will provide these e-Alerts as developments warrant to keep you informed.
Labor and Employment Attorneys
W. Terrence Kilroy Practice Area Chair 816.374.0533
tkilroy@polsinelli.com
Anthony J. Romano Practice Area Vice-Chair 816.360.4251 aromano@polsinelli.com Carol C. Barnett 816.364.2117 cbarnett@polsinelli.com Andrea C. Bernica 816.395.0659 abernica@polsinelli.com Jon A. Bierman 314.889.7045 jbierman@polsinelli.com Jack L. Campbell 816.374.0568 jcampbell@polsinelli.com Jay M. Dade 417.829.3812 jdade@polsinelli.com Monica M. Fanning 816.374.0563 mfanning@polsinelli.com Karen R. Glickstein 816.395.0638 kglickstein@polsinelli.com Mark B. Grebel 314.622.6620 mgrebel@polsinelli.com Elizabeth T. Gross 314.889.7037 egross@polsinelli.com Robert J. Hingula 816.572.4469
JoAnne Spears Jackson 417.869.3353
jjackson@polsinelli.com
Jamie Zveitel Kwiatek 314.889.7088 jkwiatek@polsinelli.com Sang-yul Lee 312.873.3631 slee@polsinelli.com Gretchen E. Lipman 720.931.8157 glipman@polsinelli.com Dona A. Nutini 602.650.2087 dnutini@polsinelli.com Eric E. Packel 816.360.4249 epackel@polsinelli.com Holly M Perkins 816.360.4305 hperkins@polsinelli.com Elisa B. Reinsmith 314.889.7087 ereinsmith@polsinelli.com William S. Robbins, Jr. 816.395.0637 brobbins@polsinelli.com Erin D. Schilling 816.374.0559 eschilling@polsinelli.com James C. Sullivan 816.374.0565 jsullivan@polsinelli.com Christopher C. Swenson 314.889.7064 cswenson@polsinelli.com Michael H. Talboy 816.395.0667 mtalboy@polsinelli.com Eric M. Trelz 314.889.7070 etrelz@polsinelli.com Judy Yi 816.360.4149 jyi@polsinelli.com Brian J. Zickefoose 816.374.0585 bzickefoose@polsinelli.com
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