The Supreme Court Decides The DOL’s Interpretation pay that is regarding 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 loan officers typically needs to be paid as nonexempt employees underneath the federal Fair work guidelines Act (FLSA) is enforceable. (Perez v. Mortgage Bankers Ass’n). This means, unless an exclusion is applicable, mortgage (as well as other) loan officers must, like all employees that are nonexempt keep a period record of them all worked, receive at least minimal wage for almost any 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 earlier in the day 2006 Opinion Letter developing the DOL’s position during those times that home loan (along with other) loan officers typically were correctly paid as “administrative exempt” workers, maybe not susceptible to 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 appropriate challenges happened. The certainly one of many significance was at the D.C. Circuit (the home loan Bankers Ass’n case that ultimately 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 since the DOL hadn’t followed the note-and-comment procedures associated with federal Administrative Procedure Act for reversing its 2006 opinion.

The outcome went along to the Supreme Court on that presssing issue alone (rather than the problem of perhaps the DOL’s Interpretation that real estate loan officers should 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 should be compensated as nonexempt employees.

“Exempt” and “Nonexempt” – What’s the real 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 following:

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

In addition, an “administrative exempt” employee’s duty that is primary are the workout of “discretion and separate judgment pertaining to issues of importance. ” This requirement is demonstrated because of the authority in order to make significant decisions and execute major tasks or functions. Things to consider include the immediate following:

  • Whether or not the worker has authority to formulate, impact, interpret, or implement administration policies or running practices
  • If the worker carries down major projects in performing the operations of this company
  • Perhaps the employee executes work that affects company operations up to a degree that is substantial whether or not the employee’s assignments are pertaining to procedure of a specific portion of this company
  • If the worker has authority to commit the boss in things which have significant impact that is financial
  • If the employee has authority to waive or deviate from founded policies and procedures without prior approval
  • Whether or not the worker has authority to negotiate and bind the business on significant things
  • Perhaps the worker provides assessment or advice that is expert administration
  • Perhaps the worker is taking part in planning long- or business that is short-term
  • Perhaps the worker investigates and resolves things of importance with respect to administration
  • Whether or not the worker represents the business in managing complaints, arbitrating disputes or resolving grievances

“Administrative exempt” workers should have the authority in order to make a separate option, however their choices or tips might be evaluated at a greater degree. The workout of discernment and judgment that is independent become more than the usage ability in using well-established methods, procedures or particular criteria described in manuals or other sources. The workout of discernment and independent judgment will not consist of clerical or secretarial work, recording or tabulating information, or doing other technical, repeated, recurrent or routine work.

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

  • They customers that are solicit
  • They get product sales training,
  • They often times are paid by payment but may get some base or even a draw against commissions, and
  • They’ve been held to a manufacturing standard on the product sales of loan services and products.

The Possible Exclusion

The 2010 Administrator’s Interpretation acknowledged that home loan (as well as other) loan officers can be correctly categorized and compensated as administrative exempt workers in certain circumstances but as long as their main responsibility is straight linked to the administration or basic business operations of the manager or their employer’s customers and meet all the other demands for an administrative exempt worker. To put it differently, creating sales to individual customers looking for mortgages and advice with regards to their purchase of the very own domiciles will not qualify as administrative exempt work. But, in the event that consumer is a company and, as an example, is looking for advice about a home loan to shop for land for a brand new manufacturing facility or any other company function, the commercial loan officer might qualify as an administrative exempt employee if the officer had been making choices pertaining to the typical company operations of this company client. Banking institutions along with other companies must give consideration to very very carefully, nevertheless, whether they want their commercial loan officers become making choices on things of importance straight linked to the customer’s company.


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

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