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 dilemma 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 real estate loan officers typically should 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 applies, home loan (along with 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 start to become paid overtime for several 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 in those days that home loan (along with other) loan officers typically had been correctly compensated as “administrative exempt” workers, maybe not susceptible to the timekeeping, minimum wage and overtime requirements of nonexempt workers.

The Supreme Court’s Choice

After the launch of the 2010 Administrator’s Interpretation, a few appropriate challenges happened. 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 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 regarding the federal Administrative Procedure Act for reversing its 2006 viewpoint.

The situation visited the Supreme Court on that problem alone (and never the problem of if the DOL’s Interpretation that home mortgage officers needs to be compensated as nonexempt employees ended up being proper), and 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 charge foundation (presently equaling a minimum of $455 per week) additionally the employee’s main task responsibility ought to be the performance of nonmanual work that is straight associated with the administration or basic company operations regarding the boss or the employer’s clients.

Per the governing regulations, work associated with “management or business that is general” is work pertaining to assisting in operating or servicing the company, as opposed to 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
  • Security and wellness
  • Personnel administration, hr, worker advantages, work relations, advertising, federal government relations
  • Computer system, internet and database management
  • Appropriate and regulatory compliance, and
  • Comparable tasks

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

  • Perhaps the worker has authority to formulate, influence, interpret, or implement administration policies or working practices
  • If the worker carries away assignments that are major performing the operations of this company
  • Perhaps the employee performs work that affects company operations up to a significant level, whether or not the employee’s assignments are associated with procedure of a specific section regarding the company
  • Whether or not the worker has authority to commit the manager in things which have significant impact that is financial
  • If the worker 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
  • If the worker provides assessment or professional advice to administration
  • If the worker is taking part in preparing long- or short-term company goals
  • Perhaps the employee investigates and resolves things of importance on the behalf of administration
  • If the worker represents the business in managing complaints, arbitrating disputes or resolving grievances

“Administrative exempt” employees must-have the authority in order to make a choice that is independent however their decisions or guidelines might be evaluated at an increased degree. The workout of discernment and separate judgment must become more than making use of ability in using well-established methods, procedures or particular criteria described in manuals or any other sources. The exercise of discernment and separate 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 loan officers typically weren’t compared to an “administrative exempt” employee but alternatively compared to a nonexempt inside product product product sales worker (in other terms., a production worker) whoever task would be to make product sales with respect to their employer in line with the following factual summary associated with main work duties and spend in accordance with home loan officers:

  • They customers that are solicit
  • They get product product sales training,
  • They frequently are paid by payment but may get some base or even a draw against commissions, and
  • These are typically held 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 (along with other) loan officers can be correctly categorized and compensated as administrative exempt workers in a few circumstances but only when their main responsibility is directly linked to the administration or basic company cash advance loans rhode island operations of these manager or their employer’s customers and meet most of the other demands for the administrative employee that is exempt. Simply put, generating sales to specific customers searching for mortgages and advice because of their purchase of one’s own houses will not qualify as administrative exempt work. But, in the event that consumer is a small business and, as an example, is searching for advice about home financing purchasing land for a unique manufacturing facility or other company function, the commercial loan officer might qualify as an administrative exempt employee in the event that officer had been making choices linked to the overall company operations for the company client. Banking institutions along with other companies must start thinking about very carefully, but, if 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 as well as other entities should review the classification that is exempt/nonexempt of their mortgage (as well as other) loan officers, both customer and commercial, and figure out whether any reclassification has to occur for appropriate conformity. Seeing a lawyer because of this decision-making and review is strongly encouraged.

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Absolvent, 2010 (12 C)

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