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

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The Supreme Court Decides The DOL's Interpretation Regarding Pay for Mortgage Loan Officers | Tigasaudarafarm

This short article first starred in the July 2015 dilemma of the Minnesota Bankers Association’s monthly publication.

The U.S. Supreme Court has decided that the Department that is federal of (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, home loan (as well as other) loan officers must, like all employees that are nonexempt keep an occasion 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 had been precisely compensated as “administrative exempt” workers, maybe maybe 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, a few appropriate challenges took place. The 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 into the Mortgage Bankers Association (MBA) and held that the 2010 Administrator’s Interpretation ended up being invalid as the DOL had not followed the note-and-comment procedures of this federal Administrative Procedure Act for reversing its 2006 viewpoint.

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

  • Tax, fund, accounting, budgeting, auditing, insurance

  • Quality control, buying, procurement
  • Marketing, advertising
  • Research
  • Health and safety
  • Personnel management, hr, worker advantages, work relations, advertising, federal federal government relations
  • Computer system, database and internet management
  • Appropriate and regulatory conformity, and
  • Comparable tasks

In addition, an “administrative exempt” employee’s duty that is primary are the workout of “discretion and independent judgment with regards to issues of importance. ” This requirement is demonstrated by the authority which will make decisions that are significant perform major tasks or functions. Things to consider include the annotated following:

  • Perhaps the worker has authority to formulate, influence, interpret, or implement administration policies or running practices
  • Perhaps the worker carries down assignments that are major performing the operations associated with company
  • If the employee executes work that affects company operations to a significant level, regardless if the employee’s assignments are associated with procedure of a certain section associated with company
  • Perhaps the worker has authority to commit the company in issues which have significant monetary effect
  • If the worker has authority to waive or deviate from founded policies and procedures without prior approval
  • Perhaps the worker has authority to negotiate and bind the business on significant issues
  • If the worker provides assessment or qualified advice to administration
  • If the worker is tangled up in planning long- or short-term company goals
  • Whether or not the worker investigates and resolves things of importance on the part of administration
  • Whether or not the worker represents the business in managing complaints, arbitrating disputes or grievances that are resolving

“Administrative exempt” workers need the authority to create a separate option, however their choices or guidelines can be evaluated at a greater degree. The workout of discernment and judgment that is independent be much more than the employment of ability in using well-established methods, procedures or particular requirements described in manuals or any other sources. The workout of discernment 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 loan 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 work would be to make sales on the behalf of their employer on the basis of the following factual summary associated with job that is primary 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 perhaps a draw against commissions, and
  • These are generally held up to a manufacturing standard on the product product 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 a few instances but as long as their primary responsibility is directly pertaining to the administration or basic company operations of these manager or their employer’s customers and meet all the other demands for an administrative exempt worker. This means, generating sales to specific consumers looking for mortgages and advice for his or her purchase of one’s own domiciles doesn’t qualify as administrative exempt work. But, in the event that client is a business and, as an example, is looking for advice about a home loan to shop for land for a fresh manufacturer 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 the company consumer. Banks along with other companies must start thinking about very very carefully, nevertheless, 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 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 because of this review and decision-making is highly encouraged.

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