The Supreme Court Decides The DOL’s Interpretation pay that is regarding Mortgage Loan Officers

This informative 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 Department that is federal of (DOL’s) March 24, 2010, Administrator’s Interpretation that home loan officers typically must certanly 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 minimum wage for each and best online payday loans 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 early in the day 2006 Opinion Letter establishing the DOL’s position during those times that home loan (along with other) loan officers typically had been correctly compensated as “administrative exempt” workers, perhaps not susceptible to the timekeeping, minimal wage and overtime requirements of nonexempt workers.

The Supreme Court’s Decision

After the launch of the 2010 Administrator’s Interpretation, a few appropriate challenges took place. The certainly one of many significance was in 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 your Mortgage Bankers Association (MBA) and held that the 2010 Administrator’s Interpretation ended up being invalid since the DOL had not followed the note-and-comment procedures associated with Administrative that is federal Procedure for reversing its 2006 viewpoint.

The scenario decided to go to the Supreme Court on that presssing issue alone (rather than the problem of whether or not the DOL’s Interpretation that home mortgage officers must certanly be compensated as nonexempt employees ended up being correct), and on March 9, 2015, the Supreme Court unanimously overruled the D.C. Circuit. This ruling means 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 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 associated with 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, fund, accounting, budgeting, auditing, insurance
  • Quality control, buying, procurement
  • Marketing, advertising
  • Research
  • Security and wellness
  • Personnel management, hr, employee advantages, work relations, public relations, federal government relations
  • Computer network, database and internet administration
  • Appropriate and compliance that is regulatory and
  • Comparable tasks

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

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

“Administrative exempt” workers should have the authority to help make a choice that is independent however their choices or suggestions can 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 practices, procedures or particular criteria described in manuals or any other sources. The workout of discernment and separate judgment will not consist of clerical or secretarial work, recording or tabulating information, or performing 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 sales worker (in other words., a production worker) whoever task would be to make product sales with respect to their employer on the basis of the following factual summary associated with the 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
  • They truly are held to a manufacturing standard on the product sales of loan items.

The Possible Exclusion

The 2010 Administrator’s Interpretation acknowledged that home loan (as well as other) loan officers might be precisely categorized and compensated as administrative exempt workers in a few circumstances but only when their main responsibility is straight associated with the administration or basic company operations of the company or their employer’s customers and meet most of the other demands for an administrative exempt worker. To put it differently, creating sales to specific customers looking for mortgages and advice with their purchase of the own domiciles will not qualify as administrative exempt work. But, in the event that client is a company and, for instance, is searching for advice about a home loan to shop for land for a brand new manufacturing facility or other company function, the commercial loan officer might qualify as an administrative exempt employee if the officer had been making choices linked to the overall business operations of this company consumer. Banking institutions along with other companies must give consideration to very very carefully, nevertheless, if they want their commercial loan officers become decisions that are making issues of importance straight linked to the customer’s company.


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