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 informative 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 Department that is federal of (DOL’s) March 24, 2010, Administrator’s Interpretation that home mortgage officers typically should be paid 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 is applicable, home loan (along with other) loan officers must, like all employees that are nonexempt keep a period record of them all worked, receive at least minimal wage for each and every hour worked, and get 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 developing the DOL’s position in those days that home loan (as well as other) loan officers typically were properly compensated as “administrative exempt” workers, perhaps not susceptible to the timekeeping, minimal wage and overtime requirements of nonexempt employees.

The Supreme Court’s Choice

After the launch of the 2010 Administrator’s Interpretation, a few challenges that are legal. The certainly one of many significance was at the D.C. Circuit (the home loan Bankers Ass’n case that fundamentally went 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 as the DOL hadn’t followed the note-and-comment procedures for the Administrative that is federal Procedure for reversing its 2006 viewpoint.

The truth decided to go to the Supreme Court on that presssing problem alone (and never the problem of whether or not the DOL’s Interpretation that home mortgage officers needs to 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 implies that the 2010 Administrator’s Interpretation stands—mortgage (as well as other) loan officers typically have to be paid 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 pertaining to assisting in operating or servicing the business enterprise, rather than work linked to manufacturing or offering a product. These include solutions like the following:

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

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

  • Whether or not the worker has authority to formulate, impact, interpret, or implement administration policies or working practices
  • If the worker carries down assignments that are major performing the operations associated with business
  • If the employee executes work that affects company operations to a degree that is substantial no matter if the employee’s assignments are pertaining to procedure of a specific section associated with the company
  • Perhaps the worker has authority to commit the company in things which have significant economic effect
  • 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 issues
  • Perhaps the worker provides assessment or advice that is expert administration
  • Whether or not the worker is involved with preparing long- or business that is short-term
  • Perhaps the worker investigates and resolves things of importance on the part of management
  • Perhaps the worker represents the organization in managing complaints, arbitrating disputes or resolving grievances

“Administrative exempt” workers should have the authority to create a choice that is independent however their choices or tips might be evaluated at a greater degree. The workout of discernment and judgment that south dakota payday loans is independent become more than the application of ability in applying well-established strategies, procedures or particular criteria described in manuals or other sources. The workout of discernment and separate judgment doesn’t consist of clerical or secretarial work, recording or tabulating data, or doing other technical, repeated, recurrent or routine work.

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

  • They customers that are solicit
  • They get product product sales training,
  • They often times are paid by payment but may get some base or perhaps a draw against commissions, and
  • They truly are held up to a production standard on the 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 could be precisely categorized and compensated as administrative exempt workers in certain instances but only when their main responsibility is straight linked to the administration or basic company operations of these manager or their employer’s customers and meet most of the other demands for the administrative employee that is exempt. Quite simply, creating sales to individual customers searching for mortgages and advice with regards to their purchase of one’s own domiciles will not qualify as administrative work that is exempt. But, in the event that consumer is a company and, as an example, is searching for advice about a home loan to shop for land for a brand new manufacturing facility or any other company purpose, the commercial loan officer might qualify as an administrative exempt employee in the event that officer had been making decisions pertaining to the typical company operations associated with company consumer. Banking institutions as well as other companies must give consideration to very carefully, nevertheless, if they want their commercial loan officers become making choices on issues of importance straight pertaining 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 (and other) loan officers, both customer and commercial, and discover whether any reclassification needs to occur for legal conformity. Seeing a lawyer with this decision-making and review is highly encouraged.