Department of Labor Administrative Interpretation States Duties Of Mortgage Loan Officers Do Not Qualify As Exempt Duties

As we previously reported here, On March 24, 2010, the United States Department of Labor("DOL") Wage and Hour Division made a significant change in its compliance assistance by moving from its longstanding practice of issuing fact specific opinion letters to issuing more general, across-the-board Administrator's Interpretations. The change is significant because it likely signals the DOL's intention to more aggressively establish its own interpretation of federal wage and hour laws.

In the first such Administrator's Interpretation, the DOL revisited the seemingly settled issue of whether mortgage loan officers qualify as exempt employees under the Fair Labor Standards Act ("FLSA"). Reversing two prior determinations that mortgage loan officers ordinarily qualify as exempt employees and therefore not entitled to be paid premium pay when they work overtime, the DOL now takes the position that the routine duties of such employees do not qualify as exempt duties.

The DOL defined the position as persons employed by financial institutions as mortgage loan officers, representatives, consultants, or originators. The typical duties include receiving internal leads, contacting potential customers, collecting required information from customers and entering that information into a computer, assessing and recommending loan products, and compiling customer documents for handling by underwriters or loan processors.

The DOL revisited the issue of whether such duties should be characterized as "non-manual work directly related to the management or general business operations of the employer or its customers" and therefore within the scope of the "administrative employee" exemption from the premium pay requirements of the FLSA.

The DOL now concludes that loan officers do not qualify as exempt employees because the work they perform is predominantly "production work" and not "administrative work." Likening mortgage loan officers to inside salespersons, the DOL now characterizes loan officers' duties as the "production work of an employer engaged in selling or brokering mortgage loan products" and not related to internal management of the business. The DOL now takes the position also that loan officers' duties do not relate to the "general business operations" of the employer's customers (who are typically individual consumers).

As part of its interpretation, the DOL withdrew a 2001 opinion letter and a 2006 opinion letter stating mortgage loan officers can qualify as exempt employees.

We think this new administrative interpretation signals a willingness on the part of the Obama Administration to reverse prior administrative interpretations interpreting FLSA exemptions more broadly.

Although this more recent administrative interpretation is not binding on the courts, current or former employees asserting they are or were misclassified as exempt employees can cite to this new administrative interpretation as persuasive authority from the administrative agency charged with enforcement of the FLSA.

In light of this new interpretation, financial institutions should consider consulting with experienced counsel to determine whether employees previously thought to be exempt would still be considered exempt employees.

Click here to download and to read a copy of the administrative interpretation.

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