Many banking and financial institutions have historically classified mortgage loan officers as exempt employees under the federal Fair Labor Standards Act ("FLSA").
Although California law clearly does not recognize the applicability of any of the wage and hour exemptions to mortgage loan officers, until recently the U.S. Department of Labor ("DOL") had adopted the position that mortgage loan officers who performed a substantial amount of analytical work in addition to selling loan products might be able to qualify as an administrative employee and thus be exempt from the FLSA's wage and hour requirements.
In 2006, the DOL issued an opinion letter which held that certain loan officers could qualify for the administrative exemption if they were paid at least $455 a week and had the following duties:
In an opinion issued March 24, 2010, the DOL has rejected its own 2006 conclusion that mortgage loan officers could potentially qualify for the administrative exemption and has definitively held that in the context of the financial services industry, "employees who perform the typical duties of a mortgage loan officer...do not qualify as bona fide administrative employees exempt under...the Fair Labor Standards Act..."
The conclusion reached in this opinion (Administrator's Interpretation No. 2010-1) was apparently based upon an investigation conducted in the last few years by the DOL into duties performed by typical mortgage loan officers throughout the financial services industry. During that investigation, the DOL discovered that the typical duties of mortgage loan officers included the following:
According to the DOL, the above duties are all directed towards the primary goal of selling the employer's loan products.
In order to qualify for the administrative exemption, an employee's primary duty must be "the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer's customers." 29 C.F.R. - 541.200(a)(2). In turn, for work to be directly related to the management or general business operations of the employer, the work must be "directly related to assisting with the running or servicing of the business, as distinguished, for example, from working on a manufacturing production line or selling a product in a retail or service establishment." 29 C.F.R. - 541.201(b).
Thus, the DOL reasoned that because the mortgage loan officers' duties are all primarily aimed at achieving the sale of the employer's loan products, the mortgage loan officer does not qualify for the administrative exemption. In other words, the facts discovered by the DOL during its investigation has lead it to conclude that the duties of the typical mortgage loan officer "do not relate to the internal management or general business operations of the company." Rather, the mortgage loan officers primarily "perform the production work of their employers" by offering and selling loan products.
In light of this significant shift in the DOL's enforcement position, we recommend that employers of mortgage loan officers review their wage and hour practices to ensure compliance with applicable law.
For more information, contact FitzGerald & Mulé LLP.
This article is intended for informational purposes only. Nothing herein should be construed to constitute legal advice. It is recommended that you seek legal counsel before making decisions regarding labor and employment matters.