You may have heard that the U.S. Supreme Court recently determined that mortgage loan originators are not exempt from federal overtime requirements. This is not exactly true. While the Supreme Court’s decision means that mortgage loan officers are not eligible for the “administrative exemption” to the overtime requirements, other exemptions exist that may apply to mortgage loan originators depending on their specific duties and how they conduct business.
Prior to 2010, the Department of Labor’s (DOL) position was that mortgage loan originators did qualify for the administrative exemption to the overtime requirements under the Fair Labor Standards Act (FLSA). In 2010, the DOL reversed its interpretation and stated that mortgage loan originators were not eligible for the administrative exemption. In Perez v. Mortgage Bankers Association, the Supreme Court considered whether the DOL was required to issue a formal proposal and seek public comment before it could change its position. The Court determined that a formal proposal and comment process was not required, and thereby upheld the DOL’s new interpretation making mortgage loan originators ineligible for the administrative exemption. However, your mortgage loan originators may still be exempt from the overtime requirements if they qualify for one of three other exemptions.
The “outside sales exemption” may apply to your mortgage loan originators if their primary duty is sales and they customarily and regularly perform this duty away from your offices or an office in their home. The DOL has interpreted “customarily and regularly” to mean greater than occasional but less than constant and it includes work normally done every workweek, but does not include isolated or one-time tasks. Mortgage loan officers who are substantially compensated with commissions based on sales may qualify.
Mortgage loan officers that primarily perform office work may qualify for the “highly compensated exemption” if they earn at least $100,000 per year and serve in an executive capacity, such as managing your mortgage business or a subdivision of your mortgage business and directing the work of two or more employees.
Mortgage loan originators that serve in a leadership role, but do not earn at least $100,000 per year, may qualify for the “executive exemption” if their primary duty is managing your mortgage business or a subgroup and they regularly supervise at least two full-time employees and have authority to hire and fire employees. If the person’s primary duty is mortgage lending, the executive exemption will not apply, even if the individual directs the work of two or more employees. To qualify for this exemption, it is important to carefully define the “primary” duty of individuals who serve in multiple roles.
As you can see, the facts and circumstances of each individual’s unique situation will determine whether or not an exemption applies. It is important to realize that the Supreme Court’s decision does not prohibit mortgage loan originators from qualifying for one of these other overtime exemptions. Many mortgage lenders are now examining the roles and duties of their mortgage loan originators to determine whether one of these other exemptions may apply or whether minor changes can be made to job descriptions or how jobs are performed in order to qualify for these other exemptions. If your mortgage loan originators were previously exempt from overtime under the administrative exemption, you may want to consult with an attorney familiar with the FLSA to see if you can easily qualify for one of the other exemptions.
For more information about the applicability of the FLSA overtime exemptions to mortgage loan originators contact Mel Tull, VBA General Counsel, at Mel@TullLawPLC.com or (804) 404-7748.
This article has been prepared for informational purposes only and is not legal advice and does not create an attorney-client relationship.