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The United States Department of Labor Releases Their Opinion as to Whether Mortgage Loan Officers Qualify for the Administrative Exemption Ender Section 13(a)(1) of the Fair Labor Standards Act


On March 24, 2010, the United States Department of Labor released a letter stating their opinion that mortgage loan officers do not qualify for the administrative exemption under Section 13(a)(1) of the Fair Labor Standards Act. The section maintains that administrators do not qualify for overtime.
First, the Administrator clarifies that there are a number of job titles held by employees who perform the functions of a mortgage loan officer. Those job titles include mortgage loan representative, mortgage loan consultant, and mortgage loan originator. However, it takes more than a job title to determine whether someone qualifies for the exemption; it is the employee’s actual job duties and compensation which determine such exemption and employees with all of these titles generally perform the same duties and receive the same compensation as a mortgage loan officer. To simplify matters, mortgage loan officer is the title used in the letter and the title we shall use in this blog.

To fall within the category of an “employee employed in a bona fide administrative capacity” an employee’s job duties and compensation must fulfill all of the following requirements: 1)The employee must be compensated on a salary or fee basis as defined in the regulations at a rate at or above $455 per week; 2)The employee’s primary responsibility must consist of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers: and 3)The employee’s primary responsibility must include the exercise of discretion and independent judgment with respect to matters of significance. The administrator’s interpretation focuses largely on the second requirement.

To elaborate on this definition, the Administrator further enumerates that the work of an employee 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” in order to qualify for the FLSA exemption. This includes work in areas such as accounting, budgeting, quality control, purchasing, advertising, research, human resources, labor relations, etc. This definition is aimed at differentiating “between work related to the goods and services which constitute the business’ marketplace offerings and work which contributes to ‘running the business itself'” as cited in Bothell v. Phase Metrics Inc.

The court in Casas v. Conseco used this definition to maintain that mortgage loan officers were “production rather than administrative employees” because “Conseco’s primary business purpose is to design, create and sell home lending products. As loan originators making direct contact with customers, it is plaintiffs’ primary duty to sell these lending products on a day-to-day basis”.

Belton v. Premium Mortgage, Inc. further supported that assertion by stating that, in determining whether an employee’s primary duty is making sales, the work performed in relation to sales should also be considered sales work. This includes compiling and analyzing potential customers’ financial data because “doing so is necessary to evaluate the customers’ qualifications for a loan, i.e. to make a sale.” Taking into account these factors of the job duties typically performed by loan officers supports the conclusion that their primary duty is to make sales.

An additional consideration in this matter is the fact that historically, mortgage loan officers were often compensated entirely by commissions, and that today many mortgage loan officers continue to be paid primarily by commissions, sometimes with a base wage, salary, or draw against the commissions. This lack of salary or low salary also makes them ineligible for the FLSA overtime exemption.

With all of the preceding evidence, the Administrator reached the conclusion that mortgage loan officers, in performing the duties described above, have a primary duty of making sales for their employers, and, therefore, do not qualify as bona fide administrative employees exempt under 13(a)(1) of the Fair Labor Standards Act.

The attorneys at Chicago Overtime Law Center have decades of experience litigating wage and hour cases, including overtime, meal breaks, vacation pay, and tips. The Chicago Overtime Law Center has offices conveniently located in both Oak Brook Terrace and Chicago. If you live in Wheaton, Rockford or anywhere in Illinois and have a wage and hour dispute, contact an Urbana overtime attorney today at 312-869-4095 or fill out an online form.