Mortgage Officers Exemption

November 16, 2010, 9:41 AM

This interview post originally appeared in CUES' Credit Union Management.

Earlier this year, the U.S. Department of Labor recently ruled that mortgage loan officers are entitled to overtime pay in the Administrator's Interpretation No. 2010-1.

CUES Credit Union Management spoke with attorney Scott W. Kezman, partner in Kaufman & Canoles Labor & Employment Practice Group, Norfolk, Va., about the new rules.

Q: What are the highlights of this ruling? A: Prior to the Administrative Interpretation, the U.S. Department of Labors Wage and Hour Division issued "opinion letters" based on specific fact scenarios presented by employers seeking guidance on whether they were properly paying their employees under the Fair Labor Standards Act (FLSA) and its implementing regulations.

In fact, as recently as 2006, the Wage and Hour Division issued an opinion letter indicating that the mortgage loan officer position in question in that request met the criteria for the administrative exemption from the overtime requirements of the FLSA. Based on this opinion letter (and an earlier letter from 2001), most people considered it fairly settled law that the vast majority of mortgage loan officers met the criteria for the administrative exemption.

The new Administrative Interpretation marks a significant change in policy by the Wage and Hour Division because it basically reversed itself and states that the Wage and Hour Division now believes that the vast majority of mortgage loan officers do not meet the criteria for the administrative exemption from the overtime requirements of the FLSA.

Stated another way, unless specific mortgage loan officers qualify for some exemption from the FLSA's overtime requirements other than the administrative exemption, they must be paid time and one-half their regular rate of employment (inclusive of commissions) for all hours worked over 40 in a workweek. Q: What does it mean for credit unions? What do they need to do? A: Credit unions need to work with their labor and employment counsel to examine their alternatives. There may be other exemptions from the FLSA's overtime requirements in play (see next question). If no exemption is a good fit, they may decide to go ahead and pay overtime and seek assistance from counsel with the various methods of calculation of overtime available when dealing with commission-earning employees.

It may also be a good time to review the compensation program available to mortgage loan officers; for example, if no exemption applies, there is no longer any salary basis" requirement. There are ways to deal with this situation but, unfortunately, none are quick and painless. (Read more about the salary basis requirement here.)

Q: Will CUs have to pay over-time for past unpaid time? Any way to avoid this? A: Not necessarily. The administrative exemption from the FLSA's overtime requirement is one of several exemptions from the FLSA's overtime requirements. Other exemptions potentially applicable to mortgage loan officers are the "executive" exemption (where the mortgage loan officer in question performs supervisory duties that meet the criteria for that exemption) and the "outside sales" exemption (where the mortgage loan officers are customarily and regularly engaged away from the CU's place of business).

In the case of "highly compensated" mortgage loan officers (those who make more than $100,000 per year), the criteria for exemption can be more easily met than with less highly compensated employees. Credit unions with questions should consult labor and employment counsel to discuss their own specific facts related to mortgage loan officer employees. --Scott W. Kezman