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March2010

CLIENTAlert

Law. From a Business Point of View.®

Guidance on the FLSA Status of Mortgage Loan Officers

The U.S. Department of Labor’s Wage and Hour Division issued a general interpretation of law last week concluding that mortgage loan officers are not bona fide exempt administrative employees under the Fair Labor Standards Act (FLSA). This interpreta-tion provides guidance on a frequently litigated area of the law, as many employers classify mortgage loan officers as exempt administrative employees.

FLSA Background

Under the FLSA, the general rule is that non-exempt employees in the United States must be paid at least the federal minimum wage for all hours worked and overtime pay at time and one-half the regular rate of pay for all hours worked in excess of 40 hours per workweek. However, these require-ments do not apply to employees who qualify for an exemption (e.g. executive, administrative, pro-fessional, computer, highly compensated, outside sales).

In order for any exemption to apply, the em-ployee’s specific job duties and salary must meet all of the Department of Labor’s requirements for that exemption category. Job titles do not determine exempt status.

Bona Fide Administrative Employee

To qualify for the administrative employee ex-emption, an employee must:

Be compensated on a salary or fee basis at a • rate of not less than $455 per week;

Have as a primary duty the performance • of office non-manual work directly related to the management or general business op-erations of the employer or the employer’s customers; and

Have a primary duty that includes the exer-• cise of discretion and independent judgment with respect to matters of significance.

©2010 Lewis and Roca LLP

If you have any questions about this Department of Labor interpretation, FLSA exemption qualifications generally, or any other employment related matter, please contact:

Howard Cole HCole@LRLaw.com 702.949.8315Abbe M. Goncharsky AGoncharsky@LRLaw.com 520.838.7711David McElhinney DMcElhinney@LRLaw.com 775.321.3414Mary Ellen Simonson MSimonson@LRLaw.com 602.262.5317

This Client Alert has been prepared by Lewis and Roca LLP for informational purposes only and is not legal advice. Readers should seek professional legal advice on matters involving these issues.

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Guidance on the FLSA Status of Mortgage Loan Officers

www.LRLaw.com Law. From a Business Point of View.®

Generally, work is considered to be directly related to management or general business op-erations when the employee’s duties are primarily “administrative,” meaning that the employee’s work contributes to the running of the business itself, as opposed to “production-based” duties, those which relate to the goods and services the business sells.

Classification of Mortgage Loan Officers

The interpretation applies to employees (wheth-er titled “mortgage loan officer” or otherwise) who typically perform the following duties: receive sales leads and contact potential customers, collect fi-nancial data from customers, identify loan products matching the customers’ needs, explain terms of available options, and compile documents for un-derwriter review or use at closings.

Evaluating these typical job duties, the Administrator concluded that a mortgage loan of-ficer’s primary duty is that of making sales, thus fall-ing on the production-based side of the employer’s business. As a result, these employees do not qualify for the administrative employee exemption, and thus are classified as non-exempt and subject to the general rules under the FLSA, i.e. they must be paid in accordance with minimum wage and overtime requirements.

However, there is still good news for employ-ers of commercial mortgage loan officers. Whereas most mortgage loan officers do not qualify for the administrative exemption because their customers

are individuals seeking personal advice in purchas-ing a home, those who assist business customers with obtaining mortgages for commercial real estate will satisfy the second prong because such duties directly relate to the general business operations of customers.

Significance of this Interpretation

It is important to note that this interpretation marks a significant departure from the Department of Labor’s traditional practice of providing labor law guidance by releasing fact-specific opinion letters that lacked universal applicability. The Department of Labor’s new approach of providing “general” in-terpretations of law will apply to employers across the board.

We will keep you informed as the Department of Labor issues other interpretations providing guid-ance on relevant issues.

Employer Recommendations

In light of this interpretation, employers should reevaluate the exemption status of mortgage loan officer employees to ensure compliance under the FLSA. Employers are encouraged to consult their employment attorney for further guidance on this matter, as the exemption qualification analysis under the FLSA is a fact-specific inquiry requiring close examination of the employee’s specific job duties and this interpretation may or may not apply to all mortgage loan officer employees.