On March 24, 2010, in its first Interpretation Letter, the U.S. Department of Labor’s Wage and Hour Division (WHD) declared that employees who perform the typical duties of a mortgage loan officer do not qualify as bona fide administrative employees exempt from the federal Fair Labor Standards Act (FLSA). The ruling is significant as it expressly overrules an opinion issued by the WHD under the Bush administration that reached the opposite conclusion.
In order to satisfy the administrative exemption, an employee must have a primary duty of performing “office or nonmanual work directly related to the management or general business operations of the employer or the employer’s customers.” In its Administrator’s Interpretation (No. 2010-1), the WHD relied on the “production versus administrative” dichotomy, reasoning that “typical” mortgage loan officers focus on selling company products, and are thuds more akin to employees who produce company products (non-exempt) than to employees who perform administrative functions (exempt).
To support its position, the WHD noted that a “typical” mortgage loan officer collects financial information from customers, runs credit reports, enters collected financial information into a computer program that identifies which loan products may be offered to customers based on the financial information provided, and works with the customer to match the customer’s needs with one of the employer’s loan products. Emphasizing the “sales” nature of this work, the WHD noted that many mortgage loan officers are compensated on a commission basis, trained in sales techniques, and evaluated on sales volume. The WHD also pointed out that many employers, defending against FLSA lawsuits, have argued that mortgage loan officers satisfy the “outside sales” employee exemption.
The Administrator’s Interpretation withdrew a 2006 WHD opinion letter (2006-31), which found mortgage loan officers satisfied the administrative exemption, and a 2001 WHD opinion letter (WL 1558764), which found mortgage loan officers to be non-exempt, but on grounds inconsistent with the current WHD analysis. The WHD also departed from its prior practice of issuing fact-specific opinion letters and embarked upon a new practice of issuing general interpretations of law and regulations that apply not only to the specific entity that requested the opinion, but to all those similarly affected.
Pointers For Employers
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