Residential loan officers are entitled to overtime pay if their primary duty involves selling mortgages, according to the U.S. District Court in Washington.
The federal court recently ruled in favor of the Department of Labor’s 2010 interpretation of the Fair Labor Standards Act that modified a 2006 DOL regulation, which largely exempted LOs from receiving any overtime pay.
The Mortgage Bankers Association had urged the court to overturn 2010 interpretation on the grounds the Department of Labor abused its discretion in modifying the 2006 regulation that was finalized during the Bush administration.
But the court found that 2006 regulation was based on a “misleading assumption” that LOs engaged mostly in administrative activities and thus where not entitled to overtime pay.
DOL attorneys argued that most mortgage loan officers are engaged in sales and most of their compensation is based on commissions.
The 2010 interpretation concluded that the LOs perform “production work” not administrative work for their employers. “The courts finds DOL’s argument persuasive,” Judge Reggie Walton said.
The MBA is considering whether to seek an appeal of the district court’s decision. A decision by the trade group is expected within the next two weeks. (The court’s decision in MBA v. Labor Secretary Hilda Solis was handed down earlier this month.)
While the ruling leans heavily toward entitling LOs to overtime pay, LOs that perform administrative duties are exempt from overtime. Collecting and analyzing information about customers’ income, assets, investments and debts, and determining which financial product is best for the customer is considered to be administrative work, according to DOL interpretation.
The DOL 2010 interruptive ruling says LOs who work primarily inside the office are entitled to overtime pay if they work over 40 hours a week. Once the 2010 ruling went into effect some companies started paying their loan officers a minimal salary to avoid paying overtime. However, LOs that mostly work outside the office are not eligible for overtime under the Labor Department’s interpretation.
