Five Reasons Not to Reclassify LOs' Overtime Status

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As a follow up to my previous blog, many clients have asked whether this means they must or should reclassify their loan officers into an exempt position. In a word the answer is generally, no. Here is why:

1. The court of appeals merely rejected the manner in which the 2010 opinion was adopted—not the opinion itself. The court specifically said the DOL could always adopt such an opinion later.

2. The opinion was just that—an opinion. It was not a regulation or existing law. It was not binding on courts. To the extent the legal analysis compels a conclusion about exempt status, the law itself did not change.

3. The 2006 opinion is not as beneficial as many would believe. While it discusses the applicability of the administrative exemption, it limits the opinion to those loan officers who are not primarily engaged in sales.  It will not be easy to convince judges and juries that loan officers paid on a primarily commission basis is not primarily engaged in sales.

4. To use the administrative exemption, loan officers must receive 455/week as opposed to minimum wage. 

5. If you decide to go to an exempt position and stop tracking time, a loan officer who is later deemed not exempt would be able to essentially tell a court how many hours they worked and without a tracking mechanism in place, the employer would have little ability to refute such claims.

This is not to say there are never circumstances where a lender might be wise to consider exempt status.  However, it is hardly a no-brain decision. It is one that must be carefully considered with a full understanding of the operative law, the relative risks, and the strategy to minimize such risks.


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