In its first Administrator Interpretation Letter, the Wage and Hour Division of the U.S. Department of Labor (DOL) announced today that mortgage loan officers do not qualify as bona fide administrative employees under section 13(a)(1) of the Fair Labor Standards Act (FLSA). In reversing its prior stance on the issue, the DOL withdrew two opinion letters issued on September 8, 2006 and February 16, 2001, in which it previously had found that loan officers were exempt administrative employees.

In Administrator’s Interpretation No. 2010-1, the DOL focused on the “production versus administrative” dichotomy in determining that mortgage loan officers are production workers whose primary duty is making sales, as opposed to administrative workers whose work is directly related to the management or general business operations of their employer or their employer’s customers. See 29 C.F.R. § 541.200.

The DOL relied on the following factors in reaching its conclusion:

• The primary job duties of mortgage loan officers – including collecting financial information from customers, entering it into the computer program to determine what particular loan products might be available to that customer, and explaining the terms of the available options and the pros and cons of each option, so that a sale can be made – constitute the production work of an employer engaged in selling or brokering mortgage loan products;
• Mortgage loan officers are paid primarily by commissions;
• Employers often train their mortgage loan officers in sales techniques and evaluate their performance on the basis of their sales volume;
• Many employers defend against FLSA lawsuits brought by mortgage loan officers by arguing that they are exempt as outside sales employees, thus conceding that their primary duty is sales; and
• Courts have repeatedly held that mortgage loan officers who work inside their employer’s place of business have a primary duty of sales.

The Wage and Hour Division announced that its new Administrator Interpretations “will set forth a general interpretation of the law and regulations, applicable across-the-board to all those affected by the provision in issue. Guidance in this form will be useful in clarifying the law as it relates to an entire industry, a category of employees, or to all employees.” Although the DOL will continue to respond to requests for opinion letters, such responses will be limited to providing references to relevant statutes, regulations, interpretations and cases and will no longer include an analysis of the specific facts presented.

This entry was written by Stephanie L. Hankin.