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  April 1, 2010
                                      Loan Officers Lose Administrative Exemption



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In an Administrator's Interpretation (Interpretation), issued March 24, 2010, the U. S. Department of Labor (DOL) has determined that mortgage loan officers who perform the typical duties of a loan officer have a primary duty of making sales for their employers and, therefore, do not qualify as bona fide administrative employees exempt under section 13(a)(1) of the Fair Labor Standards Act, 29 U.S.C. 213(a)(1). Accordingly, they are subject to minimum wage and overtime requirements.

The Interpretation applies to employees who:

  • spend the majority of their time working inside their employer's place of business, including employees who work in offices located in their homes, rather than mortgage loan officers who are customarily and regularly engaged away from their employer's place of business, and
  • employees who do not spend the majority of their time engaging in "cold-calling," contacting potential customers who have not in some manner expressed an interest in obtaining information about a mortgage loan.
By issuing this Interpretation, the DOL has now rejected its own September 8, 2006 Wage and Hour Opinion Letter FLSA 2006-31, asserting that this previous position provided an "inappropriately narrow definition of sales" as including only customer-specific persuasive sales activity (i.e., the time that a loan officer spends directly engaged in selling mortgage loan products to customers).

To fall within the meaning of an "employee employed in a bona fide administrative capacity" (therefore, exempt) an employee's job duties and compensation must meet all of the following tests:

1. The employee must be compensated on a salary or fee basis as defined in the regulations at a rate not less than $455 per week;

2. The employee's primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer's customers; and

3. The employee's primary duty must include the exercise of discretion and independent judgment with respect to matters of significance.

The DOL, contending that the second test (listed above) does not apply to loan officers, argues that the typical, primary duty of the loan officer is sales, not office or non-manual work directly related to the management or general business operations of their employer or their employer's customers. 

Although loan officers compile and analyze potential customers' financial data, they do so because doing so is necessary to evaluate the customers' qualifications for a loan (in order to consummate a sale); that is, the DOL's position is that loan officers are not analyzing the customers' information to provide advice to the customer, which the customer could take and use elsewhere, but performing "screening" for the benefit of the employer, rather than servicing for the benefit of the customer.

In determining whether an employee's primary duty is making sales, the DOL's view is that work performed incidental to sales should also be considered sales work.


  • Reclassify loan officers as "non-exempt."

This will require implementing company guidelines for proper record keeping, calculating overtime pay, and extrapolating such overtime pay from commissions, because loan officers would now be paid overtime compensation for all work performed in excess of 40 hours per work week.

  • Reclassify employees into another exemption.   

Such as:

Outside Sales Employee (primary duty is making sales, or obtaining orders or contracts for services or use of facilities and, amongst other criteria, must be customarily and regularly engaged away from the employer's place of business).

Highly Compensated Employee (earns in excess of $100,000 per year, minimum $455 per week).

 Visit our Library for Issuance     
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Application of the Administrative Exemption to Employees who Perform the Typical Job Duties of a Mortgage Loan Officer.

Administrator's Interpretation 2010-1

Issued: March 29, 2010

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