Wednesday, March 31, 2010

Department of Labor issues game-changing guidance on the administrative exemption and loan officers

In February, I discussed the application of the Fair Labor Standards Act’s administrative exemption, and made the point that whether an administrative employee is administratively exempt is determined on an employee-by-employee basis. Despite this fact-specific analysis, mortgage loan officers comprised one category of administrative professionals that the Department of Labor has historically found to be covered by the administrative exemption. Last week, however, the DOL issued a game-changing opinion (Administrator’s Interpretation No. 2010-1), in which it concluded that “employees who perform the typical job duties of a mortgage loan officer do not qualify” as exempt administrative employees:

A careful examination of the law as applied to the mortgage loan officers’ duties demonstrates that their primary duty is making sales and, therefore, mortgage loan officers perform the production work [as opposed to administrative work] of their employers.

This pronouncement important for three reasons:

  1. This Interpretation is a stark departure from conventional wisdom, and will likely cause an upheaval in how lenders pay their loan officers.

  2. The DOL has discontinued issuing detailed Opinion Letters in response to specific inquiries from the public. Instead, the Administrator of the Wage & Hour Division will issue formal Administrator Interpretations that are intended to give across-the-board interpretations of general wage and hour issues. If this first Interpretation is any indication, the Administrator will focus on areas of the law that are the most confusing or frequently litigated. These Administrator Interpretations, though, should carry the same import as the former Opinion Letters.

  3. The Department of Labor has swung with the political winds. Even before January 20, 2009, wage and hour was a minefield for employers, but at least you could usually see where the mines were. Now, they are all hidden, waiting for even the most diligent of employers to detonate one. 

Many of my blogging compatriots have shared their own thoughts on this issue:

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