A U.S. Court of Appeals overturned a ruling regarding overtime pay for loan officers that could have big implications for the way originators are paid. Yet uncertainty still remains as to how it will actually play out, according to commentary by Steven R. Peltin of Foster Pepper & Shefelman PLLC.
The U.C. Court of Appeals for the Washington D.C. Circuit ruled in favor of the Mortgage Bankers Association in the case addressing the issue of whether mortgage loan officers are exempt from overtime. A court ruled in 2010 they were exempt, but a 2012 decision challenged the ruling.
The MBA had challenged a previous interpretation of the rule that reversed an earlier Department of Labor opinion letter concluding mortgage loan officers were generally exempt under the “administrative exemption.”
According to the MBA, the lending industry has relied on the 2006 DOL opinion letter and the underlying regulations indicating that a loan officer can qualify for the administrative exemption under the FLSA. MBA claims that the abrupt reversal of this ruling subjects mortgage lenders to unnecessary litigation.
A judge later ruled in June 2012 that the 2010 interpretation was not inconsistent with the FLSA regulations and was not unlawful.
The most recent decision, however, focused on inconsistent positions taken by the Department of Labor. While a “win” for MBA, the ruling did not settle the issue of exempt status for loan officers, Peltin writes.
“The Court of Appeals did not decide whether mortgage loan officers are or should be exempt. Instead, the Court only determined that the 2010 Administrator’s Interpretation was invalid. The DOL could start the rulemaking process and properly issue new rules or regulations that repeat the 2010 Administrator’s Interpretation.”
In the interim, there is no clear indication as to whether courts will rely on recent court decisions, or an original 2006 opinion letter on the issue.
Further, Peltin points out, not all mortgage loan officers are the same.
“The application of the administrative exemption depends upon the employee’s job duties. The question is whether the employee’s “primary duty” includes the “exercise of discretion and independent judgment” with respect to “matters of significance.””
A third point of must also be considered, Peltin writes: how an employee is compensated.
“Unless the employee is paid on a “salary or fee basis,” he or she cannot be an exempt administrative employee,” he writes.
Written by Elizabeth Ecker