A federal district court ruled this month that mortgage loan officers are entitled to overtime pay under a 2010 Obama Administration regulation, as reported by Reuters. The case, Mortgage Bankers Association v. Hilda Solis, et al., decided in DC District Court, reinstates mortgage lenders to their pre-Bush administration status as non-exempt under the Fair Labor Standards Act and its overtime and minimum wage provisions. A victory for employee rights advocates everywhere, the case sends a message to all employers that the Department of Labor and courts will look carefully at the actual functions of employees in determining whether they are exempt under the Fair Labor Standards Act or not.
This case was brought by the Mortgage Bankers Association, a trade association that represents the real estate finance industry. The association brought the suit to challenge a 2010 Department of Labor administrative opinion letter which reclassified mortgage loan officers as non-exempt non-administrative employees under the Fair Labor Standards Act. Under the FLSA, employees that are classified as bona fide executive, administrative, or professional employees, or who work in the capacity of outside salesmen, need not be paid overtime at time and a half for their hours worked over 40 hours a week. Before 2004, mortgage loan officers had been presumed to be non-exempt under these provisions, as much of their work involves inside sales and does not rise to the level of managerial or administrative work. As such, for decades the industry had classified mortgage loan officers as non-exempt and paid such workers overtime when required. In 2004, the Bush Administration changed course and the Department of Labor issued an opinion letter reclassifying mortgage loan officers as exempt administrative employees. For six years thereafter, mortgage loan officers were no longer eligible for overtime under the FLSA. In 2010, the Obama Administration issued an opinion letter from the Department of Labor again classifying mortgage loan officers as non-exempt non-administrative employees under the FLSA. The Mortgage Bankers Association, which had taken advantage of not having to pay overtime for almost six years, immediately filed suit claiming the Obama administration had acted outside its authority in reclassifying the workers.
The DC district court found that the Mortgage Bankers Association’s suit had no merit, as the Obama administration was well within its rights to reclassify the workers, and its reclassification was not unreasonable. First, the court found that the new regulation did not err in considering mortgage loan officers to be primarily engaged in inside sales, which would exclude it from the administrative exemption. The court found it revealing that mortgage loan officers were mainly paid by commission based on the number of mortgages sold, and their primary duty was to undertake such sales. The court also found that mortgage loan officers did not perform duties in furtherance of the general business of the company, which would have allowed them to fall under the administrative exception. Instead, most mortgage loan officers’ work is dedicated not to the production work of the company, but to the sales aspect. Both of these issues led the court to find that mortgage loan officers were non-exempt under the Fair Labor Standards Act and as such eligible for overtime pay,