On March 24, 2010, the United States Department of Labor (“DOL”) issued Interpretation No. 2010-1, triggering dramatic changes in employee classifications for many financial institutions. Through this interpretation, the DOL classification of mortgage loan officers was changed from exempt to nonexempt under the Fair Labor Standards Act (FLSA).

This announcement serves as a reversal from the Department’s original stance on the status of mortgage loan officers and requires banks and other financial institutions to alter their pay practices accordingly to bring themselves into compliance.

However, in what was largely perceived as a positive development for the financial services industry, a federal jury in Michigan subsequently found that mortgage loan officers working at a national mortgage lender were properly classified as exempt – and therefore were not owed overtime payments by their employer.

Despite this decision, the DOL continues to hold the view that mortgage loan officers generally are not exempt. These conflicting interpretations create a muddled picture for employers. Although the DOL’s interpretation is not binding on courts, its views should be carefully considered as the department responsible for administering federal wage laws.

In light of this, many lending institutions have chosen the more conservative approach and now pay their loan officers overtime. Banks and other financial services companies should contact their legal counsel for advice as to whether their loan officers and other employees should be classified as exempt or nonexempt. The specific duties carried out by mortgage loan officers can vary at different firms, and these differences may result in distinct FLSA classifications.

Companies that take the conservative approach and choose to comply with the DOL’s interpretation must:

• Effectively track time and tasks for mortgage loan officers, and;
• Determine the regular rate of pay each week (factoring in commission payments).

To simplify the process, WorkForce Software offers EmpCenter for Financial Services – an out-of-the-box EmpCenter configuration that specifically addresses interpretation 2010-1 and other regulatory concerns unique to the financial services industry, including:

• Convenient and diverse time collection options
  EmpCenter is available with a variety of data collection devices – from web-based clocks to smartphone applications – that simplify the process of capturing time-based and task-based information for your entire workforce. EmpCenter can also interface with other systems – such as phone switches – to validate reported work time and activities.
• Pay calculations & regulatory compliance
  The Financial Services Compliance Pack calculates all overtime, including commissions and other non-discretionary pay, and supports applicable state-specific mandates, even the highly-complex regulations such as those governing workers in California. It also supports calculations for multiple pay structures such as hourly, fixed salary (regardless of hours worked), draw against commissions, or other methods that may be specific to your organization.
• Retroactive pay adjustments
  EmpCenter supports multiple methods of performing retroactive pay adjustments according to your institution’s unique requirements, such as distributing commissions among the weeks over which they were earned, and calculating any adjustments to overtime or “over standard weekly hours” pay.
• Detailed reporting and audit trails
  EmpCenter automatically calculates any pay adjustments that are necessary to bring your institution retroactively into compliance for any period of time you define prior to the system’s deployment. This includes audit trails and reports that empower you to provide proof of compliance.

The conflicting data points of Interpretation 2010-1 and the jury’s finding in Michigan have created a complex and unclear compliance picture for organizations that source and approve mortgages. To ensure compliance today and prepare for new developments in pay compliance, consider automating with EmpCenter Time & Attendance. And for more information on compliance with the Fair Labor Standards Act, visit our FLSA resources page.