4/1/2010 -

“Curiouser and curiouser!” Cried Alice (she was so much surprised, that for the moment she quite forgot how to speak good English). Lewis Carroll, Alice in Wonderland.

An official Administrative Interpretation letter from the Wage and Hour Division has dramatically disrupted the compensation landscape for banks and financial institutions and management experts fear that this signals a new enforcement policy that may portend further changes, not only for banks, but for all employers. According to this letter, the federal Wage and Hour Division has abruptly changed its opinion regarding the exempt status of mortgage loan officers. Using language and analysis that harkens back to the 1950’s era of large factories and production lines, the Wage and Hour Division has reversed its own long standing position and now declares that Mortgage Loan Officers do not qualify for the Administrative exemption from timekeeping and overtime. This decisions means that Mortgage Loan Officers must now keep a daily time record and receive overtime. The Wage and Hour Division is one part of the enormous bureaucracy that is called the Department of Labor and is responsible for enforcing the Wage and Hour regulations. In our more than 44 years of experience with this agency, this is not the first time that they have come out of left field with an unexpected and surprising decision but, for the moment, banks and financial institutions must abide by this opinion or else face a serious financial exposure.

This opinion has several ramifications for Mortgage Loan Officers. First, they must begin to keep an accurate record of their hours of work each day. They may do this by hand or electronically, but the record must be accurate and they should not record the exact same time every day. In addition, time spent outside of regular working hours in meetings, social functions, etc., where they are representing the bank, could constitute working time and be subject to the time record. Second, their pay plan must be changed to an hourly rate and they must receive time and one-half this hourly rate for all hours worked in excess of 40 per week. Some banks may choose to pay a “salary for 40 hours” but, in the event of overtime, must still pay time and one half for all hours worked in excess of 40 per week. Third, most Mortgage Loan Officers receive a commission of some sort and overtime must be paid on this commission, as well as on the hourly rate. A Mortgage Loan Officer paid primarily or exclusively by commissions presents certain additional problems which we should discuss in person.

Thus, we recommend that you immediately reclassify your Mortgage Loan Officers to a non-exempt status, have them keep a daily time record of their true and accurate hours of work and pay them time and one-half for all hours worked in excess of 40 per week. This Wage and Hour Administrative Interpretation does not apply to Loan Officers who most of their time away from the bank and who, on that basis, qualify for the outside sales exemption from timekeeping and overtime.

Please let us know if you have any questions about this surprising development, or if you would like us to come out and discuss this new development with you. If you are a retainer client of Seay Management Consultants, we will cover this point during our annual Human Resources Management Audit and make sure that you are in compliance and up to date with the regulations.

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