Supreme Court Decision

Mortgage Loan Originators:
Not Exempt From Overtime & Minimum Wage Under FLSA Administrative Exemption

In 2006, the U.S. Department of Labor (“DOL”) published an opinion letter indicating mortgage loan originators (“MLOs”) fell within the administrative exemption of the federal Fair Labor Standards Act (“FSLA”) and, therefore, did not need to be paid overtime or minimum wage.  However, in 2010 without providing any public notice or comment period, the DOL reversed this decision and issued an interpretation stating that MLOs did not qualify for the administrative exemption.  The Mortgage Bankers Association (“MBA”) sued the DOL shortly after this, challenging the validity of new interpretation since the DOL failed to provide a public notice and comment period.  The DOL won on summary judgment in the lower court, but in 2013, the D. C. Circuit Court reversed this decision.  This reversal essentially vacated the 2010 interpretation, but it left mortgage companies and banks unsure of how to treat MLOs – exempt or not exempt.

On March 9, 2015, the U.S. Supreme Court issued a decision in Perez v. Mortgage Bankers Association, which clarified the issue: MLOs are no longer considered exempt from overtime and minimum wage requirements under the administrative exemption.  This means that unless a MLO qualifies for a separate exemption (such as the outside sales employee exemption, which is very fact-specific), an employer must pay the MLO at least minimum wage, as well as overtime pay for any hours worked over 40 hours in a work week.

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