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Special Reports
Recruiting & Training
Lenders Turn to Expert for Help on FSLA
By Jennifer Harmon
CHICAGO -- Carey Bartell, a partner with the law firm of Sachnoff & Weaver
here, has been advising lenders on how to comply with the new rules and regulations issued by the Department of
Labor, the federal agency charged with enforcement of the Fair Labor Standards Act.
"Lenders have been trickling into our office as the Department of Labor begins
to enforce the new regulations and courts are beginning to interpret them," said Ms. Bartell.
The Fair Labor Standards Act requires that employers track their employees' hours
and pay time-and-a-half for all hours worked over 40 in any one work week. There are several possible exemptions
from the act's overtime requirements, however, and lenders must assess whether their employees are "exempt"
or "non-exempt" from overtime requirements on a case-by-case basis.
Mortgage lenders that treat loan officers as exempt employees can be putting themselves
at risk, Ms. Bartell added. "Loan officers are a huge problem for lenders, because they are often compensated
on a commission-only basis," she said. "That is only possible if they satisfy the outside sales exemption.
To do that, to be an outside sales person, you have to be calling on customers at their places of business around
50% of the time or more. You can't be doing business by telephone or at a home office.
"Prior to last year's changes to the regulations, it used to be that the
outside sales exemption wouldn't apply unless outside sales constituted 80% of the employee's work," she said.
"Now the rules simply say that the employee's primary duty has to be outside sales. People who used to not
qualify for the outside sales exemption now may."
To qualify for most other exemptions under the new regulations, employers must
pay employees a guaranteed salary of at least $455 per week. Employees who receive commission only, or a salary
or less than $455 per week, may not qualify for an exemption even though their job responsibilities would otherwise
satisfy the exemptions. Accordingly, in such situations, the employer must decide whether to institute a guaranteed
salary, raise the salary level for the position, or reclassify the position as nonexempt.
"The regulations require a guaranteed salary. You can certainly continue
to pay someone commissions, so long as you guarantee that, in any week they perform work, they will receive a minimum
of $455. Many loan officers are paid more than that. Mortgage lenders could have a shot at this administrative
exemption if they make some simple changes."
The regulations now give as an example of an exempt administrator as someone in
the financial services industry who collects and analyzes information about a customer's financial circumstances
and determines which financial products best meet their needs. "This type of employee looks at debt, income
and assets, and gives advice to the customer about what type of products would best suit their situation,"
Ms. Bartell said. "That is different from merely offering a set number of loan packages. A person who does
that is not really a consultant or advisor. The courts and the Department of Labor have said that a loan officer
who is not really an advisor to customers does not qualify for an exemption."
In light of the changes made to the overtime regulations, lenders should take
a few basic but important steps. A detailed analysis should be done, and as a matter of good business practice,
employers also need to review their pay practices to ensure that they are not making improper deductions from the
pay of exempt employees and are paying their nonexempt employees appropriate rates for all hours worked. Employers
should also develop a written policy and disseminate it to all employees advising them to report any improper wage
deductions to management so that the company has the opportunity to review and correct any errors.
"A lot of lenders turn to outside counsel to analyze the situation. It's
not enough that a loan officer has a certain title. It needs to be clarified what their specific duties are and
how they operate on a day-to-day basis. It's individualized for each employer. No company operates the same,"
she said. "The person doing the analysis should have a fair amount of knowledge of regulations, how they've
been applied, and gain a general overview of how that particular company works."
Ms. Bartell's firm often works with companies to perform Fair Labor Standards
Act analyses and interviews employees to find out how they perceive their jobs.
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