Are loan officers entitled
to overtime pay?
How come I did not get overtime
pay even though I worked more than 40 hours a week?
How could my employer fail
to pay overtime if I was entitled to it?
What exactly are
the exceptions to overtime pay?
Do loan officers fall
under the administrative exemption?
Do the new overtime rules
say that loan officers are no longer entitled to overtime?
What does it mean to be
“paid on a salary basis?”
Can loan officers be
exempt as “executives”?
Why doesn’t the retail or
service commission sales exemption apply to loan officers?
If I only earn commissions,
how do I calculate my overtime pay?
If my regular rate from
commissions is $22.00, do I get $33.00 more dollars for every
hour of overtime?
What
can I get in overtime as a commissioned loan officer?
What should I do if I believe
I am entitled to unpaid overtime?
Overtime for White Collar Workers in the
Financial Services Industry
Introduction
The financial services industry, and the home
mortgage industry in particular, tends to pay employees by
commission. This is particularly true for sales type positions,
such as home mortgage loan officers. A surprising number of
these white collar financial service industry workers are
entitled to overtime pay. Although federal regulations allow
employers to exempt financial service industry workers from
overtime, financial service employers must pay the white collar
workers a guaranteed salary of $455 per week. As a result,
Employers who pay only commissions and do not guarantee a
salary must pay loan officers and similar employees for overtime.
This article answers frequently asked questions on this topic.
Are loan officers entitled to
overtime pay?
Yes, with limited exceptions. The general rule
is that employers must pay employees for overtime hours, unless
the employee is “exempt” from overtime. The United States Department
of Labor (“DOL”), which regulates overtime compensation, did
not consider loan officers exempt from overtime before August
23, 2004. The DOL changed its rules as of that date to allow
an exemption for loan officers, but only if the employer pays
the loan officer a salary of $455.00 or more each week.
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How come I did
not get overtime pay even though I worked more than 40
hours a week?
Good question. First, it is possible that you
were exempt from overtime. For example, if you performed “executive”
type duties, such as supervising other employees, you may have
fallen under the “executive” exemption from overtime pay.
Another possibility is that you were entitled to overtime pay,
but your employer simply did not pay it. If that was the case
during the last three years, you may have a claim for unpaid
overtime compensation.
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How could
my employer fail to pay overtime if I was entitled to
it?
Employers might not pay overtime
for the same reason people drive over the speed limit - they
may be willing to take the chance that they will not get caught.
In some cases, however, employers may not realize that have
to pay overtime to certain employees. If an employer can prove
that they had a good faith basis for believing that they did
not owe overtime, they may reduce the amount that they must
pay, but they cannot avoid the overtime pay obligation altogether.
For employers who wilfully choose not to pay overtime, the
law allows employees to collect an extra year of unpaid overtime,
plus an additional amount equal to the overtime owed. In other
words, for employers who take their chances but get caught,
the law allows employees to recover as much as three times
more.
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The Fair Labor Standards Act (FLSA), the law
the requires overtime pay, has quite a few exemptions. The
ones that matter most to a discussion about loan officers
are the administrative, executive and retail or service industry
commissioned sales exemptions.
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Of the three exemptions, the administrative exemption
is the most likely one to apply to loan officers. However, before
August 23, 2004 the DOL and the courts did not consider loan
covered by the administrative exemption. .” Thus, the administrative
exemption almost certainly does not apply to hours worked before
August 23, 2004.
On August 23, 2004, however, the DOL changed
the administrative and other exemptions and now allows loan
officers to be treated as exempt from overtime, but only under
certain, specific circumstances.
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Do
the new overtime rules now say that loan officers are
not entitled to overtime?
Not exactly. The new rules say that loan officers
can be exempt from overtime, but only if the employer pays them,
on a salary basis, at least $455.00 each week.
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An employee is paid “on a salary basis” if
he regularly receives each pay period a predetermined amount
constituting all or part of his compensation, which amount
is not subject to reduction because of variations in the quality
or quantity of the work her performed. The clearest example
is a guaranteed salary of, say, $500.00 per week.
The salary may be all or part of the employee's compensation.
In other words, additional compensation besides the salary,
such as commissions on top of a salary, is still pay “on a
salary basis,” so long as the employee receives at least the
minimum salary every pay period. An example of this type of
compensation arrangement is an arrangement that pays the guaranteed
salary or commission earnings for that pay period, whichever
is greater. So long as the employer pays the salary in the
weeks in which the employee earns less than $455 in commissions,
the employer has paid the loan officer on a salary basis.
The key, however, is that the employer must agree beforehand
to pay the minimum salary of $455 per week. Thus, if an employee
earning pure commissions always earns more than $455.00 per
week, but his pay is tied solely to production, he is probably
not paid on a salary basis. This employee’s case becomes clearer
if he receives less than $455.00 per week during a pay period
because he did not earn enough commission income for that
pay period.
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Yes. Branch managers, for example,
may be exempt from overtime, so long as they perform "executive"
duties and are paid on a salary basis. This was true before
the DOL changed its regulations, as well as afterwards.
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An employee performs executive duties if:
- Her primary duty is managing the enterprise,
or managing a customarily recognized department or subdivision
of the enterprise;
- She customarily and regularly directs
the work of at least two or more other full-time employees
or their equivalent; and
- She has the authority to hire or fire other
employees, or her suggestions and recommendations as to
the hiring, firing, advancement, promotion or any other
change of status of other employees is given particular
weight.
The DOL has more information about executive duties on its
website. The important point for loan officers is that they
can be exempt as an executive employee as well as an administrative
employee, and that this was the case even before the August
23, 2004 DOL rule changes. However, just like administrative
employees, the executive exemption only applies if the employee
is paid on a salary basis. The salary basis test is the
same for executive and administrative employees.
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Why doesn’t the retail
or service establishment commission sales exemption apply
to commission loan officers?
In 1959 the United States Supreme Court expressly
held that enterprises in the financial field, such as banks,
credit companies and personal loan companies, do not qualify
as a “retail or service establishment” within the meaning
of this exemption. Although Congress amended this exemption
since then, it made clear that it did not intend the exemption
to apply to financial service companies. Likewise, the DOL
has long interpreted this exemption as not covering financial
service firms.
Importantly, the DOL could have, but did not, change this
exemption when it changed other exemptions. Thus, while it
chose to broaden the administrative exemption to apply to
loan officers paid $455 or more per week on a salary basis,
it did not expand the definition of “retail or service establishment”
to include financial firms. As a result, I believe it unlikely
that the DOL or a court will apply this exemption to a loan
officer working for a traditional mortgage company today,
at least until Congress or the DOL changes this exemption.
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If you only earned commissions, without any
guaranteed salary, you are probably entitled to overtime.
Your overtime rate, which is called the “regular rate,” is
the total amount that you earn during a pay period divided
by the total number of hours that you worked. Thus, if you
earned $2,500 in a two week pay period and worked 55 hours
the first week and 59 hours the second week, your regular
rate is $2,500 divided by 114 hours, or $21.92.
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If my regular rate from
commissions is $22.00, do I get $33.00 more dollars for every
hour of overtime that I work?
Not exactly. I can see how you
got there, since the general rule is that you are entitled
to 1.5 of your regular rate of pay for every hour of overtime
that you work. However, since the regular rate of pay is based
on the total hours that you work, including your overtime
hours, it treats you as receiving the regular rate for the
overtime hours to begin with. In other words, the $21.92 regular
from the example above (no rounding permitted) is for all
114 hours. That includes the 80 straight time hours plus the
34 overtime hours. Thus, you are only entitled to the “.5"
part of the “1.5" times equation.
To complete this example, if you receive $2,500 in commission
earnings in a pay period in which you worked 80 straight time
hours plus 34 overtime hours, you would get $2,500.00 plus
($21.92/2) x 34 hours, or $2,500.00 plus $372.64, or $2,872.64.
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How much you recover in unpaid
overtime depends on three factors:
- The number of overtime hours that you worked
in each pay period;
- The amount you earned in each pay period;
and
- Whether your employer's failure to pay
overtime was "willful" or not.
If your employer correctly pays you overtime
when you earn it, you would receive the overtime as calculated
in the above example. That is, you would receive $372.64 for
each pay period that you worked the same number of hours and
earned the same amount as in the example. If you earn and
work the same amount for an entire year, you would earn nearly
$10,000 that year in overtime.
If your employer failed to pay you the overtime owed because
it can prove that, in good faith, it believed that you were
not entitled to it, then you could recover unpaid overtime
from the last two years. You can also recover you attorneys'
fees.
If, however, your employer had no good faith basis for failing
to pay you overtime, then you should be able to recover unpaid
overtime for the last three years. In addition, the court
will likely double the amount as “liquidated damages” and
you are generally entitled to an award of attorneys’ fees.
In most cases the employer cannot prove a good faith belief,
which requires something such as reliance on a DOL opinion
letter. Sticking with the above example and assuming that
you earned, on average, $372.64 each two week pay period for
three years, you could recover $29,250 in unpaid overtime,
another $29,250 as liquidated damages and an award of attorneys
fees, or $58,500 plus your attorneys fees.
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What should I do if
I believe I am entitled to unpaid overtime?
You should contact an attorney
or the DOL quickly, especially if you no longer work for that
employer. You can only recover overtime for, at most, the
three years prior to filing suit. If you wait 18 months to
file suit, you can only recover the remaining 18 months of
unpaid overtime.
You should find out first, whether you are likely exempt from
overtime or not and, if not, how much you would be entitled
to receive.
If you are a loan officer who was not paid on an hourly basis
during the last three years, contact me for a brief evaluation
of your claim. If it appears that you have a valuable claim
for unpaid overtime, we can discuss your options for pursuing
it. Generally speaking, when we accept a case to recover your
unpaid overtime, you owe us only if we recover overtime for
you.
If you would like to find out more about a claim for overtime,
call or email me at:
Neil Klingshirn
Board Certified Employment Law Specialist
Fortney
& Klingshirn
4040 Embassy Parkway, Suite
280
Akron, Ohio 44333
telephone 330-665-5445 - fax 665-5446
Neil@fklaborlaw.com
330.665.5445.
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