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On March 31, 2006, DOL issued an opinion that explicitly states for the first time that mortgage loan officers can qualify under the "outside sales exemption" from overtime under the FLSA. DOL indicated that this exemption applies provided that a loan officer is "customarily and regularly" - meaning normally and recurrently in every workweek - engaged away from the employer's place of business (or a home office used by the loan officer) in sales activity. The exempt status of the outside sales mortgage loan officer is maintained if he or she also does some amount of "inside" work incidental to the loan officers' own outside sales or solicitation activity, such as making telephone calls, sending emails, or meeting with clients in the office. DOL has made it clear, as expected, that this incidental activity must relate to the loan officer's own outside sales activities. This distinction is significant, and it should be observed carefully in applying the new opinion.

The 2004 DOL rules also incorporated existing case law under which loan officers and other administrative employees in the financial services industry may be classified as exempt from the FLSA under the administrative exemption. The administrative exemption applies to employees whose primary duties are the performance of office or nonmanual work directly related to the management or general business operations of their employer or their employer's customers, and who exercise discretion and judgment. Financial services employees meet the requirements for the exemption where their duties include work such as: collecting and analyzing information regarding the customer's income, assets, investments or debts; determining which financial products best meet the customer's needs and financial circumstances; and advising the customer regarding the advantages and disadvantages of different financial products; and marketing, servicing or promoting the employer's financial products. Employees whose primary function is selling are not within the exemption. Employees subject to the exemption must also be paid at least $455 a week ($23,660 per year) on salary basis, such as advance guaranteed non-recoverable minimum draw against sales commissions. The new DOL rules also include exemptions for executives and professionals.

Since the revised rules addressed the status of exempt employees in the financial services industry generally, MBA asked the head of DOL's Wage and Hour Division for a formal opinion on how these regulations apply to mortgage loan officers specifically. In an opinion dated September 8, 2006, DOL responded positively to each of the three points in the request by agreeing that:

• The financial services industry provision in the 2004 regulations applies to mortgage loan officers whose duties are as described in MBA's request letter, even if the mortgage loan officers engage in some sales activity.
• Mortgage loan officers' use of certain software programs or tools does not exclude them from exempt status.
• Mortgage loan officers who perform administratively exempt duties under the 2004 regulations also meet the administrative duties tests in the prior regulations, which applied to periods prior to August 2004.

Based on the FLSA regulations and these opinions, many mortgage banking employees may fit within FLSA's exemptions. Specifically, since most loan officers are either outside sales people or spend a majority of their time performing exempt administrative or executive duties, they may be exempt from FLSA coverage.

MBA welcomes the latest DOL opinions which confirm its views regarding FLSA coverage.