Frequently Asked Questions about Loan Officer Overtime Compensation
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?
What can I get in overtime as a commissioned loan officer?
What should I do if I believe I am entitled to unpaid overtime?
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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.
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.
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.
What exactly are the exemptions to overtime pay?
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.
Do loan officers fall under the administrative exemption?
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.
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.
What does it mean to be “paid on a salary basis?”
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.
Can loan officers be exempt as “executives”
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.
An employee performs executive duties if:
1. Her primary duty is managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise;
2. She customarily and regularly directs the work of at least two or more other full-time employees or their equivalent; and
3. 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.
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.
If I only earn commissions, what is my overtime rate?
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.
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.
How much can I recover in unpaid overtime?
How much you recover in unpaid overtime depends on three factors:
- The number of overtime hours that you worked in each pay perid;
- The amount you earned in each pay period; and
- Whether your employer's failure to pay overtime was "wilfull" 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.
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 44333Neil@fklaborlaw.com
330.665.5445.
