Does the Supreme Court’s Loan Officer Decision Impact Your Credit Union?

March 17, 2015 at 10:40 am 2 comments

As readers of this blog know, last week the Supreme Court unanimously reversed a lower court decision and upheld the U.S.  Department of Labor’s authority to issue an opinion letter classifying mortgage loan officers as non-exempt employees for purposes of the Fair Labor Standard Act (Perez v. Mortgage Bankers Ass’n, No. 13-1041, 2015 WL 998535, at *4 (U.S. Mar. 9, 2015).  What kind of impact will this have on your credit union?  I can’t answer that for you, but the question you should be asking is: What are my employees’ primary duties? If an employee’s job is to act as a mortgage loan officer, then the decision may change the way he is classified and compensated.   In contrast, if your supervisors originate the occasional mortgage, but spend most of their day supervising staff, then the decision won’t impact your operations.  The key point is that labels don’t matter: it’s what the employee actually does that you and your HR person have to look at in the aftermath of this ruling.

First-with apologies for those of you for whom this is real basic stuff-federal law divides us up into two basic categories of workers: exempt and nonexempt.  Nonexempt employees are entitled to overtime whereas exempt employees are not.  The distinctions made sense in 1938 when it was obvious who the blue collar factory worker was and who was the white collar boss, but in the information age, the distinction isn’t as easy to figure out. Regulations recognize five categories of exempt employees including professional, administrative, executive, outside sales, and computer-related professions.   In 2010, the Obama Administration’s DOL reversed an earlier DOL opinion letter.  It ruled that mortgage loan officers were not administrative employees and had to be given overtime. Last week’s decision upheld the DOL’s right to issue this ruling.

The distinction can be tricky for credit unions, particularly smaller ones.  For example, since many branch managers wear multiple hats-they not only manage staff but they sign off on most of the mortgage loan originations-does this decision mean that they are now automatically non-exempt employees? No,   it comes down to what an employee’s “primary duties” are. Nothing in the Court’s decision changes this erstwhile test.    As explained on the DOL’s website, the primary duty “means the principal, main, major or most important duty that the employee performs.”

Remember, the label you give a job doesn’t mean all that much.  For example, our small branch manager who helps out with an occasional mortgage loan is considered a Mortgage Loan Originator under other federal regulations; after all she sometimes offers, arranges, or assists a member in obtaining or applying for a mortgage at the credit union. ( 12 CFR  1026.36.)  But, while the CFPB doesn’t care what an originator’s primary duty is, the DOL sure does

Entry filed under: Compliance, HR, Legal Watch, Mortgage Lending. Tags: .

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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