The Department of Labor is fulfilling its promise to rethink the salary thresholds applicable to an employer’s obligation to pay overtime. The Department published a proposed rule on March 22nd that would expand eligibility for overtime (and minimum wage) to certain previously exempt employees. As explained in a prior update, Labor Secretary Alexander Acosta has acknowledged that the overtime exemption needed updating, as the current thresholds were established decades ago.
As relevant to the mortgage industry, the Department announced in 2010 that it interprets the typical duties of a mortgage loan originator not to qualify for the “administrative” exemption from the federal obligation to pay employees overtime and minimum wage. Mortgage lenders had relied on previous guidance that those originators were exempt, but then had to analyze their originators’ duties to determine whether recharacterization of the originators as exempt or nonexempt was necessary.
Paying overtime compensation to mortgage loan originators can be a complex and difficult task. They often work nonstandard schedules, seeking to be available to potential borrowers, realtors, and others on a near “24/7” basis. Accordingly, keeping track of exact working hours can be tricky. In addition, they likely earn commissions (or a mix of a salary plus commissions), making the calculation of their weekly overtime rate of pay a challenge. The Department recognizes that employers of all types may decide to raise salary levels, reorganize workloads, adjust work schedules, or spread work hours in order to avoid payment of overtime.
Under the Department’s recent proposal, the salary levels for meeting the administrative exemption would increase, broadening the scope of overtime eligibility, but not as much as the Department’s prior attempt, issued in 2016. (A Texas federal court struck down that 2016 rule, holding that the Department exceeded its authority by raising the salary thresholds so high as to essentially supplant other criteria for the overtime exemption.) The current standard salary threshold is $455 per week ($23,600 per year). The Department’s proposal would raise that threshold to $679 per week ($35,308 per year).
Continue Reading Department of Labor Proposes New Overtime Salary Thresholds