Compensation

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The Department of Labor has finalized its new salary thresholds applicable to an employer’s obligation to pay overtime and minimum wage. Beginning on January 1, 2020, white collar employees who earn less than $684 per week will not qualify for the executive, administrative, or professional employee exemption, and therefore will be entitled to those protections. The Department estimates that the higher salary thresholds will create approximately 1.3 million additional eligible employees.

As we described here previously, the Department acknowledged earlier this year that the current thresholds are outdated, and sought to expand the eligibility for overtime to additional employees. The Department has long used a salary level test, as well as a duties test, to define who is a bona fide executive, administrative, or professional (“EAP”) employee who is exempt.

Effective January 1, 2020, the standard salary level for the EAP exemption will be $684 per week ($35,568 per year), with special salary levels applicable to employees in U.S. Territories. The final rule will allow employers to satisfy up to 10% of the standard or special salary levels with nondiscretionary bonuses or incentive payments, including commissions, provided that such payments are paid no less frequently than on an annual basis. Employers may meet the salary level requirement by making a catch-up payment within one pay period of the end of the 52-week period.

“Highly compensated” employees (“HCEs”), who receive a certain (higher) amount of compensation and meet a less-stringent duties test, also are exempt from federal overtime and minimum wage requirements. The Department’s final rule establishes the new HCE total annual compensation level at $107,432. …
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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).…
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Kris Kully, of Mayer Brown’s Financial Services and Regulatory Enforcement group, will speak to credit union mortgage lenders at the 22nd Annual Conference of the American Credit Union Mortgage Association (ACUMA) in Las Vegas.

On September 24th, she will lead a discussion regarding Communication and Compliance, addressing many principles to keep in mind as…

A federal court in Texas put a hold on the implementation of the U.S. Department of Labor’s overtime rule.  That rule, which was scheduled to take effect on December 1, 2016, was intended to expand significantly the number of employees entitled to overtime pay under the federal Fair Labor Standards Act.  However, the court postponed that effective date until it can fully consider whether the Department is authorized to promulgate the rule’s increases in the salary-based exemptions.…
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Kris Kully, of Mayer Brown’s Financial Services and Regulatory Enforcement group, will speak to credit union mortgage lenders at the 20th Annual Conference of the American Credit Union Mortgage Association in Washington, DC.

On September 19th, she will discuss the next wave of compliance regulations and enforcement priorities.  On September 20th, she will participate…

The U.S. Department of Labor (“DOL”) has released its final rule addressing which employees are eligible for overtime pay under the federal Fair Labor Standards Act (“FLSA”).  The FLSA, among other requirements, mandates “time-and-a-half” for employees who work more than 40 hours in a week, unless an exemption applies.  The DOL’s final rule updates the criteria for the exemptions for “white collar” employees, raising the salary levels at which those employees have a right to such overtime pay.  The Obama Administration estimates that 4.2 million additional employees will be eligible for overtime pay, including those who make up to $913 per week ($47,476 per year).

In March 2014, the White House directed the DOL to modernize and simplify the “white collar” exemptions from FLSA’s overtime and minimum wage requirements.  Those white collar exemptions apply to employees who meet the established criteria for executive, administrative, professional, or outside sales employees, among other types of duties.  Generally, the criteria for those exemptions include a duties test (i.e., what do the employees actually do?) and a salary test (i.e., do they earn a salary that is high enough that they arguably do not need FLSA protection?).  The DOL had not updated the duties or salary tests for many of those exemptions in decades.

The “administrative” exemption recently sparked panic in the mortgage lending industry, since the DOL changed its stance and declared that the typical duties of a mortgage loan originator do not qualify those individuals for that exemption.  Although that interpretation was challenged, the Supreme Court decided that the DOL properly issued the interpretation, causing many mortgage lenders to re-examine the duties of their employees to ensure that they meet the criteria for an exemption.  Alternatively, the lender must track the hours worked by those loan originators, determine their “regular rate of pay,” and ensure that those individuals’ salaries and/or commissions result in the receipt of minimum wage, plus time-and-a-half for overtime.…
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