The Department of Labor (DOL)’s new proposed change to overtime regulations in the Fair Labor Standards Act could have a major impact on lenders and loan officers, say many field experts. If set into law, the new regulations could affect mortgage companies’ bottom lines in terms of both overall profit and human capital expenditures.
Under the current regulations of the Fair Labor Standards Act, workers are exempt from overtime pay if they meet two requirements: a salary of at least $23,660 per year or $455 per week, and job responsibilities falling under the DOL’s definition of “executive, administrative or professional duties.”
The proposed change to the rule raises the salary figure of the first requirement to $50,400 per year or $950 per week. If the change is passed, businesses will be required to pay employees whose make less than these numbers an overtime bonus of 1.5 times their regular rate.
Overtime regulations for white-collar workers were last updated in 2004, with a minor update in August of 2015 setting the $455 weekly figure. The Secretary of Labor has indicated that, if passed, the rule could go into effect as early as spring 2016.
Many banks and lending agencies have made efforts to apply administrative exemption to mortgage loan officers and appraisers, thus eliminating their right to overtime pay. However, the US Supreme Court definitively ruled against this argument in spring 2015. This means that if the new rule is passed, positions that were previously defined as exempt — for example, lending specialists, branch managers, and commercial appraisers — may need to be re-examined for compliance if their salary levels do not satisfy the new requirements.
The DOL is expected to make their announcement soon, which means mortgage and lending operations need to prepare now. Law firm Hutchinson PLLC recommends starting with a thorough examination of the payroll to identify which employees are currently making between $23,660 and $50,400 per year and thus stand to potentially lose their exemption. Once the employees are identified, organizations should analyze their current overtime commitments and determine the next steps. If the employee consistently performs well and works over 40 hours per week, a salary raise to above the exemption level may ultimately save the organization money. Conversely, an employee whose salary needs to remain the same can have their job responsibilities reallocated in order to keep their workload to 40 hours or less.
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