The Department of Labor (DOL) recently issued an opinion letter which stated that certain mortgage loan officers or “loan originators” may qualify for the minimum wage and overtime exemption for outside sales employees. The Fair Labor Standards Act (FLSA) establishes the minimum wage and overtime requirements. However, certain employees are exempt from the minimum wage and overtime requirements. In this case, section 13(a)(1) of the FLSA provides an exemption for “any employee employed . . . in the capacity of outside salesman.” The guidance from the DOL is in response to confusion in the mortgage industry of classifying commission based loan officers which has led to several lawsuits seeking back pay for employees under the FLSA.

The DOL outlined three requirements that must be met in order to qualify for the outside sales exemption. First of all, the mortgage loan officers met the “sales” requirement as defined in the FLSA. The employees were described as the “sales force” loan officers and their primary duty is the sale of mortgage loan packages.

Second, the DOL found that the employees at issue are “customarily and regularly engaged away from the employer’s place of business.” The “sales force” loan officers meet clients and initiate sales outside of the employer’s place of business or the employee’s home office. In order to meet the outside sales exemption, the outside sales activities must be performed on a regular basis, not merely an isolated event. The “sales force” loan officers described in the opinion letter were described as employees who “perform their work primarily outside the office.” In order to qualify for the exemption, the outside sales activity must be a “normal and recurrent part of their workweek.”

Finally, the DOL stated that even though the “sales force” loan officers may perform some activities in their employer’s office or employee’s home office, they still qualify “so long as the inside sales activity is incidental to and in conjunction with qualifying outside sales activity.” Examples of such activities include follow up phone calls, correspondence via email, paperwork, and meeting clients or prospects in the office with whom the “sales force” loan officers have been dealing with in their outside sales activities. Sales initiated by the mail, telephone, or internet are not deemed outside sales activities unless it is used merely as an “adjunct” to outside sales.

Based on this opinion letter, mortgage loan officers who primarily make sales outside the office and meet the other requirements specified will qualify for the outside sales exemption. However, if mortgage loan officers are initiating sales via mail, telephone, or internet within the office these activities will not be deemed outside sales activities.

The DOL opinion letter is based on the facts and circumstances described in the request. It is important that all mortgage loan officers are evaluated independently to determine if they may qualify for the outside sales exemption.