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Overtime Wages In The Financial Services Industry

Loan officers, underwriters and mortgage appraisers used to be left out of overtime. That’s all changed, but many companies are still stealing from their employees in finance.

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Many employees working in financial services are entitled to overtime pay. Loan officers, loan processors, residential loan appraisers and underwriters – most of these employees deserve more for their extra hours. But employers routinely misclassify them as exempt from the Fair Labor Standards Act (FLSA), stealing money from the people who’ve earned it.

Person Signing Document

Financial services employees are most likely to be registered as exempt “administrative” employees. That may have been correct in the past, but it’s probably not anymore.

Once Exempt From Overtime, Many Workers In Finance Should Be Making Higher Wages

Traditionally, the Department of Labor’s official position was that loan officers were in fact “administrative” employees. This is one of the exemptions outlined in the FLSA, a federal law that entitles most American workers to a minimum wage and overtime for any hours worked beyond 40 in a week. “Exempt” employees, however, aren’t legally entitled to any of the Act’s privileges, and for decades, workers in financial services had no legal claim to overtime.

But in March 2010, the DOL switched its stance, holding that the vast majority of mortgage loan officers are entitled to overtime, since their primary job duty is to sell financial products. Several contentious legal battles were fought over this decision, but in 2015, the US Supreme Court put the issue to rest, in a case known as Perez v. Mortgage Bankers Association.

Recent court decisions have extended the same wage and hour rights to residential loan appraisers and other similar employees in financial services. But no amount of favorable precedent can tell an individual employee whether or not they’re exempt. Figuring out if you’re entitled to overtime can be surprisingly tricky.

Am I Entitled To Overtime?

To determine how employees should be classified under the FLSA, the Department of Labor only takes job duties into account. It’s about what you actually do at work that matters. Neither your title, nor the clients you serve, have anything to do with it.

Here are the general guidelines for an “administrative” employee, the most common misclassification affecting financial service workers:

  1. Must be paid on a salary or fee basis
  2. Must be paid at least $455 per week
  3. Primary job duties must be “office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers”
  4. Primary duty must entail the use of “discretion and independent judgment with respect to matters of significance.”

Each one of those conditions is required; if you don’t satisfy one of them, you’re not an administrative employee. But that 1st condition can be a major sticking point. In the home mortgage industry, many employees are paid on a commission basis. That’s not a guaranteed salary, so unless you make a salary in addition to your commissions, it’s likely that you’re entitled to overtime.

Even when financial service employees satisfy numbers 1, 2 and 3, many fail to satisfy the 4th condition. Take a look at your own job duties. Is less than half of your time spent using “independent judgment” to decide matters of true importance? If so, you’re probably entitled to significant back-pay.

How Much Should I Be Making?

Today, most underwriters, loan officers and loan processors should be making overtime at a wage 1.5 times their regular rate. But since few of these employees are paid on an hourly basis, calculating that regular rate can seem difficult.

Here’s how to find out how much your overtime wage should be if you make a salary, get paid on commission or both.

In either case, we’ll have to determine your “regular rate,” how much you make for non-overtime hours. Since overtime is always calculated for specific weeks, your own regular rate may change from week to week.

Salaried Employees

Make a salary but still entitled to overtime? To calculate your overtime wage, you’ll have to turn to your employee handbook first. You’ll need to figure out how many hours of work your salary is meant to cover.

Let’s say you get paid $800 for 35 hours of work every week. But this week, you worked 46 hours. The first step is to calculate your “regular rate” and we already have the tools to do it. Just take $800 and divide it by 35. That’s around $22.86, your regular rate.

Federal overtime, however, only kicks in after 40 hours of work. So how do we deal with those 5 hours between 35, how much you were expected to work, and 40? Simply pay them at the regular rate. Multiply 5 hours by $22.86 and we get $114.26. Add that sum to your $800 salary and we’re ready to calculate your overtime.

First we take your regular rate and multiply it by 1.5. That’s your overtime wage, $34.29. Now multiply that rate by your overtime hours, 6, to get $205.74. After adding all three sums together, we’ve arrived at your total pay for the week: $1,120.

Employees On Commission

For employees who only make a commission, the math is actually simpler.

Just take how much you made in a given week, divide it by the hours you worked, and you have your regular rate. Multiply that rate by 1.5 to arrive at your overtime wage. Then multiply your overtime wage by the hours you worked over 40 and add that to your commission.

How Can I Get The Back Wages I Should Have Made?

Changes in federal guidelines, like the one that extended overtime privileges to most loan officers and underwriters, aren’t always implemented straight away. Where large corporate bureaucracies are concerned, it can take years for employers to get it right on overtime. That’s why so many financial services employees who should be making overtime still aren’t.

The Fair Labor Standards Act provides workers with a way to get the wages that have been stolen from them. By filing an overtime lawsuit, you can secure hefty back wages, and the court might even double them.

Other financial service workers have already made the Department of Labor’s new position work for them – in a big way. On August 25, 2015, Bank of America agreed to settle an overtime class action filed by residential real estate appraisers to the tune of $36 million. 365 current and former appraisers will receive an average of $64,537 each in back wages.

Is More Change On The Way For Bank Employees?

Along with a slew of other changes to the federal overtime regulations, President Obama has lobbied for an increase in the salary threshold on all “white collar exemptions.” Most branch managers and assistant branch managers currently fall under these exemptions, classified as “executive” employees who aren’t entitled to overtime.

But Obama wants to increase the salary threshold. In fact, he wants to more than double it, from the current $455 per week to an estimated $970 per week. If the President’s directions are taken up by the Department of Labor, numerous bank employees who aren’t making overtime now will be owed it in the future.

You can learn more about the Department of Labor’s efforts to raise the salary threshold here.