The banking industry is up in arms over the Department of Labor’s final rule updating the overtime regulations, which will automatically extend overtime pay protections to millions of workers and thousands of loan officers within the first year of implementation.
The rule was implemented as part of the Fair Labor Standards Act (FLSA or Act) that guarantees a minimum wage for all hours worked during the workweek, and overtime premium pay of not less than one and one-half times the employee’s regular rate of pay for hours worked over 40 in a workweek.
The big debate in the mortgage and banking industry is if a loan officer is or is not exempt from the overtime requirements of the FLSA. Many brokers and banks simply did not pay loan officers for overtime compensation. With these new rules they must now determine whether their loan officers should be classified as non-exempt, and many banks will now have to pay their salaried loan officers for all overtime hours which they are not happy about.
According to the ABA Journal, the Department of Labor is today releasing its final rule doubling the salary level used to determine whether employees are classified as exempt from overtime under the Fair Labor Standards Act. Starting on Dec. 1, the new salary level for exemptions will grow from $23,660 to $47,476, or $913 per week.
The American Banker’s Association (ABA) president and CEO had issued this statement today about the new rule:
“If this rule were supposed to help workers, it misses the mark. It will be harmful to bank employees and the banks who employ them, and, as usual, smaller banks will be hit the hardest. As it stands, throngs of employees across the country, especially those at small banks and branches where a handful of employees wear many hats, will face reduced opportunity and flexibility in the workplace.
“We are disappointed that the Department of Labor has disregarded the concerns of thousands across the country, both in and out of the banking industry, who have recommended that the department conduct a comprehensive revaluation before releasing the rule, and we urge members of Congress to support the Protecting Workplace Advancement and Opportunity Act to ensure the Labor Department takes the steps necessary to get it right with a more appropriate salary threshold.”
Here are the Key Provisions of the Final Rule:
The Final Rule focuses primarily on updating the salary and compensation levels needed for Executive, Administrative and Professional workers to be exempt. Specifically, the Final Rule:
- Sets the standard salary level at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region, currently the South ($913 per week; $47,476 annually for a full-year worker);
- Sets the total annual compensation requirement for highly compensated employees (HCE) subject to a minimal duties test to the annual equivalent of the 90th percentile of full-time salaried workers nationally ($134,004); and
- Establishes a mechanism for automatically updating the salary and compensation levels every three years to maintain the levels at the above percentiles and to ensure that they continue to provide useful and effective tests for exemption.
Additionally, the Final Rule amends the salary basis test to allow employers to use non-discretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level.