Labor Laws for Loan Officers

There are a variety of issues with how commissioned sales people are paid. This page will cover mortgage loan officers, but many of the same principals would also apply to stockbrokers and other types of commissioned sales jobs in the financial sector.

Any samples that are given are for illustration purposes only and would not necessarily represent your claim.  Any statements, on this page or elsewhere, are not guarantees of any outcome.

State and Federal Overtime

In general, loan officers who sell mortgages are entitled to overtime. The confusion comes in the fact that the term "loan officer" can mean different things depending on where you work. For instance, if you are a loan officer in a bank and you evaluate customer needs based on their income, assets, and investments and then try to locate an appropriate source of funding for them, this would likely be exempt activity. However, any employee whose primary duty is selling financial products will likely be entitled to overtime. As such, most loan officers who work selling loans are likely entitled to overtime. This is true even if you take inbound calls only.

A major source of confusion in this area is that many loan officers are exempt from California overtime, but not federal overtime. What this means is that you only get overtime after 40 hours in a week, not 8 hour in a day. It also means that if you call the "Labor Board," they will tell you that you are not entitled to overtime. What they don't tell you is that you are probably entitled to it under Federal Law.

How Overtime Is Calculated on Commissions

The law requires that all work over 40 hours in a week be paid at a premium rate. Thus, when you are paid on commissions, your overtime rate will be a premium based on your commissions. The calculation is fairly straight forward. You take the total amount of commissions for the week and divide it by the total number of hours worked in that week. You then get an additional 1/2 for the overtime hours. You only get an additional 1/2 rather than 1 1/2 because the commissions are considered to already cover your base wage.

An example would be if you made $2000 in a week and worked 50 hours. Your regular rate of pay is $2000/50 = $40/hr. You must receive the overtime premium for all hours past 40. In this example it is 10 hours. You get an extra $20 per hour. You total overtime due for that week is $200.

The main issue for loan officers is that a single loan may have taken multiple weeks to complete. In that case, the amount of commissions are spread over the entire time that it took to make the loan. While this does make the computation more complicated, it does not usually change the amount of overtime that is due. This is because you have multiple loans spread over multiple weeks and your overtime is really just an averaging of these payments. In any case, you do not need to worry about the complications of computing your overtime. That is your employer's responsibility.

Minimum Wage Issues

Many loan officer positions are paid commission only. The problem is that any loan officer must be paid at least minimum wage for all hours worked. Thus, if in a given pay period, you don't make any commissions so that you don't get paid, this is illegal. The legal way for a company to do this is to pay a "draw" or some other type of guaranteed salary so that you always make at least minimum wage. If you had pay periods where you didn't get anything because you were commission only, you should contact me about getting your back wages.

Commissions on Termination

Another common problem in the loan officer field is employers that try to not pay you commissions after they have terminated your employment. In most cases, you are entitled to commissions that you earned even if the loan does not close until after you have been terminated. If the loan takes a long time to close and another salesperson had to spend a lot of time on it, then you might not be due any commission. However, if the loan closes a week or two after you were terminated, and only minimal work was done by others in the company, then you should be paid for that sale.

Independent Contractors

Many loan officers are labeled as independent contractors. If you truly work independently from the employer, this might be a valid classification. However, if you go to work at your employers place of business and he gives you the leads or other material which you use to make your sales, you are an employee. Very few loan officers will actually qualify as independent contracts. If your employer is labeling you an independent contractor, chances are this is in an attempt to get around the labor laws. If so, you should contact me immediately to figure out what you are entitled to.