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March 31, 2006
Dear Name*,
This is in response to your request for an opinion regarding whether certain “sales force” mortgage loan
officers qualify for the minimum wage and overtime exemption for outside sales
employees set forth in section 13(a)(1) of the Fair Labor Standards Act (FLSA)
(copy enclosed). It is our opinion that the “sales force” loan officers you
describe qualify as exempt outside sales employees.
Your request involves mortgage loan officers, also referred to as loan originators, who perform their
work primarily outside the employer’s offices; you expressly exclude from the
request loan officers who “perform their work mainly within the office.” The
mortgage loan officers at issue meet with customers to sell mortgage loan packages.
These “sales force” loan officers are responsible for originating their own
sales by contacting prospective clients and by developing and maintaining
referral sources. The “sales force” loan officers spend a significant amount of
time away from their employer’s place of business in performing their principal
duty of selling the loan products offered by their employer. The “sales force”
loan officers meet with prospective clients at locations other than the
employer’s business, such as a client’s home or other locations away from the
employer’s place of business. They meet with clients in person to sell mortgage
loan packages; their contact with clients by telephone, mail, and e-mail is
adjunct to these in-person contacts. The “sales force” loan officers also
obtain credit information and other necessary documentation for the loan
application process. They make in-person calls on real estate agents and
brokers, financial advisors, and other potential referral sources to develop
borrower leads. The “sales force” loan officers also engage in marketing and
promotional activities in support of their own sales. The “sales force” loan
officers have considerable flexibility to set their working hours and to
schedule the tasks they perform during the workday.
You state that the “sales force” loan officers are “customarily and regularly” engaged away from the
employer’s place of business and offices in their homes. The “sales force” loan
officers spend some time in their employer’s office taking loan applications,
attending meetings, completing paperwork, and preparing marketing and sales
materials in support of their own sales efforts. Additional activities that may
be performed at the employer’s place of business or the employees’ home offices
include: checking and bringing databases of loan products for sale and referral
services up to date; calling, writing to, or communicating by e-mail with
clients or prospects with whom the “sales force” loan officers have been
dealing during their outside sales activities; talking to such clients or
prospects in the office about their particular loan transactions; calling,
writing to, or communicating by e-mail with lists of prospective clients, loan
product vendors, and referral sources with whom the “sales force” loan officers
may not have had prior contact; and preparing loan applications and other forms
for loan sales initiated or negotiated by the “sales force” loan officers
during outside sales activities.
Section 13(a)(1) of the FLSA provides an exemption from the minimum wage and overtime requirements of the
Act for “any employee employed . . . in the capacity of
outside salesman.” The Department’s regulations define that statutory phrase as
including “any employee”:
- Whose primary duty is:
- making sales within the meaning of section 3(k) of the Act, or
- obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer; and
- Who is customarily and regularly engaged away from the employer’s place or places of business in performing such primary
duty.
29 C.F.R. § 541.500 (copy enclosed). “Primary duty” means “the principal, main, major, or most
important duty that the employee performs.” 29 C.F.R. § 541.700 (copy
enclosed). FLSA section 3(k) defines “sale” as “any sale, exchange, contract to
sell, consignment for sale, shipment for sale, or other disposition.” See
also 29 C.F.R. § 541.501 (copy enclosed).
Under 29 C.F.R. § 541.701 (copy enclosed), “[t]he phrase ‘customarily and regularly’ means a frequency
that must be greater than occasional but which, of course, may be less than
constant. Tasks or work performed ‘customarily and regularly’ includes work
normally and recurrently performed every workweek; it does not include isolated
or one-time tasks.”
The regulations provide further guidance regarding what it means to be “engaged away from the
employer’s place of business” for purposes of 29 C.F.R. § 541.500. “The
outside sales employee is an employee who makes sales at the customer’s place
of business or, if selling door-to-door, at the customer’s home. Outside sales
does not include sales made by mail, telephone or the Internet unless such
contact is used merely as an adjunct to personal calls.” 29 C.F.R. § 541.502
(copy enclosed). Outside sales employees may perform promotional work as an
exempt outside sales activity if it “is actually performed incidental to and in
conjunction with an employee’s own outside sales or solicitations.” 29 C.F.R. § 541.503 (copy enclosed). Whether promotional work is to be considered exempt is
determined on a case-by-case basis. Id.
It is the position of the Wage and Hour Division that employees of finance companies who obtain and
solicit mortgages may be exempt outside sales employees if they are “customarily
and regularly engaged away from their employer’s place of business in obtaining
mortgages from brokers and individuals.” Field Operations Handbook (FOH) § 22e02
(copy enclosed). “Work incidental to the employee’s obtaining the mortgage,
such as obtaining credit information from the mortgagor, before and after the
sale would qualify as exempt work if done with respect to [the employee’s] own
sales.” Id.
Your letter also refers to FOH § 22e06 (copy enclosed), which lists several activities that real estate sales employees may perform at the employer’s place of business in conjunction with outside sales work without losing the outside sales exemption. These activities include:
- Bringing a multiple listing book up to date;
- Calling prospects with whom the sales employee has been dealing during outside sales activities;
- Dictating or writing letters to such prospects;
- Talking to such prospects in the office about their particular transactions;
- Calling a list of prospective buyers or sellers of homes with whom the sales employee has had no prior contact;
- Preparing a contract and other forms required for a sale negotiated during the sales employee’s outside sales activity; and
- Talking to a “walk-in” prospect with whom the employee has had no prior contact and showing photographs and discussing terms
on specific houses, if such activity results in subsequent outside sales activity with the prospect.
Id. You suggest that these duties are analogous to the tasks performed by the “sales force” loan officers
while at their employer’s place of business or their home office. For purposes
of this letter, “employer’s place of business” includes the employee’s home
office, because “any fixed site, whether home or office, used by a salesperson as
a headquarters or for telephonic solicitation of sales is considered one of the
employer’s places of business, even though the employer is not in any formal
sense the owner or tenant of the property.” 29 C.F.R. § 541.502.
Based on the information you have provided, the “sales force” loan officers appear to meet the requirements
for the outside sales exemption. First, the “sales force” loan officers fulfill
the sales requirement of the exemption. Their principal duty is the sale of
mortgage loan packages. According to WH Opinion Letter January 15, 1971
(copy enclosed), “an employee who actually obtains an application for a
loan would be engaged in exempt work; the consideration being
the interest paid for the amount loaned.” Therefore, the
sale of mortgage loan packages meets the definition of sales in section 3(k) of
the FLSA. See FOH § 22e02.
Second, whether “sales force” loan officers are “customarily and regularly engaged away from the
employer’s place of business” depends on the extent to which they engage in
sales or solicitations, or related activities, outside of the employer’s place
or places of business. By meeting clients outside of the employer’s place of
business in order to initiate sales, such as at the clients’ homes, the “sales
force” loan officers fulfill the “outside” requirement of the outside sales
exemption. Activities employees perform that are incidental to their outside
sales or solicitations also qualify as exempt outside sales work, but only if
the incidental activity is in support of their own sales and not just generally
“directed towards stimulating the sales of [the] company.” 69 Fed. Reg. 22,160,
22,163 (Apr. 23, 2004) (copy enclosed). See also 29 C.F.R. §§ 541.500(b)
and 541.503. In addition, the frequency of performing qualifying exempt outside
sales activities must “normally and recurrently [be] performed every workweek;
it does not include isolated or one-time tasks.” 29 C.F.R. § 541.701. This
type and frequency of exempt outside sales activity is implicit in your
representation that “sales force” loan officers “perform their work primarily
outside the office.” Of course, “sales force” loan officers who do not engage
in outside sales activity as a normal and recurrent part of their workweek fail
to meet the exemption’s requirements.
Finally, the “sales force” loan officers may qualify for the outside sales exemption even though they may
perform some activities at their employer’s place of business, so long as the
inside sales activity is incidental to and in conjunction with qualifying
outside sales activity. See Olivo v. GMAC Mortgage Co., 374 F. Supp. 2d
545, 551 (E.D. Mich. 2004). The performance of activities related to the sales
of mortgage loan packages made outside the employer’s place of business does
not disqualify the “sales force” loan officer from the exemption. Activities
such as making phone calls, sending e-mails, and meeting with clients in the
office are considered exempt if performed incidental to or in conjunction with
the “sales force” loan officer’s own outside sales activities. 29 C.F.R. § 541.503;
FOH § 22e02.
Therefore, although each “sales force” loan officer must be evaluated on an individual basis to
determine whether he or she qualifies for the outside sales exemption, those
employees whose job duties match the duties described above would be exempt
from the minimum wage and overtime requirements of the FLSA.
This opinion is based exclusively on the facts and circumstances described in your request and is
given based on your representation, express or implied, that you have provided
a full and fair description of all the facts and circumstances that would be
pertinent to our consideration of the question presented. Existence of any
other factual or historical background not contained in your letter might
require a conclusion different from the one expressed herein. You have
represented that this opinion is not sought by a party to pending private
litigation concerning the issue addressed herein. You have also represented
that this opinion is not sought in connection with an investigation or
litigation between a client or firm and the Wage and Hour Division or the
Department of Labor.
We trust that this letter is responsive to your inquiry.
Sincerely,
Alfred B. Robinson, Jr.
Acting Administrator
Enclosures:
29 C.F.R. §§ 541.500-.503
29 C.F.R. § 541.700-.701
69 Fed. Reg. 22,160, 22,163(Apr.23, 2004)
FOH §§ 22e02, 22e06
WH Opinion Letter January 15, 1971
* Note: The actual name(s) was removed to preserve privacy in accordance with 5 U.S.C. § 552(b)(7)
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