MAMB Member Area

Employment Agreement Provisions for Outside Sales Employees

LEGAL NOTICE – The information provided below is not a substitute for legal advice by experienced wage and hour counsel nor is it to be used “as is.” The general information provided by MAMB necessarily must be modified to meet each employer’s specific facts and circumstances. In addition, the information provided is based on the Outside Sales exemption requirements under the federal Fair Labor Standards Act. Employers must check the wage and hour laws of the states in which their employees work and/or reside to determine the requirements of the Outside Sales exemption under state law. MAMB members are strongly encouraged to retain experienced wage and hour counsel to advise them in properly implementing the Outside Sales exemption.

Subject: Implementing the “Outside Sales” Requirements so that Loan Officers/Originators Qualify as Exempt from Overtime and Minimum Wage Requirements of the FLSA

The National Association of Mortgage Brokers (NAMB) has led the efforts to enable its members to comply with the wage and hour laws, including the minimum wage and overtime requirements. One significant step was obtaining from the U.S. Department of Labor Wage and Hour Division (DOL) an Opinion Letter dated March 31, 2006 describing the circumstances in which a Loan Officer/Originator (LO) properly can be classified as an Outside Sales employee that is exempt from both minimum wage and overtime under the federal Fair Labor Standards Act (FLSA). Outside Sales employees lawfully can be compensated on a commission-only basis based on their individual productivity. Under the Outside Sales exemption, the employees do not have to be paid minimum wage, overtime or a specified salary or draw.

Now, in response to numerous requests from members, NAMB is pleased to provide additional information regarding steps that mortgage brokers can take to properly implement the Outside Sales employee exemption. Below NAMB provides general considerations for implementing the Outside Sales exemption, and some general provisions that can be included in employment agreements with Outside Sales employees.

1. General Considerations in Applying the Outside Sales Exemption

In implementing the Outside Sales exemption, the following General Considerations
should be evaluated:

• The Loan Officer/Originator (LO) should be an employee paid on a W-2 basis,
  and not an independent contractor paid on a 1099 basis.
• The LO position should be designated and referred to as a “Sales” position in
  advertisements, job descriptions, employment agreements, and other materials
  describing the position or its duties.
• Designate in advertisements, job descriptions and employment agreements that
  LOs are paid on a commission basis.
• Designate in advertisements, job descriptions and employment agreements that
  LOs are required to solicit new business and to develop and to maintain referral
  sources.
• Designate in advertisements, job descriptions and employment agreements that
  LOs have the freedom to set their own hours and schedule their daily/weekly
  tasks.
• Consider designating in advertisements, job descriptions and employment
  agreements that LOs have minimal direction, monitoring and supervision – BUT
  CHECK AGAINST FEDERAL AND STATE LICENCING REQUIREMENTS
  AND REGULATIONS REGARDING MONITORING AND SUPERVISION
  OBLIGATIONS BY BROKER.
• Consider designating in advertisements, job descriptions and employment
  agreements that LOs have a minimum sales/”production standards” requirement.
• Consider designating in advertisements, job descriptions and employment
  agreements that LOs will receive sales training.

  2. Employment Agreement Language
  

It often is a sound employment practice to employ Outside Sales employees pursuant to a
written employment agreement, signed by both the employer and the employee. The
well-drafted agreement includes the key terms governing the employment relationship,
and typically will specify that the employee is an at-will employee and state the
compensation terms. Another key provision in a well-drafted employment agreement is
an accurate description of the job duties.

Below are some standard provisions that may be useful in describing the Outside Sales
employee’s duties. The actual job duties performed determine whether an employee is
properly classified as an Outside Sales employee, who can be exempt from minimum
wage, overtime and salary requirements. Note, again, that these provisions must be
modified as necessary to accurately describe your Outside Sales employees’ actual job
duties.

Job Duty

Your primary duty as a Loan Officer/Originator is the sale of mortgage loan [packages or
products/] (referred to as “loan products”). to customers of [insert name of company].
You understand and agree that you will spend at least [50%] of your time each workweek
selling loan products. The types of work activities you are expected to perform that
qualify as “selling” are discussed below.

Work Outside the Office

In performing your primary duty of selling mortgage loan products, you understand and
agree that you will spend at least [40%] of your time [each workweek] away from [insert
name of company]’s “place of business.” You further understand that any fixed site
including [insert name of company]’s offices or a home office (yours or someone else’s)
is considered the employer’s place of business for purposes of determining whether you
are performing your primary duty of sales away from [insert name of company] place of
business.

Specifically, you understand and agree that you are required to meet customers and
potential customers away from [insert name of company] place of business to sell
mortgage loan products. In order to fulfill this job requirement, you must meet in person
with customers and potential customers at the customer’s home, place of work or at some
other mutually agreeable location. Customers may come to [insert name of company]
place of business to drop off documents or complete necessary paperwork for the loan
process but such meetings should be limited and should only take place after initial
meetings away from [insert name of company] place of business.
Finally, you understand and agree that contact with customers and potential customers by
mail, telephone or Internet does not qualify as selling away from [insert name of
company] place of business and that such contact should be only adjunct to meeting with
customers outside of the office.

In addition to meeting with customers and potential customers to sell mortgage loan
products to satisfy the requirement of spending at least [40%] of your time each
workweek away from [insert name of company] place of business, you may also meet
with potential referral sources and loan product vendors, and engage in marketing and
promotion work in support of your own sales of mortgage loan products.

Work Inside the Office

In addition to the work outside the office described above, you may also perform certain
duties and functions inside the office that qualify as meeting the percentage of time you
must spend selling loan products so long as such duties and functions are in support of
your own sales. Work considered in support of your own sales includes: obtaining credit
information; preparing loan applications and supporting documents; dealing with
customers, prospective customers, loan product vendors and referral sources by telephone
calls, e-mails and mail; meeting with customers, prospective customers and referral
sources; and checking and updating data bases of loan products and referral sources;
preparing marketing and promotional materials; [include any other activities that loan
officers routinely perform inside the office in support of their own sales.]

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