The financial services industry has been a prime target for class and collective action claims for overtime under the Fair Labor Standards Act (FLSA) and related state laws. For decades, banks and related institutions classified large swaths of their workers as administrative employees, exempt from the FLSA’s overtime requirements. Earlier this month, the Ninth Circuit Court of Appeals concluded that mortgage underwriters do not qualify for the administrative overtime exemption because they engage in production and not support work for the lenders.
In McKeen-Chaplin v. Provident Sav. Bank, the plaintiffs were a group of mortgage underwriters who analyze customers’ eligibility for loan products, and approve or disapprove the loans, often applying additional conditions. The Ninth Circuit concluded that these activities do not meet the FLSA’s requirement that administrative employees’ primary duties relate to the management or general operations of the business. In other words, to qualify, the employees’ primary duties cannot involve production work related to the goods and services offered by the business.
In this case, the court concluded that the mortgage underwriters simply assure that the that the product being sold fits within criteria established by others. They have little role in establishing those criteria. The Ninth Circuit considered this work to be production rather than support duties, and did not even reach the issue of the employees’ exercise of discretion and independent judgment in performing these duties. The court also said that Department of Labor regulations illustrating exempt jobs within the financial services industry did not cover mortgage underwriters.
This decision echoes a similar 2009 case from the Second Circuit, and disagrees with a Sixth Circuit case last year that classified mortgage underwriters as exempt. The U.S. Supreme Court may not view these decisions as impacting enough employees to justify high court review. As with an increasing number of wage issues, the employees’ FLSA exempt status may depend on their geographic location.