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Job’s Required Use of Discretion Derails Loan Underwriters’ Overtime Lawsuit in Sixth Circuit

clockIn a recent case (and a noteworthy one to Tennessee employers and employees) that continues the exploration of which employees are, or are not, qualified under the Fair Labor Standards Act to receive overtime pay, the Sixth Circuit Court of Appeals ruled that a bank’s failure to pay its residential mortgage loan underwriters overtime did not violate the FLSA. The underwriters performed tasks that were integral to one of the employer’s primary business objectives (lending money) and did their jobs using a substantial degree of discretion and independent judgment, so they were exempt from receiving overtime.

In this situation, a group of residential mortgage loan underwriters sued their employer, Huntington Bancshares, Inc., for failing to pay them overtime in violation of the FLSA. A federal district court in Ohio concluded that the underwriters were exempt from receiving overtime pay under 29 U.S.C. § 207(a)(1) because they qualified as administrative employees.

The underwriters appealed but still were not successful. The FLSA permits most employees to receive overtime pay if they work more than 40 hours in a week. The law does, however, carve out a few groups of employees who are not entitled to overtime pay. One of these groups of “exempt employees” consists of people in administrative jobs. Under 29 U.S.C. § 213(a)(1), one of the key criteria that establishes a worker as an administrative employee is if the job demands that the worker exercise substantial amounts of discretion or judgment. Another is that the employee’s task is integral to the employer’s business.

In the case of Huntington’s residential mortgage loan underwriters, their jobs included exercising the required degree of discretion. The underwriters’ jobs demanded that they verify the accuracy of the information in the application and determine whether or not that applicant should receive a loan. Although Huntington had guidelines governing the acceptance and rejection of residential mortgage loan applications, underwriters nevertheless had significant independent judgment in the decisions they made. In some circumstances, the guidelines either expressly instructed the underwriter to use her own judgment or else offered no direction at all. In other cases, underwriters were allowed, if specific criteria were met, to approve applications even though the applicant did not satisfy the guidelines, or to “flag” an application even though the applicant satisfied the guidelines for approval.

This large amount of discretion clearly satisfied the law’s requirement that an employee “exercise discretion and independent judgment in” the completion of her job duties.

The underwriters’ work was vital to Huntington’s business. While the underwriters neither created nor sold the bank’s residential mortgage loan products, their duties were a necessary ancillary component of one of the bank’s central functions:  lending money. By making independent decisions about which credit risks (which borrowers) the bank should or should not approve and take on, the underwriters were an integral component in one of the bank’s primary objectives:  selling loans.

The Huntington underwriters’ FLSA case was the latest in a series of actions probing the extent of the coverage of “exempt employee” status. Last year, the 2d Circuit Court of Appeals in New York reinstated a FLSA overtime case brought by a “document review” attorney at a large law firm. Unlike the power of discretion given to Huntington underwriters, the guidelines given to the document review attorneys were so strict that they potentially removed all independent judgment, which meant that those attorneys, unlike the Huntington underwriters, potentially were not exempt and were entitled to overtime pay.

If you think your employer has improperly failed to pay you overtime, or if you’re an employer facing an overtime pay action, an experienced legal team can help you with your case. The skilled Tennessee overtime attorneys at Mays & Kerr are here to help, delivering the experience and determination you expect and deserve.

To speak with one of our lawyers about your case, call 1-877-986-5529.

More blog posts:

Appeals Court Applies Agricultural Exception to Case Involving Tennessee Worm Farmers, Atlanta Employment Attorneys Blog, Feb. 25, 2016

6th Cir.: Employee’s Testimony Alone Enough to Defeat Summary Judgment in Unpaid Overtime Case, Atlanta Employment Attorneys Blog, July 15, 2015