Sixth Circuit Confirms Exempt Status of Mortgage Loan Originators

by Butler Snow LLP
Contact

Employers who rely on exempt classifications to avoid paying overtime—and particularly employers in the banking and financial services industries—should take in interest in a recent ruling affirming the exempt status of a group of mortgage bankers.
 
Facts
 
The defendant in this case, Quicken Loans, offers mortgages to customers in all fifty states.  The company utilizes mortgage bankers to play a lead role in the lending process.  Mortgage banker Ryan Henry and 445 of his colleagues sued Quicken, claiming the company failed to pay them overtime wages from 2003 to 2007, in violation of the Fair Labor Standards Act, 29 U.S.C. §201 et seq. (“FLSA”).  In fact, Quicken had not paid overtime, relying on the administrative exemption from the overtime requirements of the FLSA.   (Under the FLSA, time records must be kept and overtime must be paid for all employees, unless the employer can prove that an exemption applies).
 
For the administrative exemption to apply, an employee must be compensated on a salaried basis of at least $455 per week, must have a primary duty of “office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers” and which includes the “exercise of discretion and independent judgment with respect to matters of significance.”  In addition, the United States Department of Labor (“USDOL”) has provided specific guidance regarding the applicability of the administrative exemption to employees in the financial services industry.  The USDOL regulations state that while certain analytical and customer service functions may qualify as exempt administrative work, “an employee whose primary duty is selling financial products does not qualify for the administrative exemption.”  29 C.F.R. § 541.203(b). 
 
In this case, Quicken and the mortgage lenders agreed about the salaried basis of payment for the position, but not about much else.  The mortgage lenders insisted that they were nothing more than glorified salesmen, told constantly to “sell, sell, sell,” and that they worked off of a 2-page document outlining a ten-step process for developing business.  This undermined the argument that they exercised sufficient discretion and independent judgment to qualify for the position.  Nonsense, countered Quicken.  Mortgage lenders are far more than salesmen; they are the “quarterbacks” of the lending team, charged with collecting and analyzing relevant information and understanding client’s objectives goals and needs. 
 
Neither side was able to obtain summary judgment (meaning, a ruling on the law eliminating the need for a trial), so the issue was presented to a jury.  The trial went on for five weeks and included testimony from the plaintiffs, from supervisory personnel of Quicken, and from Quicken mortgage lenders who had not joined the class.  The mortgage lenders pushed hard on policies and other documents supposedly proving that mortgage lending was a “by the numbers” sales job.  Meanwhile, Quicken scored some points by pointing out how some of the mortgage lenders, while downplaying their roles for the case, had bragged on their resumes about important job responsibilities they carried out at Quicken.
 
In the end, the jury sided with Quicken, and ruled that the mortgage lenders were in fact exempt employees and so Quicken did not have to pay them any overtime.  The plaintiffs appealed, and the decision ended up in front of the United States Court of Appeals for the Sixth Circuit. 
 
Court’s ruling
 

The Sixth Circuit basically concluded that both sides had had their say, and that Quicken won fair and square.   The mortgage lenders argued that the case never should have been sent to the jury to begin with.  They argued that since other courts and the USDOL had previously issued rulings and opinions that the administrative exemption does not apply to mortgage lenders, the trial court in this case should have followed suit and ruled for them as a matter of law.  But the Sixth Circuit pointed out that, for FLSA exemptions, a determination must be made based on the facts of each situation.  In this case, concluded the court, Quicken presented ample evidence from which the jury could reasonably have concluded that the mortgage lenders were not just glorified salespeople.  Henry et. al. v. Quicken Loans, Case No. 11-2125.
 
Bottom line
 
This case is good news for employers in the financial services industry, who have been struggling in recent years with the issue of whether to reclassify mortgage loan originators in light of a 2010 USDOL opinion stating that the position is non-exempt.   Employers may wish to take a close look at the job descriptions utilized by Quicken, as described in the court’s opinion, in tailoring their own job descriptions.    But does this case mean that mortgage loan originators are automatically exempt?  Unfortunately, no.  The case make clear that courts are supposed to consider the facts on a case-by-case basis, and that more often than not, the issue should be decided by a jury. 
 
Employers generally should take heart that neither the trial court nor the Sixth Circuit in this case deferred to the prior rulings from the USDOL.   As the USDOL becomes more and more aggressive in narrowly defining exemptions, employers may find a better (though admittedly quite costly) forum for resolution of these issues in the judicial process.  This case also serves as a reminder for all employers relying on exempt classifications to ask themselves whether they could establish the exemption criteria for each position, if challenged.   Wage and hour classification audits are the best prevention for misclassification lawsuits, so, if you haven’t done one lately, consider putting that task on your “to do” list for 2013.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Butler Snow LLP | Attorney Advertising

Written by:

Butler Snow LLP
Contact
more
less

Butler Snow LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
Feedback? Tell us what you think of the new jdsupra.com!