EXEMPT OR NON-EXEMPT? A potentially costly question under the FLSA Exempt Tests!

The Department of Labor (DOL) has increased its FLSA investigators and they’re on a mission to find misclassified exempt from overtime positions across the United States. The word on the street is that they have been told that our expanding government budget needs additional tax revenue to help balance the budget and they are instrumental in finding and penalizing employers that have intentionally or un-intentionally misclassified their exempt positions.

The DOL decided to improve their FLSA efforts by issuing a FLSA Interpretation of NO. 2010-1. The DOL’s interpretation allowed the agency to declare certain mortgage lending positions non-exempt from not meeting the Administrative designation tests. The DOL made this interpretation on the basis that certain loan officers did not meet the tests of primary duties requiring discretion, independent judgment and matters of significance. The DOL surmised that the typical consumer and mortgage loan officer duties were of a sales, service and client relationship nature and the primary job focus did not meet the test for Administrative exemption.

This DOL FLSA interpretation put the Banking sector on notice since most if not all loan officers have been designated as exempt positions based on the DOL’s early FLSA original ruling in 2006 where the DOL recognized the loan officer position as meeting the Administrative exemption test.

Several court cases have ensued since the FLSA NO. 2010-1 Interpretation and most of the cases have been initiated by individual loan officers or smaller class groups of loan officers claiming overtime back pay from being designated as exempt from overtime by their respective banks and the DOL’s determination that the consumer and mortgage loan officer are non-exempt from overtime pay.

From the Henry et. al v. Quicken Loans cases which was won by Quicken Loans, the following comment was made by Quicken Loans about their Mortgage Lenders, “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.”

From this case and other recent cases, we would recommend the following action steps to prepare for the inevitable DOL FLSA audit while the Courts determine the viability of the DOL’s FLSA NO. 2010-1 Interpretation.

  • Complete comprehensive, consistent and compliant position descriptions that truly reflect the primary duties and responsibilities for the position.
  • Conduct audits to determine if actual duties and responsibilities match those described in the position descriptions and meet with employees to assess their understanding and agreement with the position duties and responsibilities.
  • Utilize job evaluation compensable factors terminology to proactively describe position requirements that support independent judgment, decision-making and matters of significance.
  • Obtain court rulings from recent cases to increase understanding on how banks that have won their FLSA cases have described and met the FLSA Administrative Exempt tests for their respective loan officer positions.