DOL Decides That “Typical” Mortgage Loan Officers Are Not Exempt Employees

On March 24, 2010, the U.S. Department of Labor issued a formal Administrator’s Interpretation that could impact business in the financial services industry that classify mortgage loan officers as exempt employees. The DOL decided that employees who perform the typical duties of “mortgage loan officers” and “mortgage loan representatives” do not meet the administrative exemption.

According to the DOL, the following are the “typical duties” of a mortgage loan officer:

"Mortgage loan officers receive internal leads and contact potential customers or receive contacts from customers generated by direct mail or other marketing activity. Mortgage loan officers collect required financial information from customers they contact or who contact them, including information about income, employment history, assets, investments, home ownership, debts, credit history, prior bankruptcies, judgments, and liens. They also run credit reports. Mortgage loan officers enter the collected financial information into a computer program that identifies which loan products may be offered to customers based on the financial information provided. They then assess the loan products identified and discuss with the customers the terms and conditions of particular loans, trying to match the customers’ needs with one of the company’s loan products. Mortgage loan officers also compile customer documents for forwarding to an underwriter or loan processor, and may finalize documents for closings."

The DOL concluded that “mortgage loan officers who perform the typical duties described above have a primary duty of making sales for their employers and, therefore, do not qualify as bona fide administrative employees exempt under section 13(a)(1) of the Fair Labor Standards Act.”

This new guidance is Administrator’s Interpretation No. 2010-1, which can be found here. It is required reading for any financial services business that treats its mortgage loan officers or representatives as exempt.

A Touch of Class - An Update

Although courts continue to follow the concept that only a "minimal showing" is necessary to obtain conditional certification of a collective ("class") action under the Fair Labor Standards Act, the more complex and varied the jobs are, the less likely that class treatment will be available. Consider the following recent examples: certification was granted in Khadera v. ABM Industries (WD Wash)(janitors); Marrero v. KRA Corp. (ED Pa)("career agents" for government consulting firm); Davis v. Terminix International (ED Va)(pest technicians); Ferrer v. Raines & Walsh & Sons (SD NY)(construction workers); and Martinez v. Cargill Meat solutions (D Neb)(meat processing production line personnel). Class certification was denied in Velasquez v. HSBC Finance Corp. (ND Cal.)(account executives handling loans, insurance and a variety of other financial products) and Combs v. Jennifer Convertibles (ND Cal)(plaintiffs wanted to represent "all employees" of furniture chain). In Salazar v. Butterball (D Colo), the union representing poultry processors was found to have acquiesced in the company's practices regarding donning and doffing, and the case was dismissed.

Likewise, attempts to expand already-certified classes or to define the class too broadly are meeting judicial resistance. In Murray v. Tyson Foods (CD Ill), nearly 1500 additional plaintiffs were denied leave to join into a case where the plaintiffs' attorneys had failed to move for class certification. Two out of three claims of Pizza Hut delivery drivers in Wass v. NPC International (D Kan) were booted dut to the vagueness of the complaint filed with the court. In Parker v. Smithfield Foods (EDNC), plaintiffs and the defendant jointly obtained a narrowing of the certified class to exclude personnel performing nonprocessing jobs.

Nor does the employer have to await lengthy discovery and a motion from plaintiffs' counsel to address the class issue. In Vinole v. Countrywide Home Loans, a case involving both federal and state wage-hour claims filed by "external home loan consultants," the employer filed a preemptive motion to deny class certification, asserting that a "highly factual, individualized analysis" of each employee's job was necessary. The District Court accepted that argument, and the US Court of Appeals for the Ninth Circuit agreed.

One of the most unusual decisions we've seen lately is Smith v. Johnson & Johnson. In her deposition, plaintiff Smith expounded on the independence she enjoyed from any but the most basic directions on how to perform her job, a posture which the trial court found fatal to her insistence that she was engaged in nonexempt work. On appeal, she tried to characterize her sworn statements as "puffery" - she insisted she had inflated her own importance. The Third Circuit was not impressed with this newfound modesty, and upheld the dismissal of the case.

It all goes to show that not all classes are certifiable, not all FLSA claims are meritorious, and even jurisdictions which have been seen as bad places for employers to litigate can be persuaded to listen to what an employer has to say. Careful analysis of the facts and the law by both plaintiffs and defendants can result in more care in whether complaints are filed at all, how they are handled, and how they are resolved.