Academic journal article ABA Banking Journal

Love's Labor Lost: New Fair Labor Standards Act Interpretations Spark Drama Worthy of Shakespeare

Academic journal article ABA Banking Journal

Love's Labor Lost: New Fair Labor Standards Act Interpretations Spark Drama Worthy of Shakespeare

Article excerpt

To exempt or not to exempt, if you are an HR specialist at a bank, that is the question. Recent developments at the United States Supreme Court and the Department of Labor have created a drama worthy of Shakespeare as the industry comes to grips with a sudden shift in the previously-settled understanding of how to apply the Fair Labor Standards Act (FLSA) exemptions to employees working in the mortgage loan area, especially underwriters and loan officers. Changes are afoot that could impact how your institution classifies mortgage-related positions and whether these employees qualify for overtime pay under the FLSA.

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While it isn't as sexy as, say, federal preemption, the issue of FLSA compliance is hardly "Much Ado About Nothing." Most of the banking industry treats mortgage underwriters and other similar positions as "exempt" from the overtime requirements of the FLSA. One of the most common exemptions is the "administrative" exemption. To qualify, the position must be "directly related to management policies or general business operations" and the employee "customarily and regularly exercises discretion and independent judgment."

Two recent events have challenged the long-standing assumption that mortgage personnel qualify as exempt. First, in late 2009 the United States Court of Appeals for the Second Circuit issued its opinion in J.P. Morgan Chase v. Whalen. The plaintiffs, mortgage loan underwriters, challenged the bank's classification of their position as exempt under the "administrative" exemption. …

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