Can our Agricultural Loan Officer qualify as an exempt employee based on his professional duties? He is part of the loan committee that votes on loans, as well as the executive committee (he is an executive officer of the bank). He is second in command at his location, under the senior vice president. His salary is over the $47,476 threshold.

Yes, we believe the agricultural loan officer may be exempt from minimum wage and overtime requirements based on his specific job duties.

In general, the Fair Labor Standards Act (FLSA) and the Department of Labor (DOL) regulations will exempt an employee whose compensation exceeds the threshold salary and who also has the duties of an “executive, administrative, or professional” employee, as defined by the DOL’s regulations. An administrative employee is one with primary duties are “directly related to the management or general business operations of the employer or the employer's customers,” and which “include the exercise of discretion and independent judgment with respect to matters of significance.”

A clear example of “discretion and independent judgment with respect to matters of significance” would be the agricultural loan officer’s exercise of judgment as an executive officer of the bank and as a voting member of your loan committee, which votes on underwriting decisions for the bank. Exercising underwriting authority alone could be sufficient to show that this employee is exempt; we are aware of at least one federal court case that denied a class action lawsuit filed by commercial loan officers claiming that they were nonexempt, primarily because their job descriptions included “underwriter credit authority limits up to $2MM.”

We should note that the DOL has determined that many mortgage loan officers are nonexempt, in part because their primary job duties involve sales, rather than the management or general business operations of their banks or customers. However, because your agricultural loan officer does not appear to have a primary duty of making sales, and exercises independent judgment as part of the loan committee and serves as an executive officer of the bank, we do not believe that the DOL’s interpretation on mortgage loan officers would apply.

However, because this classification is so fact-specific, and because getting it wrong in the DOL’s view could result in large penalties and civil money damages, we recommend consulting with employment counsel when determining whether particular employees are exempt.

For resources related to our guidance, please see:

Fair Labor Standards Act, 29 USC 213(a)(1) (Exception for “any employee employed in a bona fide executive, administrative, or professional capacity . . . .”)

Department of Labor Regulations, 29 CFR 541.200 (The administrative exemption applies to employees (1) “Compensated on a salary or fee basis at a rate of not less than $455 per week,” (2) “Whose primary duty is the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers,” and (3) “Whose primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.”)

Department of Labor Overtime Rule, 81 Fed. Reg. 32391 (May 23, 2016) (This rule raises the salary threshold from $455 per week (or $23,660 per year) to $913 per week (or $47,476 per year), but a federal district court in Texas issued a preliminary injunction temporarily blocking the DOL from implementing this final rule nationwide — Nevada v. U.S. Dept. of Labor, No. 4:16-CV-731 (E.D. Texas Nov. 22, 2016).)

DOL Administrator's Interpretation No. 2010-1 (March 24, 2010) (“Based upon a thorough analysis of the relevant factors, the Administrator has determined 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, 29 U.S.C. § 213(a)(1).”)

Lutz v. Huntington Bancshares, Inc., 2013 WL 1703361 at *5 (S.D. Ohio 2014) (“This [job] description, in particular the last sentence regarding underwriter credit authority . . . suggest that the Business Banking underwriter positions come with more discretion in the performance of the underwriter function, which would arguably bring the Business Banking positions closer to satisfying the administrative exemption from FLSA overtime requirements. . . . The Court denies Plaintiffs’ motion . . . to the extent it seeks to include Business Banking underwriters within the scope of the class.”)