It is possible that your bank’s credit and loan review analysts (for the purposes of our answer, we are treating credit underwriters and loan review analysts as the same) may be considered exempt employees, based on their job duties and other circumstances. We recommend consulting with an employment attorney for a determination of whether any specific employees are exempt.
The determination of whether an employee is exempt, meaning that they are not entitled to overtime pay or the minimum wage requirements in the Fair Labor Standards Act of 1938 (FLSA), is determined by the DOL’s three-part test for the administrative and professional exemption. An exempt employee must satisfy all three parts of the test:
- Does the employee receive at least $455 in compensation each week?
- Is the employee’s “primary duty 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”?
- Does the employee’s “primary duty include the exercise of discretion and independent judgment with respect to matters of significance”?
The DOL issued an Interpretation in 2010 concluding that mortgage loan officers are nonexempt employees. Its conclusion was based on the “typical job duties” of a mortgage loan officer (e.g., contacting potential customers, collecting customer information, compiling documents, etc.), concluding that employees with such duties “have a primary duty of making sales for their employers” and therefore are nonexempt. However, the DOL Interpretation does not apply to credit and loan review analysts, whose job duties are distinct from mortgage loan officers’ duties, and who are unlikely to be viewed as having a primary duty of making sales.
We are not aware of any court decisions analyzing whether a credit and loan review analyst would be exempt from the FLSA. However, several federal appeals courts have considered whether a mortgage loan underwriter is exempt, with two concluding that they are nonexempt and one concluding that they are exempt — but none of those were decided by the Seventh or Eighth Circuits, which cover Illinois.
It may be possible to harmonize the existing federal appellate decisions. One of the decisions holding that mortgage loan underwriters were nonexempt relied on the fact that the underwriters were “trained only to apply the credit policy as they found it, as it was articulated to them through the detailed Credit Guide.” By contrast, the decision holding that mortgage loan originators were exempt relied on the fact that they “exercise considerable discretion in applying the Bank’s Guidelines” and consequently “assist in the running and servicing of the Bank’s business by making decisions about when [the bank] should take on certain kinds of credit risk.”
Additionally, the Seventh Circuit’s decisions in other contexts may be helpful. For example, a decision dealing with insurance claims investigators held that these employees were exempt — even though they worked under “strict guidelines” in their employer’s adjusting manual. In making this conclusion, the court noted that the employees had “leeway to deviate from the adjusting manual provided they document their reasons for doing so, authority that itself connotes discretion and independent judgment.”
By analogy, credit and loan review analysts might be considered exempt employees, even if they are subject to the bank’s (or a secondary market investor’s) strict credit or underwriting guidelines. This determination would depend on a careful analysis of the analysts’ job duties, including whether they exercise discretion in applying any guidelines, whether they can deviate from the guidelines, and whether they have other job duties that qualify them as exempt. But 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 certain employees are exempt.
As a final note, the DOL issued a final rule in 2016 that doubled the salary threshold for the first part of the three-part test discussed above. However, that rule was blocked by order of a federal district court, and under the new presidential administration, the DOL “has decided not to advocate for the specific salary level ($913 per week) set in the 2016 Final Rule at this time and intends to undertake further rulemaking to determine what the salary level should be.” Additionally, while the DOL has rescinded some of the guidance issued under previous administrations, it has not rescinded its 2010 Interpretation regarding MLOs.
For resources related to our guidance, please see:
- Fair Labor Standards Act, 29 USC 213(a)(1) (The Act’s overtime and minimum wage requirements do not apply to “any employee employed in a bona fide executive, administrative, or professional capacity . . . .”)
- Department of Labor Regulations, 29 CFR 541.200(a)(2) (“The term ‘employee employed in a bona fide administrative capacity’ . . . shall mean any employee: (1) Compensated on a salary or fee basis pursuant to § 541.600 at a rate per week of [currently, $455, since the DOL’s attempt to raise the threshold has been blocked by a federal court] . . . . (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 Regulations, 29 CFR 541.203(b) (“Employees in the financial services industry generally meet the duties requirements for the administrative exemption if their duties include work such as collecting and analyzing information regarding the customer’s income, assets, investments or debts; determining which financial products best meet the customer’s needs and financial circumstances; advising the customer regarding the advantages and disadvantages of different financial products; and marketing, servicing or promoting the employer’s financial products. However, an employee whose primary duty is selling financial products does not qualify for the administrative exemption.”)
- Davis v. J.P. Morgan Chase & Co., 587 F.3d 529, 535 (2nd Cir. 2009) (“It is undisputed that the underwriters played no role in the establishment of Chase’s credit policy. Rather, they were trained only to apply the credit policy as they found it, as it was articulated to them through the detailed Credit Guide.”)
- Lutz v. Huntington Bancshares, Inc., 815 F.3d 988, 993 (6th Cir. 2016) (“Huntington’s underwriters perform administrative work because they assist in the running and servicing of the Bank’s business by making decisions about when Huntington should take on certain kinds of credit risk, something that is ancillary to the Bank’s principal production activity of selling loans.”)
- Lutz v. Huntington Bancshares, Inc., 815 F.3d 988, 995–996 (6th Cir. 2016) (“ . . . the job duties performed by underwriters resemble those duties performed by positions deemed administrative by the DOL regulations, including claims adjusters and employees in the financial-services industry. . . . Finally, because the underwriters in Davis were trained only to apply Chase’s credit policy ‘as they found it,’ id., Davis is factually distinguishable from the instant case because Huntington’s underwriters exercise considerable discretion in applying the Bank’s Guidelines.”)
- McKeen-Chaplin v. Provident Sav. Bank, FSB, 862 F.3d 847, 852 (9th Cir. 2017) (“Thus, we conclude that where a bank sells mortgage loans and resells the funded loans on the secondary market as a primary font of business, mortgage underwriters who implement guidelines designed by corporate management, and who must ask permission when deviating from protocol, are most accurately considered employees responsible for production, not administrators who manage, guide, and administer the business.”)
- McKeen-Chaplin v. Provident Sav. Bank, FSB, 862 F.3d 847, 854 (9th Cir. 2017) (“DOL has also specifically analyzed mortgage loan officers and made clear that they ‘do not qualify as bona fide administrative employees’ because they ‘have a primary duty of making sales for their employers.’ DOL Wage & Hour Div. Op. Ltr., at *9 (Mar. 24, 2010). Mortgage underwriters are distinct from mortgage loan officers in the mortgage production process — most significantly because their primary duty is not making sales on Provident’s behalf. But they are not so distinct as to be lifted from the production side into the ranks of administrators.”)
- Roe-Midgett v. CC Servs., Inc., 512 F.3d 865, 875 (7th Cir. 2008) (Concluding that appraisers who investigate vehicle damage related to insurance claims are exempt employees, rejecting the argument that these employees “are so constrained by [the employer’s] adjusting manual and estimating software that there is no room for independent judgment. But independent judgment is not foreclosed by the fact that an employee’s work is performed in accordance with strict guidelines. . . . Moreover, MDAs have the leeway to deviate from the adjusting manual provided they document their reasons for doing so, authority that itself connotes discretion and independent judgment. Moreover, the use of computer software does not itself imply a lack of independent judgment or discretion.”)
- 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).”)
- DOL Request for Information, Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees, 82 Fed. Reg. 34616 (July 26, 2017) (“Litigation challenging the 2016 Final Rule is currently pending before the Fifth Circuit Court of Appeals and in the U.S. District Court for the Eastern District of Texas. By district court order, the Department is enjoined from implementing and enforcing the Final Rule. See Nevada, et al., v. U.S. Dep’t of Labor, et al., 218 F. Supp. 3d 520, 534 (E.D. Tex. 2016), appeal pending, No. 16-41606 (5th Cir.). . . As stated in our reply brief filed with the Fifth Circuit, the Department has decided not to advocate for the specific salary level ($913 per week) set in the 2016 Final Rule at this time and intends to undertake further rulemaking to determine what the salary level should be.”)