Wednesday, February 16, 2011


In March, the Department of Labor issued Administrator’s Interpretation No. 2010-1, finding that employees in the financial services industry, regardless of the job title assigned, who perform the typical job duties of a mortgage loan officer, may be entitled to overtime pay.  The opinion will have widespread effect on federal courts applying the FLSA and will be persuasive authority in interpreting California Labor Code which expressly incorporates federal definitions of exempt duties.
As a result of the Administrator’s opinion, financial service employees in California such as underwriters, loan officers, analysts, escrow closers, claims adjusters, and brokers of financial products, who have typically been misclassified as exempt from overtime may now be entitled to overtime pay.
Under Federal regulations, if a financial services employee works in a bona fide administrative capacity, if they perform work “directly related to management policies or general business operations” and “customarily and regularly exercises discretion and independent judgment, then they are likely classified as an exempt employee.” This is different than an employee who may work in a “‘production’ or, in a retail or service establishment, ‘sales’ work.”
According to the Administrator’s Interpretation, “a careful examination of the law as applied to the mortgage loan officers’ duties demonstrate that their primary duty is making sales and, therefore, mortgage loan officers perform the production work of their employers.”
Similarly, in a recent decision by the Second Circuit Court of Appeals, Davis v. J.P. Morgan Chase & Co., the court determined that underwriters approving loans under established company guidelines for the most part were performing non-exempt duties, and had to be classified as “production” workers entitled to overtime pay.  In its analysis, the Court drew a distinction between employees directly producing the goods or services that were the primary output of a business, and employees performing general administrative work applicable to the running the business, who regularly exercised discretion and independent judgment.
Many California employees working in the financial services industry may have been misclassified as exempt employees.  Following the Administrator’s guidelines and cases like Davis, thousands of California’s financial services employees may be entitled to overtime pay.  If owed overtime pay, the employees may collect up to four years of back pay under California’s overtime pay laws.
If you feel you may have a potential overtime claim related to being improperly classified or if you have questions regarding your California exempt status, contact California’s overtime attorney, Steven L. Miller at 1-818- 986,8900, visit his website at or email him today at
According to the Administrator, “a careful examination of the law as applied to the mortgage loan officers’ duties demonstrate that their primary duty is making sales and, therefore, mortgage loan officers perform the production work of their employers.”  As a result, mortgage loan officers fall squarely on the non-exempt side of the so-called production/administrative dichotomy and they are therefore entitled to overtime pay.
California underwriters may indeed be owed overtime pay. This job title and the duties of underwriters, at least at one bank, have been examined in a recently decided case called Davis v. J.P. Morgan. In this case the court in the second circuit decided that underwriters approved loans under established company guidelines and their duties are for the most part non exempt duties and therefore these employees are entitled to overtime pay.
In Davis v. J.P. Morgan, underwriters at Chase were primarily responsible for selling loan products under management’s guidelines. As the Second Circuit put it, “Underwriters were given a loan application and followed procedures specified in the Credit Guide in order to produce a yes or no decision.”
California Underwriters being misclassified as exempt employees might be common issue for all underwriters in this profession in California. If the California courts follow this ruling and others like it, thousands of California underwriters could be entitled to overtime pay. Some of the largest institutions employing underwriters in California are Citigroup (NYSE: C), J.P. Morgan (NYSE:JPM)   Bank of America (NYSE:BAC) and Wells Fargo (NYSE:WFC)
Underwriters in California, if owed overtime pay, may collect up to 4 years of back pay under the liberal California overtime pay laws.