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Provident Savings Bank must pay overtime pay to mortgage underwriters who work more than 40 hours a week, the U.S. Court of Appeals for the Ninth Circuit ruled. The decision deepens a split among federal circuit courts on whether a Fair Labor Standards Act exemption applies to such employees ( McKeen-Chaplin v. Provident Sav. Bank, FSB , 2017 BL 230858, 9th Cir., No. 15-16758, 7/5/17 ).
The Ninth Circuit July 5 joined the Second Circuit in holding that mortgage underwriters’ primary duties don’t involve the “exercise of discretion” or “independent judgment” needed to classify them as exempt administrative employees. The Sixth Circuit, in contrast, has ruled mortgage underwriters are exempt from the FLSA’s overtime requirements.
Litigation regarding the FLSA’s “white-collar exemption,” which includes the administrative employee provision, often turns on courts’ examination of a job’s “primary duty.” The Labor Department’s stalled final rule to raise the exemption’s salary test would leave the primary duty standards unchanged.
The Ninth Circuit “properly recognized that these mortgage underwriters are entitled to overtime pay for their long hours of work,” said Matthew Helland, a partner with Nichols Kaster LLP in San Francisco who argued for the workers on appeal.
The court “confirmed long-standing Ninth Circuit precedent that work must relate to a company’s management or general business operations for the administrative exemption to apply,” Helland said in a July 5 email to Bloomberg BNA. “To quote the court, ‘the question is not whether an employee is essential to the business, but rather whether her primary duty goes to the heart of internal administration—rather than marketplace offerings.’ ”
An attorney representing Provident Bank didn’t respond to Bloomberg BNA’s request for comment.
Workers are exempt from the FLSA’s overtime requirements as “bona fide” administrative employees if they are paid at least $455 a week and satisfy a “primary duty” test.
The Labor Department regulations say they must perform “non-manual work” related to “the management or general business operations” of the employer or its customers. Their primary duty also must involve “the exercise of discretion and independent judgment with respect to matters of significance.”
Employers have the burden to prove workers fall within FLSA exemptions, which should be “construed narrowly” in favor of employees’ eligibility for overtime pay, the Ninth Circuit said.
“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,” Judge Sidney R. Thomas wrote in an opinion joined by Judges Mary H. Murguia and Michael M. Baylson.
A federal district court ruled the Provident underwriters are exempt administrative employees.
But the Ninth Circuit said the mortgage underwriters don’t decide if Provident “ should take on risk.” Instead, they assess whether, based on bank-provided guidelines, a “particular loan at issue falls within the range of risk” Provident “has determined it is willing to take.”
That’s “quite distinct” from responsibility for “assessing or determining Provident’s business interests,” the court said. “Mortgage underwriters are told what is in Provident’s best interest, and then asked to ensure that the product being sold fits within criteria set by others.”
Daniel S. Brome of Nichols Kaster also represented the underwriters. Michael Ludwig, Howard Knee, and Caitlin Sanders of Blank Rome LLP in Los Angeles represented the bank.
To contact the reporter on this story: Kevin McGowan in Washington at firstname.lastname@example.org
Text of the opinion is available at http://www.bloomberglaw.com/public/document/McKeenChaplin_v_Provident_Sav_Bank_No_1516758_2017_BL_230858_9th_?doc_id=XL9QG1SG000N.
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
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