For several years, the financial industry has closely watched the controversy surrounding the issue of whether mortgage loan officers are exempt from the overtime requirements of the Fair Labor Standards Act (FLSA) under the "administrative exemption." An unexpected victory for Quicken Loans last week in a Detroit federal court highlights the continuing uncertainty over this issue. On March 17, a federal court jury in Detroit found that 400 Quicken Loan mortgage loan officers seeking overtime pay, in fact, did qualify for the administrative exemption and were not entitled to overtime. This victory for Quicken was unexpected. In the wake of the verdict, the company issued a press release explaining that the company "could have settled the lawsuit and avoided an expensive drawn out legal battle, but [Quicken] fought for what is right."

The plaintiffs' attorneys in the case had argued that the employees did not qualify for the administrative exemption because they were essentially sales workers and not true administrative employees involved in the general management or operations of the company. The plaintiffs had been encouraged by a 2010 U.S. Department of Labor (DOL) administrator's interpretation directing that the administrative exemption does not apply to mortgage loan officers because, in the view of the DOL, they are primarily engaged in selling rather than administrative functions. This interpretation overturned 2006 opinion letters by the Bush administration finding that loan officers are generally exempt.

Notably, in response to that 2010 interpretation, Quicken Loans had already modified the manner in which the company compensated loan officers going forward to provide for the payment of overtime. Also, the facts at issue in the Quicken lawsuit predated the 2010 interpretation. Still, the Quicken verdict demonstrates that juries will not always agree with the current DOL view that mortgage loan officers are primarily engaged in selling as opposed to performing administrative duties.

Some points for employers to consider:

  • The DOL's view that mortgage loan officers generally are not exempt, of course, remains unchanged.
  • The DOL's interpretation is not binding on courts and there may be more verdicts and court decisions finding loan officers exempt – particularly, when the specific facts indicate those employees are not primarily engaged in selling.
  • Financial industry employers should continue carefully evaluating whether their lending employees qualify for exemption.
  • Most lending institutions are adopting the safer approach and are now paying their mortgage loan officers overtime.
  • The Quicken case and the 2010 DOL interpretation concerned employees generally involved in residential lending and not commercial loans. Even the DOL seems to recognize that there may be a better argument that in some circumstances, commercial lenders can qualify for the administrative exemption.
  • Perhaps most importantly, employers in all industries must be aware of the concern that the DOL increasingly views any employee in any industry directly involved in the production or selling of a product or service as ineligible for the administrative exemption.