USDOL Issues Second Pro-Employee "Administrator's Interpretation"

Posted on June 17, 2010 by Noel Tripp

As discussed previously, the USDOL Wage and Hour Division has ceased issuing Opinion Letters in response to specific requests for guidance from the public, but rather has decided to issue more general “Administrator’s Interpretations” of its own volition on topics of the DOL’s choosing. As with the first such Interpretation, which set forth the Division’s current view that loan officers generally cannot qualify for the administrative exemption, the Division’s second Interpretation, issued on June 16, also evinces a pro-employee position and contravenes Opinion Letters issued by the Division during the Bush administration. 

Specifically, Deputy Administrator Nancy J. Leppink’s “Interpretation” significantly modifies the Division’s application of § 3(o) of the FLSA, 29 U.S.C. § 203(o), which provides that time spent “changing clothes or washing at the beginning or end of each workday” can be non-compensable pursuant to “the express terms” of a collective bargaining agreement, or “by custom or practice” thereunder. This is a vital provision for unionized employers, as pursuant to case law time spent donning and doffing protective equipment is generally compensable unless addressed by the CBA or “custom or practice”. The DOL’s revised position is that: (1) time spent donning and doffing “protective clothing” (e.g., helmets, smocks, plastic aprons, arm guards, gloves, knife holders, etc.) is a compensable activity not subject to § 3(o); and (2) changing into “ordinary clothes” (i.e. a uniform) can commence the compensable workday even if the changing time itself is not compensable.   This second conclusion has potentially expansive implications.

As to the first issue, the Interpretation specifically rejects Opinion Letters issued by the DOL in 2002 and 2007 stating that the term “clothes” typically includes such protective equipment, and thus time spent in donning and doffing them can be non-compensable. Deputy Administrator Leppink found that excluding such “protective equipment” from the definition of “clothes” is consistent with Congress’ intent to narrowly circumscribe the 3(o) exclusion. However, in reaching this conclusion, the DOL assumes that § 3(o) is an exemption to an FLSA requirement, and thus is to be construed narrowly, despite the fact that many courts (including multiple Circuit Courts) have ruled that § 3(o) is not an “exemption” but instead a definition of “hours worked”, to be construed broadly. Ms. Leppink relied on DOL Opinion Letters issued in 1997, 1998 and early 2001 stating that “protective equipment” was not clothes for purposes of 3(o). (All three of these opinion letters were issued by the Clinton administration.)   Deputy Administrator Leppink acknowledged that recent Circuit Court decisions were consistent with the 2002 and 2007 Opinion Letters and contrary to the DOL’s new position. The Interpretation attempts to distinguish those appellate court decisions, but the new position of DOL cannot be reconciled with them. 

In a second and potentially much more controversial opinion, Ms. Leppink stated that even if “changing clothes” is excluded from “hours worked” under § 3(o) and is non-compensable, it nevertheless can be a principal activity that may starts the continuous compensable workday if it is otherwise a “principal activity.” The FLSA provides that employees are entitled to compensation for all hours worked from the beginning of the first “principal activity,” until the end of the last “principal activity,” including any task which is “integral and indispensible” to those principal activities. The 2007 Opinion Letter and numerous court decisions which held that where § 3(o) excludes from “hours worked” the time cannot start the compensable work day. Ms. Leppink rejected that position and referred to the conclusions in the 2007 Opinion Letter as “conclusory.”   An argument can be made that such an interpretation renders § 3(o) meaningless and is directly contrary to the legislative history of the statute. The DOL’s new position as set forth in the Interpretation, is that any time spent following clothes changing, including time spent walking or commuting to an employee’s actual work station, is now compensable regardless of whether the employer is unionized or § 3(o) is applicable, unless the employer can demonstrate such changing time is not integral and indispensable.    

All employers should carefully review their practices regarding whether any mandatory attire worn by employees constitutes a “uniform”, and whether changing time and/or time immediately following changing time is compensable in light of this Interpretation due to the expansive nature of its language. Unionized employers who have negotiated time donning and doffing protective clothing as non-compensable must carefully consider whether to continue such a practice.   An influx of FLSA claims, especially against unionized employers who have availed themselves of § 3(o), is likely and it will be up to the courts to decide whether to adopt the DOL’s modified positions.
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Eleventh Circuit Finds Crane Dispatcher To Be Exempt Administrative Employee

Posted on June 9, 2010 by Noel Tripp

In light of other case law, a recent pro-employer decision from the Eleventh Circuit Court of Appeals, holding that a salaried dispatcher for a crane rental company qualified as an exempt administrative employee, adds credence to a question often asked by legal and human resources professionals: is the administrative exemption in the eye of the beholder? Rock v. Ray Anthony Int'l, LLC, 2010 U.S. App. LEXIS 10775 (11th Cir. Fla. May 26, 2010).

At the trial court level, the district court found that Rock’s duties as dispatcher included “customer communication, choosing the appropriate crane for specific jobs, assigning operators to cranes, overseeing other employees, preparing and reviewing job tickets, and maintaining the crane rental schedule . . . He was also responsible for selecting the type of materials, supplies, machinery, equipment, and tools that were needed to meet the customers' needs.” Id. at * 5-6. The trial court concluded that these duties “related to servicing or running [defendant’s] general business operations”, rendering him eligible for the administrative exemption. Id. at * 6.

On appeal, Rock argued that the recently issued DOL Administrative Interpretation regarding loan officers (discussed here), which opined that employees performing sales work generally are engaged in “production” and not eligible for classification as exempt “administrative” employees, supported a non-exempt finding, as his responsibilities were “more akin to sales and retail.”

The Eleventh Circuit, relying on precedent within the Circuit, observed that “even when employees engage in sales, their duties are administrative if the majority of their time is spent advising customers, hiring and training staff, determining staff pay, and delegating matters to staff.” Id. at * 9 citing Hogan v. Allstate Ins. Co., 361 F.3d 621, 627 (11th Cir. 2004). Because the trial court found that Rock’s duties “went beyond mere sales” and included management of the crane division, the administrative classification was upheld.  Id.

Rock is welcome news for employers within the 11th Circuit’s purview of Florida, Georgia and Alabama. However, the general lack of clarity as to what constitutes “administrative” work is highlighted when the Rock decision is juxtaposed with a recent decision involving dispatchers issued by a New York federal court. In Iaria v. Metro Fuel Oil Corp., 2009 U.S. Dist. LEXIS 6844 (E.D.N.Y. Jan. 30, 2009), the court denied the employer’s motion for summary judgment as to its classification of a dispatcher as an exempt administrative employees. In part, the Court’s decision in Iaria was premised on crediting the plaintiffs’ testimony that their duties did not involve supervisory or management responsibilities, but were limited to “monitoring drivers' deliveries, responding to drivers' problems, handling some customer service calls, routing, entering data in the computers, and checking the drivers' logs.” Id. at * 3.  The Court stated that these dispatcher plaintiffs’ “duties relate more directly to the service and product that [defendant] provides -- the delivery of fuel for heating -- than they do to servicing the business.” Id. at * 11.   

Employers utilizing the administrative exemption, especially with sales and quasi-sales position, must closely review the DOL’s current position and the applicable law in their Circuit, as well as applicable state law, to ensure understanding of all potential risks.

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USDOL Issues Interpretation Reversing Prior Position As To Potential Application Of Administrative Exemption to Mortgage Loan Officers

Posted on March 25, 2010 by Noel Tripp

On March 24, 2010, Nancy J. Leppink, the Deputy Administrator for the Wage and Hour Division of the United States Department of Labor, issued an “Administrator’s Interpretation” stating that employees who perform the typical job duties of a mortgage loan officer generally do not meet the prerequisites for the administrative exemption under the FLSA.   The issuance of the Interpretation is a significant departure from the Division’s past practice of generally issuing legal opinions solely in response to requests for guidance from the public, and may be a sign of a more aggressive Wage and Hour Division.  The Interpretation is directly contrary to a September 8, 2006 opinion letter issued by the Division stating that mortgage loan officers could qualify for the exemption, and in fact the Deputy Administrator stated that the previous opinion was based on a misleading assumption and a selective and narrow analysis.

The Division bases its new position on the following conclusions:

  • A Mortgage Loan Officer’s primary duty is to make sales and accordingly he/she performs production work and not administrative work.  As stated by the Deputy Administrator, “[w]ork such as collecting financial information from customers, entering it into the computer program to determine what particular loan products might be available to that customer and explaining the terms of the available options and the pros and cons of each option, so that a sale can be made, constitutes the production work of an employer engaged in selling or brokering mortgage loan products.”
  • While in certain situations, providing advice to a business regarding a potential mortgage to purchase land could qualify as exempt work based on it being related to the management or general business operations of the employer’s customers, home loans do not as “[i]ndividuals acting in a purely personal capacity do not have “management or general business operations.”
  • Its belief that the September 8, 2006 opinion letter improperly created an alternative standard for the administrative exemption for employees in the financial services industry.

This is a significant development for industry employers that relied on the administrative exemption for loan officers based on the 2006 opinion letter.  This narrowing of the definition of “administrative” work by the DOL is also consistent with the Second Circuit’s recent decision in Davis v. J.P. Morgan Chase & Co., 587 F.3d 529 (2d Cir. 2009)(underwriter “produced” bank’s product of making loans, and thus was not an administrative employee). 

While it is not a resolved legal issue, some courts have held that the 7(i) “commissioned employee” exemption also is inapplicable to mortgage loan officers because they do not work in a “retail” industry. Compare Gatto v. Mortgage Specialists of Ill., Inc., 442 F. Supp. 2d 529 (N.D. Ill. 2006) with In re: Wells Fargo Home Mortg. Overtime Pay Litig., 2008 U.S. Dist. LEXIS 46595 (N.D. Cal. June 11, 2008). This would leave the outside sales exemption as the only potential exemption on which employers in the industry can rely, however, such exemption typically has limited application in the industry as most mortgage loan officers perform services from a fixed location.  An additional open question remains as to whether loan officers who are “highly compensated” (i.e., are paid on an FLSA-compliant salary basis and receive more than $100,000/year in total compensation) may still qualify for exemption.  29 CFR § 541.601.

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