The exempt status of loan officers continues to make headlines as the Mortgage Bankers Association presses for Supreme Court affirmance of its successful challenge to a DOL opinion regarding the applicability of the administrative exemption to those workers. A new court decision highlights the fact intensive nature of exemption inquiries, and also the potentially misleading nature of an umbrella term such as loan officer or underwriter. Lutz v. Huntington Bancshares Inc., 2014 U.S. Dist. LEXIS 86435 (S.D. Ohio June 25, 2014).
In Lutz, defendant Huntington Bank successfully demonstrated to the Court that its loan sales process is divided into two functions, “with . . . loan originators and loan processors contacting and discussing options with potential customers, selling those customers on the appropriate loan package, and collecting all necessary information for the loan application.” Only when that discussion resulted in an application for a mortgage loan would the underwriter Plaintiffs then receive the application “for review and approval,” without communicating with the customer. Based on this factual finding, the Court rejected a series of cases constraining application of the administrative exemption to loan officer or underwriter positions based on the predominance of their sales function and a narrow view of the applicability of the exemption to sales-related duties.
The Court then analyzed whether the underwriters’ work was related to the bank’s general business operations and whether they exercised discretion and independent judgment. The Court found both of these aspects of the administrative exemption test were satisfied because the underwriters’ work was akin to that of (administratively exempt) insurance adjusters and they had discretion over the loan approval process. The Court also rejected the Department of Labor’s 2010 opinion letter regarding the applicability of the administrative exemption to loan officers, the subject of the ongoing Mortgage Bankers Association litigation.
Banks, mortgage banking firms and other financial services sector employers continue to defend challenges to the applicability of white collar exemptions to various classifications of workers, often highly compensated ones. Industry employers must stay abreast of legal developments within their states of operation, and seek to conform their classifications to legal guidance such as the Lutz opinion.