On March 17, 2011, a Michigan jury returned a verdict in favor of loan company, Quicken Loans Inc., in a class action lawsuit alleging that Quicken had failed to pay them overtime under the Fair Labor Standards Act (“FLSA”).  The jury found that the loan officers had been properly classified as exempt employees under the FLSA’s administrative exemption.  The case is entitled Henry v. Quicken Loans Inc. and is in the Eastern District of Michigan.

This verdict is significant as it is the first ruling by the courts on the applicability of the administrative exemption to loan officers. Even more noteworthy is that the jury disregarded the recent “administrative interpretation” issued by the United States Department of Labor (“DOL”) that provided, going forward, that loan officers would be treated as non-exempt employees.  In spite of this guidance, the jury decided that the administrative exemption applied.

The DOL’s March 20, 2010 “administrative interpretation” reasoned that contrary to the requirements of the administrative exemption, the typical mortgage loan officer’s primary duty is not “the performance of office or non-manual work related to the management or general business operations of the employer or employer’s customers.”  Rather, mortgage loan officers are responsible for selling loan products produced by the company, but their duties do not relate to servicing the business itself.

In contrast to the reasoning of the DOL, the jury in Henry v. Quicken Loans Inc., ruled that the individuals constituted administrative employees in that they were engaged in “sophisticated financial analysis” and exercised discretion and independent judgment regarding business related matters.

As I stated in an earlier entry, there have been numerous overtime suits filed by mortgage loan officers and underwriters within the past year.  Henry v. Quicken Loans Inc. may provide loan companies with a defense to such lawsuits. This is great news for the financial services industry.

To be continued…