unpaid overtimeIn McKeen-Chaplin v. Provident Savings Bank, ___ F.3d ___ (9th Cir. July 5, 2017), the Ninth Circuit Court of Appeals reversed the grant of summary judgment by the U.S. District Court for the Eastern District of California (Judge Burrell) in favor of defendant. The Court held that mortgage underwriters were not exempt under the Administrative Exemption under the Fair Labor Standards Act (“FLSA”) and, therefore, were entitled to overtime compensation for hours worked in excess of forty per week.

Plaintiff brought a class action on behalf of herself and all other mortgage underwriters who worked for defendant bank, which “sells mortgage loans to consumers . . . and then resells those funded loans on the secondary market.” Plaintiff claimed that the underwriters, who were “responsible for thoroughly analyzing complex customer loan applications and determining borrower creditworthiness in order to ultimately decide whether [the bank would] accept the requested loan,” were improperly classified as exempt (i.e. salaried, not hourly) and denied overtime pay.

The district court conditionally certified an opt-in class but later concluded that the underwriters qualified for the Administrative Exemption based on its finding that their primary duty included “quality control” or similar activities directly related to the bank’s general business operations. Thus, the district court granted summary judgment for the bank and plaintiff appealed.

The appellate court disagreed, holding that the underwriters’ primary job duty did not relate to the bank’s management or general business operations and, therefore, the administrative employee exemption did not apply. In so holding the court applied the analysis used by the Second Circuit in Davis v. J.P. Morgan Chase & Co., 587 F.3d 529 (2d Cir. 2009) rather than that applied by the Sixth Circuit in Lutz v. Huntington Bancshares, Inc., 815 F.3d 988, 995 (6th Cir. 2016). Specifically, the court concluded that the underwriters “do not decide if [the bank] should take on risk, but instead assess whether, given the guidelines provided to them from above, the particular loan at issue falls within the range of risk [the bank] has determined it is willing to take. Assessing the loan’s riskiness according to relevant guidelines is quite distinct from assessing or determining [the bank]’s business interests. Mortgage underwriters are told what is in [the bank]’s best interest, and then asked to ensure that the product being sold fits within criteria set by others.” With respect to the district court’s quality control finding, the appellate court noted that “this was a legal conclusion . . . that was not supported by the record evidence.”

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