Contributed by Jon Hoag
The administrative exemption continues to trouble the financial services industry. On June 6, 2012, a federal district court rejected the Mortgage Bankers Association’s legal battle to invalidate the United States Department of Labor’s (DOL) March 24, 2010 interpretation. As a reminder, the DOL’s March 24, 2010 interpretation boldly reversed its prior opinion to conclude that mortgage loan officers no longer qualify for the administrative exemption under the Fair Labor Standards Act (FLSA). The court’s decision is a blow to the financial services industry. Not only did the decision permit the DOL to flip-flop on critical guidance concerning the exemption of loan officers, but it also sends a reminder that the DOL has its sights on the financial services industry and the DOL intends to maintain its strict interpretation of wage and hour laws; making application of the administrative exemption in the banking industry that much more precarious.
The easy lesson from the DOL’s March 24, 2010 interpretation is that the classification used for mortgage loan officers must be reassessed. Now that the DOL has obtained court approval for its interpretation, we can expect the DOL and plaintiffs’ attorneys to more aggressively pursue misclassification issues within the financial services industry. For those that were holding out hope that the March 24, 2010 interpretation would be invalidated, it is time to capitulate and conduct the appropriate wage and hour classification audit immediately.
All employers should note that the DOL’s March 24, 2010 interpretation is not solely about mortgage loan officers. Although the interpretation focused on mortgage loan officer position, it sends a broader message that the DOL intends to aggressively pursue misclassification issues and the administrative exemption will be an area of focus. The fact the DOL’s interpretation was recently upheld is a setback for all employers, especially those in the financial services industry. There almost certainly will be more scrutiny of wage and hour issues within the financial services industry in light of the court’s decision. This is a time for all employers in the industry to take immediate and proactive steps to minimize potential liability. The following steps should be considered to help ensure your positions are classified correctly:
- Analyze your job descriptions and revise accordingly to make sure they reflect (in great detail) the job responsibilities and duties. Have employees review and sign an acknowledgement that the job description is accurate.
- Review all positions classified as administrative exempt closely to be certain the positions actually meet the test. Focus the analysis on the third element related to discretion and independent judgment as this is the most difficult element to meet.
- Review other internal documents such as training materials, performance evaluations, etc. to ensure they are consistent with the exempt classification (e.g. the exempt employee is being evaluated on non-manual work directly related to the business operations).
- Make sure that all members of management involved with setting pay classifications are trained and educated about the issues and consequences associated with misclassifying employees.
- Set and follow a schedule to audit all position classifications on an annual basis.