On March 2, 2016, the U.S. Court of Appeals for the Sixth Circuit held that residential loan underwriters of Huntington National Bank are administrative employees under the FLSA and therefore not entitled to overtime pay.  The primary duty of an underwriter is to decide whether or not a customer qualifies for a desired loan, relying on an initial recommendation generated by an underwriting software program.  To do this, the underwriter applies the bank’s guidelines and lending criteria, as well as any pertinent regulations, to determine whether the loan would fall within the bank’s acceptable level of risk.  While the guidelines often give the underwriter a choice among options, at times they are silent and the underwriter must rely on personal experience or judgment to make a decision.  An underwriter has the authority to approve a loan that does not meet the bank’s guidelines, and can make alternative credit recommendations to an otherwise non-qualifying customer.

As to the specific requirements of the administrative exemption (29 C.F.R. § 541.200(a)), the court noted that Huntington’s underwriters assist in the running and servicing of the bank’s business by making decisions about when the bank should take on certain kinds of credit risk, a duty that is ancillary to the bank’s principal “production” activity of selling loans.  The underwriters therefore fell on the “administrative” side of the “administrative-production dichotomy,” one analytical tool used by courts to draw the line between employees who help to administer an employer’s general business operations (who can qualify for the overtime exemption) and those employees whose duties are principally related to the day-to-day production of the goods or services the employer sells (who often won’t).  In reaching this conclusion, the Sixth Circuit acknowledged a potential split with the Second Circuit (which ruled in 2009 that loan underwriters fall on the “production” side of dichotomy), noting that in the Sixth Circuit, “the focus is on whether an employee helps run or service a business—not whether that employee’s duties merely touch on a production activity.”

The court also concluded that underwriters exercise discretion and independent judgment as to matters of significance for the bank, even though they consult published guidelines as they make decisions.  While they don’t determine the bank’s overall risk policy, the underwriters still make decisions that significantly impact the business, and they actually determine the risk the bank will accept for any particular loan.

The opinion, in Lutz v. Huntington Bancshares, Inc., No. 14-3727, should be welcome news to all employers in the banking, lending, and financial services industries.

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Photo of Allan Bloom Allan Bloom

Allan S. Bloom is a nationally recognized trial lawyer and advisor who represents management in a broad range of employment and labor law matters. As a litigator, Allan has successfully defended a number of the world’s leading companies against claims for unpaid wages…

Allan S. Bloom is a nationally recognized trial lawyer and advisor who represents management in a broad range of employment and labor law matters. As a litigator, Allan has successfully defended a number of the world’s leading companies against claims for unpaid wages, employment discrimination, breach of contract and wrongful discharge, both at the trial and appellate court levels as well as in arbitration. He has secured complete defense verdicts for clients in front of juries, as well as injunctions to protect clients’ confidential information and assets.

As the leader of Proskauer’s Wage and Hour Practice Group, Allan has been a strategic partner to a number of Fortune 500 companies to help them avoid, minimize and manage exposure to wage and hour-related risk. Allan’s views on wage and hour issues have been featured in The New York TimesReutersBloomberg and Fortune, among other leading publications. His class-action defense work for clients has saved hundreds of millions of dollars in potential damages.

Allan is regularly called on to advise boards of directors and senior leadership on highly sensitive matters such as executive transitions, internal investigations and strategic workforce planning. He also has particular expertise in the financial services industry, where he has litigated and arbitrated cases, including at FINRA and its predecessors, for more than 20 years.
A prolific author and speaker, Allan was the Editor of the New York State Bar Association’s Labor and Employment Law Journal from 2012 to 2017. He has served as an author, editor and contributor to a number of leading treatises in the field of employment law, including ADR in Employment Law (ABA/Bloomberg BNA, Senior Editor), Employment Discrimination Law (ABA/Bloomberg BNA, Final Proof Editor), Cutting Edge Advances in Resolving Workplace Disputes (Cornell University/CPR, Editor), The Employment Law Review (Law Business Research, U.S. Chapter Author), and The Complete Compliance and Ethics Manual (SCCE, Chapter Author).

Allan is a member of the NYSBA’s House of Delegates, sits on the Executive Committee of the NYSBA’s Labor and Employment Law Section, and is a Fellow of the College of Labor and Employment Lawyers. He has been recognized as a leading practitioner by Chambers since 2011.