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Loan Underwriters Entitled to Overtime Pay

In a significant victory for workers in the mortgage industry, the United States Court of Appeals for the Second Circuit has held that underwriters for J.P. Morgan Chase had been misclassified as exempt, when in fact, they were non-exempt. The bank had argued that it was not required to pay loan underwriters overtime pay because they were “exempt” under the “administrative exemption” to the wage and hour laws. The Court disagreed, finding that loan underwriters are not administrative employees, but rather production employees doing “production” work involving loan sales. The court concluded that J.P. Morgan Chase had been misclassifying the underwriters as exempt employees – meaning they were not exempt and the bank should have been paying them overtime pay as required under the FLSA. Fair Labor Standards Act requires that most American workers receive overtime pay (at time and a half) if they work over 40 hours per week – unless their job falls under an exemption, such as the “administrative” exemption claimed by Chase.

These cases turn on an analysis of a worker’s actual job duties and responsibilities. In the J.P. Morgan case, the plaintiffs were loan underwriters whose duties involved approving loans in accordance with guidelines provided by the bank. The court stated, “Underwriters were given a loan application and followed procedures specified in the Credit Guide in order to produce a yes or no decision”…”Their work is not related either to setting ‘management policies’ nor to ‘general business operations’ …, but rather concerns the ‘production’ of loans — the fundamental service provided by the bank.” So, the court concluded, the nature of the loan underwriters’ work was production rather than administrative.

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