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Sixth Circuit: Loan Underwriters Not Titled to Overtime Pay

Sixth Circuit:  Loan Underwriters Not Titled to Overtime Pay

On March 2, 2016, the U.S. Court of Appeals for that Sixth Circuit held that residential loan underwriters of Huntington National Bank are administrative employees underneath the FLSA and for that reason not titled to overtime pay. The main duty of the underwriter would be to decide whether a person qualifies for any preferred loan, depending with an initial recommendation produced by an underwriting computer software. To get this done, the underwriter is applicable the bank’s recommendations and lending criteria, in addition to any pertinent rules, to find out if the loan would fall inside the bank’s acceptable degree of risk. As the recommendations frequently provide the underwriter an option among options, at occasions they’re silent and also the underwriter must depend on personal expertise or judgment to consider. An underwriter has the legal right to approve financing that doesn’t satisfy the bank’s recommendations, and may make alternative credit recommendations for an otherwise non-qualifying customer.

Regarding the specific needs from the administrative exemption (29 C.F.R. § 541.200(a)), a legal court noted that Huntington’s underwriters help in the important and servicing from the bank’s business by looking into making choices about once the bank must take on some types of credit risk, an obligation that’s ancillary towards the bank’s principal “production” activity of promoting financial loans. The underwriters therefore fell around the “administrative” side from the “administrative-production dichotomy,” one analytical tool utilized by courts to attract the road between employees who assistance to administer an employer’s general business procedures (who are able to entitled to the overtime exemption) and individuals employees whose responsibilities are primarily associated with your day-to-day manufacture of the services or goods the business sells (who frequently won’t). In reaching this conclusion, the Sixth Circuit acknowledged a possible split using the Second Circuit (which ruled in ’09 credit underwriters fall around the “production” side of dichotomy), observing that within the Sixth Circuit, “the focus is on whether an worker helps run or service a company-not whether that employee’s responsibilities just discuss a production activity.”

A legal court also came to the conclusion that underwriters exercise discretion and independent judgment regarding matters of importance to the financial institution, while they consult printed recommendations because they make choices. When they don’t determine the bank’s overall risk policy, the underwriters still make choices that considerably change up the business, plus they really determine the danger the financial institution need for just about any particular loan.

The opinion, in Lutz v. Huntington Bancshares, Corporation., No. 14-3727, ought to be welcome news to any or all companies within the banking, lending, and financial services industries.

U.S. Regions: Countrywide

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