In a major departure from its long-standing practice, the U.S. Department of Labor’s Wage and Hour Division recently announced it no longer will issue fact-specific opinion letters in response to requests submitted by individuals and organizations. Historically, the DOL has issued such opinion letters interpreting the Fair Labor Standards Act, the Family and Medical Leave Act, the Davis-Bacon and Related Acts and the Service Contract Act. Instead, the DOL will, when it deems appropriate, issue “Administrator’s Interpretations,” which the DOL indicated will provide “general interpretations of the law and regulations applicable across-the-board” to an entire industry, a category of employees, or to all employees with respect to the statutory or regulatory issue(s) addressed in the Interpretation.
The DOL’s stated rationale for this significant policy change is its belief that issuing general interpretations will provide more comprehensive guidance to a greater number of employers and employees in comparison to its prior fact-specific opinion letters, where even a slight difference in facts might result in a different outcome. Although the DOL will continue to respond to requests for opinion letters, its response now will be limited to providing references to relevant statutes, regulations and other authority, without analysis of any specific facts presented by the requestor. One troubling possible future ramification of the DOL’s elimination of fact-specific opinion letters may be its potential impact upon an individual employer’s ability to raise as an affirmative defense in wage-hour litigation its good faith efforts to comply with the FLSA. An employer acting in conformity with, and in reliance on, written administrative interpretations of the DOL can establish an affirmative defense to back pay liability under the Portal-to-Portal Act. 29 U.S.C. § 259. If individual employers are no longer able to obtain fact-specific opinion letters, it may be more difficult to establish this affirmative defense unless an employer’s specific facts fall within a general interpretation.
In its first Administrator’s Interpretation, released on March 24, 2010, the DOL reviewed what it determined are the “typical” job duties (described below) of a mortgage loan officer and concluded that employees performing these duties, regardless of their particular job title, do not qualify as bona fide administrative employees exempt from the overtime pay requirements of the FLSA. Notably, in reaching this conclusion, the DOL rejected and withdrew its previous opinion letter issued just a few years ago on September 8, 2006 (FLSA 2006-31) in which it reached the very opposite conclusion, i.e., the DOL had found that mortgage loan officers performing these same or very similar duties can qualify for exempt administrative status under the FLSA.
The FLSA requires employers to pay employees one and one-half times their regular rate for all hours over forty worked in a single workweek. An employer is not, however, required to pay overtime to employees who work in a “bona fide executive, administrative or professional capacity.” 29 U.S.C. § 213(a)(1).
The FLSA “administrative” exemption covers employees ”whose primary duty is the performance of office or nonmanual work directly related to the management or general business operations of the employer or the employer’s customers.” 29 C.F.R. § 541.200. Such duties also must require “the exercise of discretion and independent judgment with respect to matters of significance.” Id.
To qualify for the administrative exemption, the employee’s primary duty generally must be servicing the business of the employer or the employer’s customers rather than manufacturing or selling the employer’s product line (the “duties test”). Id. The employee must also be paid on a “salary basis,” and the salary paid to exempt administrative employees must amount to no less than $455 per week for each week of employment.
In evaluating whether mortgage loan officers meet the “duties test” for exempt administrative status, the DOL in its Administrator’s Interpretation found that the following are their “typical” job duties:
In contrast to its earlier opinion letters, the DOL concluded that performing these duties demonstrates the employees’ primary duty is making sales and, as such, they are performing the “production work” of selling their employers’ loan products, rather than performing the exempt administrative work of servicing the business of their employer or their employers’ customers. The DOL relied on a number of factors in making this determination, including its interpretation of case law; its analysis of regulations distinguishing between routine non-exempt sales work and exempt administrative work; its observation that typical compensation arrangements for many mortgage loan officers are based at least in part on commissions; and its observations that mortgage loan officers are often trained in sales techniques and their performance often is evaluated on the basis of sales volume and other production goals.
The DOL acknowledged employees also may qualify for the administrative exemption if their primary duty is directly related to the management or general business operations of their employers’ customers. In making this determination, the DOL emphasized the importance of focusing on the identity of the customer, and whether the customer is acting in a personal or business capacity. In that regard, the DOL found that the customers of mortgage loan officers typically are individual homeowners seeking advice for their personal needs as opposed to business needs and accordingly, do not qualify for the administrative exemption. The DOL further acknowledged the outcome might be different where the customer is a business seeking advice about mortgage-related decisions or is a sole proprietor seeking such advice for business needs.
Like prior opinion letters issued by the DOL, an Administrator’s Interpretation is not legally binding in judicial proceedings. Nonetheless, at minimum, this Interpretation is a setback on a going forward basis for employers in the mortgage loan industry who, when engaged in litigation over loan officers’ exempt administrative status, previously had been able to establish as an affirmative defense their good faith reliance on the DOL’s September 2006 opinion letter. This Administrator’s Interpretation also signals that the DOL may be taking a harder look at the “production versus staff” dichotomy in distinguishing between nonexempt and exempt administrative, in contrast to the approach it took in the prior Bush administration. Any such renewed emphasis on this dichotomy would appear to be inconsistent with the DOL’s stated intention in its Preamble to the revised 2004 FLSA regulations, in which the DOL indicated it intended to reduce the emphasis on this distinction. In any event, the elimination of fact-specific opinion letters and the DOL’s reversal of its position with regard to mortgage loan officers is consistent with widely-held expectations that the DOL will be taking a more aggressive, employee friendly enforcement approach with regard to exemption and other wage-hour issues. Baker Hostetler is well positioned to assist employers in reviewing their compensation and payroll policies and practices and in tightening compliance with arcane and often complex wage and hour requirements.
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David A. Grant (
Authorship Credit: Paula F. Seger and David A. Grant
 The DOL also withdrew an opinion letter issued on February 16, 2001 (2001 WL 1558764) in which it likewise determined performance of similar duties could fall within the administrative exemption but in that particular instance, the loan officers were not exercising the requisite discretion and independent judgment to qualify for exempt status.
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