Employment-Second Circuit Rules That An Underwriter Is Entitled To Overtime Pay

In Davis v. J.P. Morgan Chase & Co., No. 08-4092 (2nd Cir. 2009), the Court faced the issue of whether the plaintiff-underwriter, who was employed by J.P. Morgan Chase (“Chase”) and whose job at Chase was to approve loans to individuals in accordance with detailed guidelines provided by Chase, is an administrative employee and therefore exempt from the overtime requirements of the Fair Labor Standards Act (“FLSA”).

In analyzing the case, the Court said that the FLSA (at 29 U.S.C. § 213(a)(1)) states that employees who work in bona fide executive, administrative, or professional capacities are exempt from the FLSA overtime pay requirements. The regulations (at 29 C.F.R. § 541.2(a)) add that a worker is employed in a bona fide administrative capacity if he or she performs work directly related to management policies or general business operations and customarily and regularly exercises discretion and independent judgment. The regulations further explain (at 29 C.F.R. §541.205(a)) that work directly related to management policies or general business operations consists of those types of activities relating to the administrative operations of a business, as distinguished from production or sales work. As such, employment may be classified as belonging in the administrative category, which falls squarely within the administrative exception, or as production/sales work, which does not. In this particular case, the question comes down to whether the plaintiff-underwriters performed day-to-day sales activities or more substantial advisory duties.

As to this question, the Court said that the primary duty of the plaintiff-underwriter was to sell loan products under the detailed directions of the guidelines provided by his employer, Chase. There is no indication that the underwriter was expected to advise customers as to what loan products best met their needs and abilities. Underwriters were given a loan application and followed procedures specified in the employer’s guidelines in order to produce a yes or no decision as to the approval of the application. This work is not related either to setting “management policies” or to “general business operations”, but concerns the “production” of loans- the fundamental service provided by the bank. As such, the Court held that the plaintiff-underwriter was not employed in a bona fide administrative capacity, and therefore was not exempt from the FLSA overtime requirements.