As we begin the new year, you should be aware that the U.S. Department of Labor is giving increasing scrutiny to the administrative exemption to the overtime pay requirements of the Fair Labor Standards Act (FLSA). One of several “white collar” exemptions, the administrative exemption has several key elements, including requirements that the employee have a primary duty that is focused on the employer’s management or general business operations, and the exercise of discretion and independent judgment regarding matters of significance.
In a decision that surprised many observers, the Labor Department last year reversed its previous interpretation of the FLSA and concluded that mortgage loan officers are not covered by the administrative exemption. The Department reasoned that those employees are primarily focused on the sale of their employer’s financial products to customers rather than being focused on running the employer’s business itself. The ruling drew a distinction between “production employees” and “administrative employees.”
This administrative interpretation of the FLSA by the Labor Department has implications far beyond the mortgage loan industry, and can affect employees in many other businesses. It would be prudent for employers to begin the New Year by examining their exempt employee classifications to determine if they comply with the requirements for exemptions from the overtime pay requirement.
