Wednesday, December 9, 2009

JP Morgan underwriters are entitled to FLSA overtime pay

Not everyone is entitled to overtime. The Fair Labor Standards Act says that you get overtime pay if you work more than 40 hours per week unless, among other things, you work in a "bona fide executive administrative, or professional capacity." This provision brought a Mr. Michael J. Davis and his co-workers into Federal court against J.P Morgan Chase.

The case is Davis v. J.P. Morgan, decided on November 20. Davis and others were underwriters responsible for approving loans in accordance with guidelines provided by J.P. Morgan, which regarded these employees as exempt from the FSLA. This was a huge gamble. If J.P. Morgan called it wrong, it can owe a lot of people a lot of money. J.P. Morgan called it wrong, the Second Circuit (Lynch, Pooler and Livingston) rules in vacating summary judgment in favor of the employer.

Federal regulations say that someone works in a bona fide administrative capacity if she performs work "directly related to management policies or general business operations" and "customarily and regularly exercises discretion and independent judgment." This is in contrast to "'production' or, in a retail or service establishment, 'sales' work." Where do the plaintiffs in this case fall?

Underwriters at Chase were primarily responsible for selling loan products under management's guidelines. As the Second Circuit puts it, "Underwriters were given a loan application and followed procedures specified in the Credit Guide in order to produce a yes or no decision" from the customer. "Their work is not related either to setting 'management policies' nor to 'general business operations' such as human relations or advertising, but rather concerns the 'production' of loans -- the fundamental service provided by the bank." As far as the FLSA is concerned, these underwriters fall under the category of production rather than of administrative work.

This opinion was written by Judge Lynch, newly appointed to the Second Circuit. He was a district court judge when he heard the appeal and became a Circuit judge when he wrote the opinion. The opinion is well-structured. It starts by suggesting that Second Circuit authority points in this direction, and then it cites what the Court deems "persuasive decisions of our sister circuits" as well as district court rulings in the Second Circuit. Trial court decisions from around the country round out the discussion. Judge Lynch then distinguishes a few cases cited by J.P. Morgan from around the country. Legal scholarship that any Second Circuit junkie can appreciate.

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