Here’s a cautionary tale about the pitfalls of trying to classify employees as exempt under the Fair Labor Standards Act (FLSA).

A loan underwriter for a New York bank sued under the FLSA, saying he should be paid for the overtime he regularly worked.

His employer argued that he qualified as exempt, since he was an “administrative” employee.

Under the FLSA, an employee qualifies for the administrative exemption if he or she does work that’s “directly related to management policies or general business operations” and “regularly exercises discretion and independent judgment.”

No discretion involved

The man claimed he reviewed loan applications using the bank’s Credit Guide – a detailed document setting strict parameters for lending. He simply followed procedures to come up with a yes-or-no decision. No discretion was exercised.

The judge sided with the employee. The man was engaged in the “production” of loans – the fundamental product offered by the bank.
Thus, he wasn’t an exempt employee.

Cite: Davis v. J.P. Morgan Chase