It is probably safe to say that well paid employees who have earned prestigious employment titles and are receiving weekly salaries believe themselves NOT to be entitled to over-time pay.  Similarly, their employers feel confident that the weekly salary is all the compensation these employees are entitled to receive. That is to say that the employers have taken comfort in labeling these employees as being exempt from overtime by relying on what is commonly known as the "administrative exception." However, as recent cases have illuminated, many employers may be in for a rude awakening, these employees may be owed substantial back overtime wages.

Most recently, on November 20, 2009 the United States Court Of Appeals For The Second Circuit decided the case of Davis v. J.P. Morgan Chase & Co.  The Davis case is a class action seeking overtime wages for a group of employees known as "underwriters." 

Generally, properly trained and experienced underwriters can expect to receive salaries from banks, and /or mortgage banks, in the range of $45,000.00 to $85,000.00.  Underwriters review the complete loan packages submitted on behalf of potential borrowers and, after careful review determine if the applicant fits into any of the available loan programs offered by the underwriter's employer. This is a covenanted position sought after by loan processors who, after years of gathering the documentation required to establish  complete loan packages, hope to have good work rewarded with a promotion to the position of underwriter. J.P.Morgan Chase argued that these employees were administrative and decision-making  employees who fell squarely within the administrative exception to the overtime law.

However, the Court's reasoning will not be limited to underwriters or the banking industry.

The Second Circuit in the Davis case found that the underwriters in the employ of J.P.Morgan Chase were entitled to years of back overtime wages.   However, the Court's reasoning will not be limited to underwriters or the banking industry.  

 In order to qualify for the administrative exception, held the Davis Court, the employee's services must be  performed for the purpose of internally running the company.  This definition excludes from the exception an employee  whose services are being sold to customers to generate revenue.  The Court warned employers and alerted employees that only an employee who is, "directly producing the good or service that is the primary output of a business" will be found to be under the umbrella offered by the administrative exception. Whereas, the "employees performing general administrative work applicable to the running of any business" are entitled to overtime pay. 

In reaching this decision, the Court put the business world on notice that the determination of whether or not the administrative exemption to the overtime law would apply would not be determined by the conclusion that the employee: is the recipient of a  a large weekly salary, requires particular skills to do the job, enjoys a position of responsibility, or handles large monetary transactions. Moreover, regardless of whether the employer is in the business of selling goods or services, the same rules will be applied across the board.  

Close