Many of you have already heard about the decision in Virginia Federal Court where Prospect Mortgage won a jury trial by applying the outside sales exemption to a loan officer suing Prospect for minimum wage and overtime. Before everyone scrambles to read their contracts, a couple things need to be kept in mind.
First, this was a jury trial. This means Prospect lost on summary judgment—where the court can dismiss claims if it finds the plaintiff cannot prevail as a matter of law. It follows that Prospect thus paid a substantial amount in legal fees (easily exceeding $100,000) and had to incur the risk that an unpredictable jury could have found against it, exposing it to all of the plaintiff's legal costs.
Another important thing to keep in mind is that the case turned on the specific facts at issue. In particular, the plaintiff in the Prospect case had admitted in deposition that she spent up to 50% of her time out of the office and her business was completely referral-based—she did not get leads of any sort. Also, her employment contract was well written—providing significant evidence that her employment was in fact outside the office.
Lastly, the claim in Prospect was based upon an employee who worked in a state where the outside sales exemption did not require a majority of time spent out of the office, as many states require. As such, notwithstanding the victory for Prospect, when one considers the cost, risk, and specific facts and applicable law of the case, it does not stand for the broad notion that the outside sales exemption automatically applies to all loan officers.
Rather, Prospect does illustrate the fact that a loan officer, whose employment is referral-based and who has executed an appropriate employment agreement, may be properly classified as outside sales exempt. This, of course, is not a ground-breaking or new standard. At all times, this exemption has been available, when appropriate, taking into account the way an employee gets their business, their location of work, and the applicable law.
Of course, there are other options, including recoverable minimum wages, which achieve the same results but may in a particular case, be more appropriate and involve less risk.
The bottom line is the decision on how to classify an employer's loan officers should be made on a case-by-case basis, taking into account the applicable law, the manner in which loans are originated, and the particular duties of the loan officers, as well as their volume and the lender's willingness to take some risk.
This is a decision that should be made after consultation with legal counsel and consideration of the unique circumstances of the particular employment. Once determined, the classification should be backed up by the execution of a proper employment agreement supporting the basis for the classification decision.