Swigart et al v. Fifth Third Bank

Filing 144

ORDER THAT DEFENDANT'S MOTION FOR PARTIAL SUMMARY JUDGMENT (Doc. 32 ) IS DENIED. Signed by Judge Timothy S. Black on 5/7/12. (mr1)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION
DUSTIN SWIGART and SONIA
SCHULTZ, on behalf of themselves and
others similarly situated,

Case No. 1:11-cv-88

Plaintiffs,
Judge Timothy S. Black
vs.
FIFTH THIRD BANK,
Defendant.
ORDER THAT DEFENDANT’S MOTION FOR PARTIAL SUMMARY
JUDGMENT (Doc. 32) IS DENIED
This civil action is before the Court on Defendant’s motion for partial summary
judgment (Doc. 32) and the parties’ responsive memoranda (Docs. 38, 126, 137, 140).1
Also before the Court is a Statement of Interest by the United States (Doc. 122) and its
supplemental authority (Doc. 139).
I.

INTRODUCTION AND PROCEDURAL POSTURE

Plaintiffs filed this action on behalf of themselves and all current and former
Mortgage Loan Officers (“MLO”) employed by Defendant Fifth Third Bank since
February 11, 2008 (the “Proposed FLSA Collective Plaintiffs”).2 Plaintiffs claim that

1

Plaintiffs seek oral argument on this motion. (Doc. 126 at 1). Local Rule 7.1(b)(2)
anticipates oral argument if it “is deemed to be essential to the fair resolution of the case because
of its public importance or the complexity of the factual or legal issues presented.” Here, the
Court finds, however, that the pleadings are clear on their face and that oral argument is not
necessary.
2

Plaintiffs also bring this action on behalf of themselves and all present and former MLO’s
employed by Defendant in the State of Ohio since February 11, 2008 (the “Proposed Ohio
Subclass Plaintiffs”).

Defendant improperly classified them as exempt from the overtime requirements of the
Federal Fair Labor Standards Act (“FLSA”), and its associated regulations, and the Ohio
Minimum Fair Wage Standards Act (“Ohio Wage Act”). Specifically, Plaintiffs claim
that Defendant violated the FLSA and Ohio law when it failed to pay them overtime
compensation when they worked more than 40 hours in a workweek.
Plaintiffs filed a motion for conditional certification and judicial notice, requesting
that the Court conditionally certify the case as a collective action and authorize Plaintiffs
to send notice to all MLOs employed by Defendant within three years of the date the
motion was filed. (Doc. 31). Defendant opposed Plaintiffs’ motion by moving for partial
summary judgment on its Section 259 Good Faith defense. (Docs. 32, 33). The Court
granted Plaintiff’s motion for conditional certification and judicial notice, deferring
consideration of Defendant’s motion for partial summary judgment, and ordering a
limited discovery period. (Docs. 39, 40).
During the limited discovery period, Plaintiffs obtained documents from
Defendant regarding its Good Faith defense and deposed three witnesses: (1) Mark
Wilson, Defendant’s 30(b)(6) corporate designee; (2) Stephanie Bauer Daniel,
Defendant’s in-house counsel who was involved in its classification decision; and
(3) Joseph Treinen, Defendant’s former Vice-President of Retail Mortgage Lending and
the management employee on whom Mark Wilson relied to determine the job duties of
Defendant’s MLOs. (Doc. 126, Ex. 2 at ¶ 3). The limited discovery period is now
closed, and Defendant’s motion for partial summary judgment is ripe for review.
-2-

In its motion for partial summary judgment, Defendant argues that when
classifying the MLOs as exempt, it relied in good faith on a series of relevant regulatory
pronouncements of the U.S. Department of Labor (“DOL”), including 2004 revisions to
the “white-collar” exemption regulations (the “2004 regulations”) and an Opinion Letter
issued by the DOL on September 8, 2006 (“the 2006 Opinion Letter”). Defendant also
relied upon the advice of counsel regarding its evaluation of the MLO position and
interpretation of the relevant DOL regulations. Therefore, Defendant maintains that
Plaintiffs cannot recover for any claim to overtime compensation after September 8,
2006, and because Plaintiffs’ claims for compensation do not begin until February 11,
2008, Plaintiffs cannot recover any overtime compensation as a matter of law, and such
claims should be dismissed.
Defendant also asks the Court to invalidate the DOL’s recent Administrator’s
Interpretation 2010-1 (“AI 2010-1"), which rescinded the 2006 Opinion Letter and held
that MLOs do not qualify for the administrative exemption.

-3-

II.

RELEVANT FACTUAL BACKGROUND 3

Plaintiffs are joined in this case by approximately 356 additional current and former
MLOs. (Doc. 126, Ex. 2 at ¶ 5). Defendant hires, promotes, ranks, terminates, and pays
its MLOs based on their sales production. (Doc. 126, Ex. 11 at 74-77). In fact,
Defendant paid MLOs based on the profitability of their loans, meaning that a MLO
would receive more commission if she sold a loan to a borrower at an interest rate above
the rate set by Defendant. (Id. at 120-121).
MLOs report to an area sales manager. (Doc. 126, Ex. 11 at 18-24). Area sales
mangers are responsible for managing and coaching MLOs on sales, sales processes, and
how to improve sales results. (Id. at 21-22). Area sales managers also make sales calls
with MLOs so that they can provide immediate feedback on sales presentations. (Id. at
21-22). Area sales managers are paid based on their own loan production as well as the
loan production of the MLOs under their supervision. (Id. at 22).
Since 2005, Defendant has provided each of its MLOs with a “MLO Playbook.”
(Doc. 126, Ex. 11 at 63; Doc. 131, Exs. 2-3). The MLO Playbook explains all of the
things that a MLO needs to do in order to be successful. (Id.) Throughout the MLO

3

See Doc. 32, Ex. 1 and Doc. 126, Ex. 1. Defendant failed to “set forth in separately
numbered paragraphs a concise statement of each material fact as to which the moving party
contends there is no genuine issue to be tried.” See Chief Judge Dlott’s Standing Order
Governing Civil Motions for Summary Judgment available at: http://www.ohsd.uscourts.gov/
judges/dlott/Standard%20Order.pdf. Instead, Defendant included numerous material facts in
each numbered paragraph, making the non-conforming-to-rule pleading exceedingly difficult to
decipher.
-4-

Playbook, Defendant uses the phrase “non-negotiable” to describe a policy that must be
followed. (Id. at 57-58). Put differently, non-negotiable means “this is something that
really is not for discussion. This is our process and how we are going to go about it.”
(Doc. 126, Ex. 11 at 57-58; Doc. 131, Exs. 2-3). Among the non-negotiable policies is
the “One Bank” strategy, which is an addendum to the MLO Playbook. (Doc. 126, Ex. 11
at 57-58; Doc. 131, Exs. 2-3). The One Bank strategy “works to compliment
[Defendant’s] existing Mortgage Sales Process.” (Id.) The One Bank strategy has its
own “One Bank Sales Process” which is a non-negotiable accompaniment to Defendant’s
existing mortgage sales process, and provides as follows:
(1) Prepare and prospect (lead generation and lead conversion);
(2) Assess needs;
(3) Recommend solutions;
(4) Close the sale and implement solutions; and
(5) Follow through.
(Doc. 126, Ex. 11 at 58-59; Doc. 131, Exs. 2-3). In the sale of mortgages, the One Bank
Sales Process extends from the initial meeting with the customer to the closing and
beyond. (Doc. 126, Ex. 11 at 72; Doc. 131, Ex. 3 at 470-474). MLOs are only paid
commission on a loan when it closes and, as a result, MLOs view the entire process –
from sales call, to obtaining a loan application, to the closing – as a “sale.” (Doc. 126,
Ex. 11 at 73-74). Defendant incorporates this expectation into its weekly “MLO Sales

-5-

Results” reports, which track the number of closings attributable to each MLO. (Doc.
131, Ex. 3 at 647-648).
Defendant required its MLOs to “cross-sell” additional bank products and services
such as checking accounts and credit cards to every customer. (Doc. 126, Ex. 11 at 5354; Doc. 131, Ex. 3 at 448, 466). Cross-selling is another one of Defendant’s nonnegotiable policies. (Id. at 458). Cross-selling is important to Defendant because “it
costs institutions five times more to attract a new client than it does to cross sell to an
existing one,” and because “[t]he more products a customer has with [Defendant], the less
likely they are to leave.” (Id. at 465). Defendant encouraged cross-sales with a referral
program called “Team Fifth Third.” (Doc. 126, Ex. 11 at 53-54; Doc. 131, Ex 3 at 467).
Under the Team Fifth Third referral program, MLOs received additional compensation
for each successful cross-sale. (Id.)
Defendant also trained its MLOs in sales techniques, and even hired outside
vendors to provide mortgage sales training. Since 2009, Defendant has partnered with a
company called XINNIX to provide sales productivity training.4 (Doc. 126, Ex. 11 at 8081, 16-18). The XINNIX training combined an eight-week internet training course with
weekly conference calls and homework assignments. (Id. at 81; Doc. 131, Exs. 4-5).
The first four weeks of the course focus on the “Four Pillars of Success,” which
are: (1) they know you (marketing); (2) they like you (relationship); (3) they trust you
4

XINNIX’s website notes: “XINNIX, The Mortgage Academy of Excellence, provides the
mortgage industry’s most proven and effective sales development programs in the country.” See
http://www.xinnix.com/aboutus (last visited on April 11, 2012).
-6-

(follow-through); and (4) you make them money (deliver). (Doc. 131, Ex. 4 at 6249).
The course materials also instruct MLOs on how to overcome their own “sales call
reluctance.” (Id. at 6306). Part of the training on overcoming sales call reluctance
includes a live phone test. (Id., Ex. 7). Using a computer program, the MLO is judged on
their ability to sell, and the results of the test are reviewed in the XINNIX course. (Id.,
Ex. 4 at 6316; Ex. 7). The course materials also include scripts teaching MLOs how to
overcome objections (Id. at 6267-6268; Ex. 5 at 5781), how to speak with receptionists
(Ex. 5 at 5786), how to ask someone out to lunch (id.), how to close a sale (Id. at 5794),
how to ask for referral business (Id. at 5799), and how to pitch sales to current borrower
clients (Id. at 5801). In the event that a MLO did not know what to say in a voicemail
message, the MLO Playbook provides specific instructions. (Id., Ex. 3 at 2595). A prior
version of the MLO Playbook contained a message to the MLOs which explains how
important Defendant considered these everyday tasks to be to the MLOs’ sales: “An
outdated voicemail message could mean death to a sale.” (Id., Ex. 8).
When Mark Wilson joined Defendant as its Human Resources Business Partner in
October 2005, he had no experience in the financial services industry. (Doc. 126, Ex. 11
at 8-9, 87). Mr. Wilson never worked as a MLO or supervised MLOs for Defendant or
any other company. (Id. at 29-30). The basis of Mr. Wilson’s knowledge of MLOs’ job
duties stems from shadowing a MLO for half a day, and later in his tenure, relying on
Joseph Treinen, a former MLO. (Id. at 29, 92, 102).

-7-

Upon his hire, Mr. Wilson began an audit of the MLO position and applicable law
to determine if Defendant’s MLOs were appropriately classified as exempt administrative
employees. (Id. at 35, 84-85). Mr. Wilson conducted the audit with the help of in-house
counsel, Defendant’s compensation department, and senior management from the
mortgage line of business (particularly Joe Treinen). In-house counsel retained the law
firm of Mayer Brown as outside counsel to confirm that the decision that Mr. Wilson
reached in his audit was proper. (Doc. 126, Ex. 11 at 124-26). Based on two sets of
documents (the MLO job description (Id., Ex. 7) and the MLO Playbook (Id., Ex. 3),
Mayer Brown concluded that Defendant’s MLOs could be properly classified as exempt
under either the administrative or outside sales exemptions. (Doc. 126, Ex. 13 at 28, 4445; Ex. 1 - Mayer Brown Memo). Mayer Brown’s analysis of the administrative
exemption and the 2006 Opinion Letter noted that “in order to satisfy the FLSA
administrative exemption as set forth in the [] Opinion Letter, Fifth Third Bank must be
able to show that its [MLOs] spend less than half their working time engaged in
“customer specific sales activity.” (Ex. 1). According to Mr. Wilson, he relied on Mr.
Treinen to confirm that this was true. (Doc. 126, Ex. 11 at 102).
The MLO position maintained its administratively exempt classification until it
was formally revisited after March 24, 2010, when the DOL issued its Administrator’s
Interpretation 2010-1. (Doc. 32, Ex. 6 at ¶ 12). Mr. Wilson and members of Defendant’s
senior management made the decision to reclassify the MLO position as nonexempt, and
to restructure the compensation program for the MLO position. (Id. at ¶ 13).
-8-

Defendant’s human resources personnel and management staff undertook an interactive
process with MLOs, to identify time worked by each in excess of forty hours in any week
since March 24, 2010. (Id. at ¶ 14). As of January 3, 2011, all individuals currently
employed by Defendant as MLOs have been reclassified as nonexempt from the FLSA’s
overtime requirements and have been offered and/or received overtime pay for any time
worked in excess of forty hours in any week since March 24, 2010. (Id.)
III.

STATUTORY AND REGULATORY BACKGROUND 5

The FLSA generally requires covered employers to pay minimum wages and
overtime compensation for hours of work exceeding 40 in a workweek at a rate of one
and one-half times an employee’s regular rate of pay. 29 U.S.C. §§ 206(a), 207(a)(1).
Exempt from the minimum wage and overtime compensation provisions of the FLSA,
however, is any employee who is “employed in a bona fide . . . administrative . . .
capacity.” 29 U.S.C. § 213(a)(1). Any employees that qualify as administratively
exempt, therefore, are not entitled to overtime compensation under the FLSA.
The Wage and Hour Division (“WHD”) of the Department of Labor (“DOL”)
administers and enforces the FLSA, and issues regulations and interpretations of those
regulations. In 2004, the WHD revised its regulations governing administratively exempt
employees under the FLSA. 29 C.F.R. §§ 541.200-541.204. Moreover, the WHD has
issued three Opinion Letters and one Administrator’s Interpretation – two issued prior to
5

As adopted in large part from Lewis v. Huntington Nat’l Bank, No. 11cv58, 2012 U.S. Dist.
LEXIS 32166, at *11-27 (S.D. Ohio Mar. 12, 2012).
-9-

the regulation revisions and two after – interpreting its regulations to determine the status
of MLOs under the administrative exemption.6
A.

The 1999 Opinion Letter

In May of 1999, the WHD issued an Opinion Letter in response to a request
regarding the exempt status of MLOs under § 213(a)(1). Opinion Letter, 1999 DOLWH
LEXIS 54 (Dep’t of Labor May 17, 1999) (“1999 Opinion Letter”). The MLOs employed
by the requestor of the Opinion Letter were responsible for developing new business for
their employer by contacting prospective borrowers and referral sources; evaluating the
borrowers’ financial situation and providing a pre-qualification letter; consulting with
borrowers to obtain the best loan package available; working with lenders in selecting
loan programs for borrowers; consulting with borrowers regarding desirability of locking
in a given interest rate; assisting the borrowers in preparing a loan application; presenting
and obtaining borrowers’ signatures; submitting loan applications to the central office;
and consulting with loan processors or borrowers to resolve any problems. Id. at 1–2.
The MLOs were subject to minimal supervision by branch managers. Id. at 2.

6

Prior to 2010, the DOL communicated its interpretations of the FLSA and its regulations by
issuing public Opinion Letters in response to questions submitted by private parties. The WHD
changed its practice in 2010, and started issuing Administrator’s Interpretations “when
determined, in the Administrator’s discretion, that further clarity regarding the proper
interpretation of a statutory or regulatory issue is appropriate.” Wage and Hour Division,
Rulings and Interpretations, Administrator Interpretations.
Http://www.dol.gov/whd/opinion/opinion.htm (Last visited April 8, 2012). The WHD explained
that it believed “this will be a much more efficient and productive use of resources than
attempting to provide definitive opinion letters in response to fact-specific requests submitted by
individuals and organizations, where a slight difference in the assumed facts may result in a
different outcome.” Id.
-10-

The DOL concluded that these mortgage loan officers did not qualify for the
administrative exemption because: (1) they carried out the company’s day-to-day
activities rather than determining the overall course and policies of the business; and
(2) they did not exercise discretion and independent judgment. Id.
B.

The 2001 Opinion Letter

A letter was filed in response to the 1999 Opinion Letter, requesting that the WHD
reconsider its finding in the 1999 Opinion Letter that MLOs were not exempt “in light of
the advisory duties they perform on behalf of their employer’s customers.” Opinion
Letter, 2001 DOLWH LEXIS 5, at *1 (Dep’t of Labor Feb. 16, 2001) (“2001 Opinion
Letter”). Specifically, the response letter pointed out that the MLOs worked with
borrowers to create loan packages that best met the goals of the borrowers while
complying with various lender requirements. Id. The MLOs selected from a wide range
of loan packages and supervised the processing of the transaction until closing. Id. In
order for the MLO to perform these duties, he had to understand a customer’s credit
history and financial goals. Id.
A member of the Fair Labor Standards Team found that while it agreed the
primary duties of the MLOs were the performance of office or nonmanual work directly
related to management policies or general business operations, MLOs were not exercising
the necessary discretion and independent judgment to be considered administratively
exempt. Id. at 2-3. The WHD explained that it appeared that the MLOs were “using their
skill and knowledge in applying techniques, procedures, and/or specific standards (such
-11-

as loan-to-value ratios and debt ratios) in choosing already established loan packages,”
and such tasks did not demonstrate the requisite exercise of discretion and independent
judgment to categorize the MLOs as administratively exempt. Id.
C.

The 2004 Revisions to the WHD’s Regulations

The revisions to the regulations addressing administratively exempt employees
under the FLSA became effective on August 23, 2004. See Defining and Delimiting the
Exemptions for Executive, Administrative, Professional, Outside Sales and Computer
Employees, 69 Fed. Reg. 22122 (Apr. 23, 2004) (to be codified at 29 C.F.R. pt 541)
(hereinafter “Defining the Exemptions”). Under the revised 29 C.F.R. § 541.200, an
administratively exempt employee under the FLSA is one who is:
(1)
(2)

(3)

compensated on a salary or fee basis at rate of not less than $455 per week;
whose primary duty is “the performance of office or non-manual work
directly related to the management or general business operations of the
employer or employer’s customers”; and
whose primary duty also includes “the exercise of discretion and
independent judgment with respect to matters of significance.” 7

Section 541.201(a) explains that to perform “work directly related to the management or
general business operations,” an employee “must perform work directly related to
assisting with the running or servicing of the business, as distinguished, for example,
from working on a manufacturing production line or selling a product in a retail or service
establishment.” This can include work in finance, and “employees acting as advisers or
consultants to their employer's clients or customers (as tax experts or financial
consultants, for example) may be exempt.” 29 C.F.R. §§ 541.201(b), (c).

7

This language was already contained in the regulations prior to the 2004 revisions.
-12-

An employee exercises discretion and independent judgment when he or she
compares and evaluates possible courses of conduct, and acts or makes a decision after
considering various possibilities. 29 C.F.R. § 541.202(a). Whether an employee is
exercising discretion and judgment is a fact-specific inquiry. 29 C.F.R. § 541.202(b).
Nevertheless, factors to consider are whether the employee:
(1)
(2)
(3)

(4)
(5)
(6)
(7)
(8)
(9)
(10)

has authority to formulate, affect, interpret, or implement management
policies or operating practices;
carries out major assignments in conducting the operations of the business;
performs work that affects business operations to a substantial degree, even
if the employee's assignments are related to operation of a particular
segment of the business;
has authority to commit the employer in matters that have significant
financial impact;
has authority to waive or deviate from established policies and procedures
without prior approval;
has authority to negotiate and bind the company on significant matters;
provides consultation or expert advice to management;
is involved in planning long- or short-term business objectives;
investigates and resolves matters of significance on behalf of management;
and
represents the company in handling complaints, arbitrating disputes or
resolving grievances.

Id. The exercise of discretion and independent judgment does not include “clerical or
secretarial work, recording or tabulating data, or performing other mechanical, repetitive,
recurrent or routine work.” 29 C.F.R. § 541.202(e).
Finally, § 541.203 was added as a new provision to the regulations in 2004 that
provides “administrative exemption examples.” Of import here is subsection (b), which
provides:

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Employees in the financial services industry generally meet the duties
requirements for the administrative exemption if their duties include
work such as collecting and analyzing information regarding the
customer's income, assets, investments or debts; determining which
financial products best meet the customer's needs and financial
circumstances; advising the customer regarding the advantages and
disadvantages of different financial products; and marketing, servicing
or promoting the employer's financial products. However, an employee
whose primary duty is selling financial products does not qualify for
the administrative exemption.
29 C.F.R. § 541.203(b) (emphasis added).
The administrative exemption was not available for employees who had a
“‘primary duty to sell [the company’s] lending products on a day-to-day basis’ and ‘failed
to exercise discretion and independent judgment.’” Defining the Exemptions, 69 Fed.
Reg. at 22145 (quoting Casas v. Conseco Fin. Corp., No. 00-1512, 2002 U.S. Dist.
LEXIS 5775, at *9 (D. Minn. Mar. 31, 2002)).
D.

The 2006 Opinion Letter

The WHD issued another Opinion Letter in 2006, this time signed by the WHD
Administrator himself, addressing whether certain MLOs were administratively exempt
from the minimum wage and overtime compensation provisions of the FLSA. Opinion
Letter, 2006 DOLWH LEXIS 42, at *1, 19 (Dep’t of Labor Sept. 8, 2006) (“2006
Opinion Letter”). This time, however, the WHD found that the MLOs qualified under the
exemption. Id. at 12. The MLOs at issue in the 2006 Opinion Letter worked with
employer’s customers to assist them in identifying and securing mortgage loans. Id. at 4.
The MLOs did this by responding to customer leads; collecting and analyzing customer

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financial information; assessing customer financial circumstances to determine if the
customer would qualify for a loan; and advising the customer about the risks and benefits
of the loan alternatives. Id. Some of the MLOs used technological tools to assist in
communicating a loan prequalification, loan preapproval, or qualified loan approval. Id.
at 5. The MLOs sales activities were described as “customer-specific persuasive sales
activity, such as encouraging an individual potential customer to do business with his or
her employer’s mortgage banking company rather than a competitor, or to consider the
possibility of a mortgage loan if they have not expressed prior interest.” Id.
Based on this description of MLO job duties provided, the WHD concluded that
the MLOs had “a primary duty other than sales, as their work includes collecting and
analyzing a customer’s financial information, advising the customer about the risks and
benefits of various mortgage loan alternatives in light of their individual financial
circumstances, and advising the customer about avenues to obtain a more advantageous
loan program.” Id. at 12-13. The WHD noted, however, that if a MLO’s primary duty
was selling mortgage loans, the MLO would not qualify under the exemption. Id. at 13,
n.3. In other words, the 2006 Opinion Letter was based on the specific facts presented to
it in the request.
E.

The 2010 Administrator’s Interpretation

In March of 2010, the WHD issued an Administrator’s Interpretation regarding the
application of the administrative exemption to employees who perform the typical job
duties of a MLO. Administrator’s Interpretation No. 2010-1, 2010 DOLWH LEXIS 1, at
-15-

*1 (March 24, 2010) (“2010-1 AI”). The WHD found that the primary duty of a MLO is
making sales on behalf of his or her employer, which is not directly related to the
management or general business operations of the employer or the employer’s customers,
and, therefore, MLOs did not meet the requirements under the administrative exemption.
Id. at 30. The WHD withdrew the 2006 Opinion Letter “[b]ecause of its misleading
assumption and selective and narrow analysis.” Id. The 2001 Opinion Letter was also
withdrawn because the member of the Fair Labor Standards Team had concluded,
incorrectly, that the primary duties of the MLO were office and nonmanual work directly
related to management policies or generally business operations (even though the ultimate
conclusion of the Opinion Letter was that MLOs were not administratively exempt). Id.
The WHD examined federal case law to determine the typical job duties of an
MLO, and found that those duties included the following:
(1)
(2)

(3)
(4)
(5)

(6)
(7)

Receiving internal leads and contacting potential customers, or receiving
contacts from customers;
Collecting required financial information from customers including
information about income, employment history, assets, investments, home
ownership, debts, credit history, assets, investments, home ownership,
debts, credit history, prior bankruptcies, judgments, and liens;
Running credit reports;
Entering collected financial information into a computer program that
identifies which loan products may be offered to customers;
Assessing the loan products identified, discussing with the customers the
terms and conditions of particular loans, trying to match the customers’
needs with one of the company’s loan products;
Compiling customer documents for forwarding to an underwriter of loan
processor; and
Finalizing documents for closing.

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Id. at 3-4. The WHD explained that the “case law and regulatory distinction between
servicing the business and routine sales work requires an examination of whether an
employee who performs the typical job duties of a mortgage loan officer has the primary
duty of making sales.” Id. at 13. The WHD reasoned that the MLOs typical job duties
indicate that their primary duty is making sales. Id. at 15–16. The WHD pointed out that
“employers often train their mortgage loan officers in sales techniques and evaluate their
performance on the basis of their sales volume.” Id. at 18. Typical day-to-day duties of
MLOs “do not relate to the internal management or general business operations of the
company,” and fall “squarely on the production side of the business.” Id. at 23.
III.

STANDARD OF REVIEW

A motion for summary judgment should be granted if the evidence submitted to
the Court demonstrates that there is no genuine issue as to any material fact, and that the
movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). See Celotex
Corp. v. Catrett, 477 U.S. 317, 322 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 247-48 (1986). The moving party has the burden of showing the absence of genuine
disputes over facts which, under the substantive law governing the issue, might affect the
outcome of the action. Celotex, 477 U.S. at 323. All facts and inferences must be
construed in a light most favorable to the party opposing the motion. Matsushita Elec.
Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).

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A party opposing a motion for summary judgment “may not rest upon the mere
allegations or denials of his pleading, but . . . must set forth specific facts showing that
there is a genuine issue for trial.” Anderson, 477 U.S. at 248 (1986).
IV.
A.

ANALYSIS

Good Faith Defense

Defendant argues that it is shielded from liability for misclassifying its MLOs as
administratively exempt employees under Section 259, because it relied in good faith on
the 2006 Opinion Letter.
To establish a good faith affirmative defense under Section 259, an employer must
show that it acted in: (1) reliance on; and (2) conformity with a WHD regulation, Opinion
Letter, or Administrator’s Interpretation; and (3) in good faith. 29 U.S.C. § 259(a); Frank
v. McQuigg, 950 F.3d 590, 598 (9th Cir. 1991). This Circuit has explained that in close
cases, courts should consider “the reasonableness of the employer’s actions in light of the
administrative interpretation in question.” Marshall v. Baptist Hosp., Inc., 668 F.2d 234,
238 (6th Cir. 1981). However, this Court is also mindful that federal courts have noted
that the “burden of proof is a heavy one, since a defense under Section 259 would act as a
bar to this proceeding, thereby absolving [the defendant] of liability and penalties for any
past FLSA violations.” Figas v. Horsehead Corp., No. 06-1344, 2008 U.S. Dist. LEXIS
87199, at *21 (W.D. Pa. Sept. 3, 2008).
The good faith requirement contains both subjective and objective components.
Id. The subjective component requires an employer to show that it had “honesty of
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intention and no knowledge of circumstances which ought to put him upon inquiry.” Id.
(quoting 29 C.F.R. § 790.15(a)). However, subjective good faith is not enough – the
employer must also satisfy an objective test. In other words, “good faith is not to be
determined merely from the actual state of [the employer’s] mind.” 29 C.F.R.
§ 790.15(a)). The employer must show that it “acted as a reasonably prudent man would
have acted under the same or similar circumstances.” Id. “By its very nature, the
question of good faith is fact intensive and implicates a question of credibility for the trier
of fact.” Henchy v. City of Absecon, 148 F. Supp. 2d 435, 442 (D.N.J. 2001). With
regard to conformity, the employer must show that it actually conformed to the regulation,
order, ruling, approval, or interpretation. 29 C.F.R. § 790.14(a). “This is true even
though the employer erroneously believes he conformed with it and in good faith relied
upon it[.]” Id. Likewise, the employer must plead and prove “that he actually relied upon
it.” 29 C.F.R. § 790.16(a).
This Court finds that for reasons explained in detail below, genuine issues of
material fact exist as to whether Defendant relied on and conformed to the 2006 Opinion
Letter.8
8

It is unnecessary to address whether Defendant acted in good faith at this time since
Defendant has failed to meet its burden with respect to the first and second elements. If an
employer has established that it relied on and acted in conformity with an Opinion Letter, it is
usually implied that the employer has also acted in good faith. Frank, 950 F.3d at 598 (“The
Portal Act and its regulations strongly imply that an employer who relied on and conforms to an
Opinion Letter which specifically address him and his circumstances is acting in good faith.”).
Even if this Court did a close analysis of the good faith element, there is a significant body of
evidence upon which a jury could reasonably determine that Defendant was on notice that its
actions were not in conformity with the regulations.
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1.

Reliance

The objective good faith element of the Good Faith defense requires that
Defendant prove that in making its decision to classify the MLOs as exempt in reliance
upon the 2006 Opinion Letter approval, it “acted as a reasonably prudent man would have
acted under the same or similar circumstances.” 29 C.F.R. § 790.15(a).
Defendant points out that Mr. Wilson was aware of the 2006 Opinion Letter,
reviewed it, consulted with outside counsel, and affirmed that the MLOs at Fifth Third
were properly classified as an administratively exempt position because the job duties
described in the 2006 Opinion Letter were substantively similar to those performed by the
MLOs for Defendant. (Doc. 137 at 6). In reliance on this advice, Defendant concluded
that the MLO job position complied with the specifications in the 2006 Opinion Letter.
However, there is no evidence that Defendant made an attempt to communicate
with its MLOs or their supervisors to determine the MLOs’ primary job duties or whether
they were actually performing the same job duties as the mortgage loan officers described
in the 2006 Opinion Letter.9 Instead, Defendant relied on the declaration of Mark

9

Notably, the last paragraph of the 2006 Opinion Letter states:
“This opinion is based exclusively on the facts and circumstances
described in your request and is given based on your representation,
express or implied, that you have provided a full and fair
description of all the facts and circumstances that would be
pertinent to our consideration of the question presented. Existence
of any other factual or historical background not contained in your
letter might require a conclusion different from the one expressed
herein.” 2006 WL 2792445, at 6.
However, “[a]dministrator interpretations hedged with qualifications, [such as] the caveat that
the correct answer depends upon particular circumstances, cannot provide the definitive opinion
necessary to raise the statutory bar of section 259.” Cole v. Farm Fresh Poultry, Inc., 824 F.2d
923, 928 (11th Cir. 1987).
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Wilson, who admitted that during his entire career with Defendant, had “maybe” one or
two conversations with MLOs regarding their job duties.10
Furthermore, the undisputed facts show that Defendant hired, trained, fired,
promoted, evaluated, ranked, and paid its MLOs based on their sales of mortgage loans.
Defendant assigned sales managers to supervise MLOs and to help them increase their
sales and it required MLOs to cross-sell other financial products. Moreover, Defendant
issued MLOs a “playbook” informing them that they were required to follow a mortgage
loan sales process because each borrower became a part of the MLOs book of business
and a potential source of referral business. There is considerable evidence supporting a
finding that Defendant considered MLOs to be its “sales force.” In fact, Mr. Reinent, the
vice-president who had worked as a MLO for Defendant, testified that the primary job
duty of MLOs was to sell loans.
Moreover, in the memorandum drafted by Mayer Brown, it notes that some of
Defendant’s MLOs could be classified as exempt under the “outside sales” exemption,
while others could be classified as exempt under the administrative exemption. However,
by their very terms, these two exemptions are mutually exclusive – a MLO cannot be
simultaneously exempt under the outside sales exemption and the administrative
exemption because the former requires the employee to have a primary job duty of sales,
10

Mr. Wilson claims that he relied in part on Mr. Treinen, who had previously worked as a
MLO. However, Mr. Wilson’s reliance on Mr. Treinen is disputed, because Mr. Treinen testified
that the MLOs’ primary duty is and was to sell loans, which contradicts Defendant’s decision to
classify the MLOs as administratively exempt.
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whereas that same primary job duty disqualifies an employee from coverage under the
latter. Compare 29 C.F.R. § 541.500 with 29 C.F.R. § 541.203(b). These classifications
cannot be rectified. Still, Defendant reviewed the memorandum, made no further inquiry
as to the primary job duties of its MLOs, and classified them as exempt administrative
employees.
Therefore, Defendant is unable to satisfy the first element of its affirmative
defense at the summary judgment stage. Although Defendant has provided detailed
information about the steps it took to comply with the regulations, there is no explanation
or information as to why it failed to address the discrepancies and red flags that were
raised in its audit process. Whether Defendant acted as any reasonably prudent business
would have acted under similar circumstances implicates a question of disputed fact,
thereby precluding entry of summary judgment.
2.

Conformity

The Good Faith defense “is not available to an employer unless the acts or
omissions complained of were ‘in conformity with’ the regulation, order, ruling, approval,
interpretation, administrative practice or enforcement policy upon which he relied. This
is true even though the employer erroneously believes he conformed with it and in good
faith relied upon it; actual conformity is necessary.” 29 C.F.R. § 790.14(a). See also
EEOC v. Home Ins. Co., 672 F.2d at 265 (“if there is no conformity, general good faith in
other respects cannot save the day”). An employer cannot avail itself of the defense

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unless it relied on a DOL interpretation that specifically addresses its circumstances.
Frank, 950 F.2d at 599. In other words, “[t]he administrative interpretation relied upon
must provide a clear answer to the particular situation[.]” Cole v. Farm Fresh Poultry,
Inc., 824 F.2d 923, 928.
A reasonable jury could conclude that Defendant has not demonstrated conformity
with the 2006 Opinion Letter because Defendant has failed to show that the
circumstances described in the Opinion Letter actually match the circumstances at Fifth
Third. For example, Defendant’s MLO Playbook describes the sales component of the
MLOs’ job duties completely differently than the 2006 Opinion Letter. The 2006
Opinion Letter states that the sales component of a mortgage loan officer’s job duties is
limited to “customer-specific sales activity,” which is time spent attempting to convince a
customer to obtain a loan, with the mortgage loan officer’s employer. However, in
Defendant’s MLO Playbook, the mortgage sales process goes further by including the
implementation of solutions. Additionally, where the 2006 Opinion Letter assumes less
that 50 percent of the mortgage loan officer’s working time is spent selling to customers,
Joe Treinen testified that the MLOs’ primary job duty was selling. Therefore, because the
job duties of Defendant’s MLOs differed significantly from the hypothetical job duties
outlined in the 2006 Opinion Letter, a reasonable juror could conclude that Defendant did
not act in conformity with the letter. See Cole, 824 F.2d at 928 (holding that an employer
failed to prove it conformed to a DOL opinion letter where hypothetical facts contained in

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the Letter are not “closely analogous to the situation of the employees”). Moreover, a
reasonable trier of fact could determine that the duties of Defendant’s MLOs did not
qualify them as administratively exempt under the regulations.
Accordingly, Defendant is likewise unable to satisfy the second element of its
affirmative defense at the summary judgment stage. In the final analysis, Defendant may
be able to persuade a finder of fact that it actually relied upon and acted in conformity
with the 2006 Opinion Letter and is thus entitled to a good faith affirmative defense, but
Defendant has not met its burden at this stage of the litigation. Therefore, Defendant’s
motion for summary judgment on its Good Faith affirmative defense is DENIED.
B.

Enforceability of the 2010-1 AI

This Court recently held that the U.S. Department of Labor’s Administrator
Interpretation 2010-1 (“2010 AI”) is an interpretive rule within the meaning of the
Administrative Procedure Act (“APA”), 5 U.S.C. § 553(b)(A). Specifically, the APA’s
notice and comment procedures are not required for an interpretive rule such as the 2010
AI that modifies a prior interpretation of the same agency regulation, and the 2010 AI is
not inconsistent with the regulation it interprets. Lewis v. Huntington Nat’l Bank, No.
2:11cv58, 2012 U.S. Dist. LEXIS 32166, at *52-56 (S.D. Ohio Mar. 12, 2012).
Therefore, it was well-within WHD’s discretion to issue Opinion Letters and
Administrator’s Interpretations of the FLSA Regulations.

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Accordingly, this Court affirms its recent decision in Lewis, adopts the reasoning
therein, and finds that Defendant’s motion for partial summary judgment on the grounds
that the 2010-1 AI was unlawfully promulgated is DENIED.
V.

CONCLUSION

Accordingly, for the reasons stated herein, Defendant’s motion for partial summary
judgment (Doc. 32) is DENIED.
IT IS SO ORDERED.
s/ Timothy S. Black
Timothy S. Black
United States District Judge

Date: 5/7/12

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