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Mitchell v. Kentucky Finance Co.: Overtime Protections for Loan Officers - Timothy Coffield
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Mitchell v. Kentucky Finance Co.: Overtime Protections for Loan Officers Tim Coffield
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Legal Insight, Supreme Court Cases
In Mitchell v. Kentucky Finance Co., 359 U.S. 290 (1959) the
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Supreme Court held that the business of making personal loans to individuals does not constitute “sales of . . . services”
Ex Parte
by a “retail or service establishment,” within the meaning of
Young: A
the retail and service establishment exemption to the Fair
Partial Way
Labor Standards Act. This is the case regardless of whether
Around
the company might be thought of in the financial industry as being engaged in “retail financing.” Mitchell is important because it helps ensure that mortgage loan officers and other similar positions are entitled to overtime pay.
Statutory Background – Retail and Service Establishment Exemption The FLSA generally requires employers to pay overtime, i.e. https://coffieldlaw.com/mitchell-v-kentucky-finance-co-overtime-protections-for-loan-officers/
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Mitchell v. Kentucky Finance Co.: Overtime Protections for Loan Officers - Timothy Coffield
one and one-half the employee’s regular rate of pay, for
Virginia
each hour the employee works over forty in a work week. 29
Employmen
U.S.C. § 207(a)(1). The FLSA also contains certain exemptions
t Records
to the overtime requirement, including Section 7(i). 29 U.S.C.
Law:
§207(i). Under Section 7(i), a “retail or service establishment”
Guaranteei
is not required to pay an employee overtime if “(1) the
ng
regular rate of pay of such employee is in excess of one and
Employees
one-half times the minimum [wage], and (2) more than half
the Right to
his compensation for a representative period (not less than one month)Practice represents commissions on goods or services.” Areas Attorney Employment Law Blog 29 U.S.C. § 207(i). To establish that the exemption applies, an
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employer must show that it is a “retail or service establishment.”
}
Section 7(i) does not define the term “retail or service
i
AUGUST 15, 2021 TIM COFFIELD
establishment.” However, when Congress enacted Section 7(i) in 1961, a separate FLSA provision, 29 U.S.C. § 213(a)(2), exempted certain retail or service establishments from both
Virginia Pay
overtime and minimum wage requirements. Charbonneau v.
Transparen
Mortg. Lenders of Am., LLC, No. 18-2062-HLT-ADM, 2020 WL
cy Law:
4334981, at *3 (D. Kan. July 28, 2020), citing Fair Labor
Protecting
Standards Amendments of 1961, Pub. L. 87-30, § 6, 75 Stat. 65,
the Right of
71 (1961) (setting forth amendments to 29 U.S.C. § 213).
Virginia
Section 13(a)(2) defined a “retail or service establishment” to
Employees
mean “an establishment 75 per centum of whose annual
to Discuss
dollar volume of sales of goods or services (or both) is not for
Pay
resale and is recognized as retail sales or services in the
Information
particular industry.” Id. Congress repealed Section 13(a)(2) in
} JULY 17, 2021 i TIM
1989, but most courts have determined that the identical term in Section 7(i) has the same meaning. For example, the Eighth Circuit explained:
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When Congress passed § 207(i) in 1961, it specifically stated that the term “retail or service establishment” was to have the same meaning in that section as it did in § 213(a)(2). See 29 C.F.R. § 779.411 (1992). Thus, any construction of the term as defined in § 213(a)(2) became a part of the definition of the term as found in § 207(i). Nothing in the 1990 amendments changed § 207(i). The term “retail or service establishment” still remains, and there is no expression of congressional intent that it should be construed any differently. Absent specific congressional intent, we will not conclude that Congress retained the term “retail or service https://coffieldlaw.com/mitchell-v-kentucky-finance-co-overtime-protections-for-loan-officers/
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Mitchell v. Kentucky Finance Co.: Overtime Protections for Loan Officers - Timothy Coffield
establishment” in § 207(i) yet at the same time discarded
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thirty years of established meaning.
COLLECTIVE ACTIONS
Reich v. Delcorp, Inc., 3 F.3d 1181, 1183 (8th Cir. 1993); Charbonneau, 2020 WL 4334981, at *3 (D. Kan. July 28, 2020) (same, collecting cases). The DOL also interprets the term “retail or service establishment” in Section 7(i) to have the definition set forth in Section 13(a)(2). See 29 C.F.R. § 779.411.
COMPENSATION
COURT CASE
COURT CASES
For these reasons, theAreas Supreme Court’s interpretation in Practice Attorney Employment Law Blog Mitchell of “retail and service establishment” under the old
Contact
DISCRIMINATION
Section 13(a)(2) governs the meaning of “retail and service establishment” under the current Section 7(i).
EMPLOYEES
Facts
EMPLOYMENT
Mitchell involved a suit to enjoin Kentucky Finance Company from violating the overtime and recordkeeping provisions of the FLSA. Kentucky Finance Company and a sister company were engaged in the business of making personal loans, in amounts up to $300, to individuals, and in purchasing
EMPLOYMENT LAW
EQUAL PAY
FIRST AMENDMENT
conditional sales contracts from dealers in furniture and appliances.
FLSA
The parties agreed that the company was subject to the
FREE SPEECH
FLSA’s overtime and recordkeeping provisions unless it constituted a “retail and service establishment” under
FMLA
INSIGHTS
Section 13(a)(2). The question for the Court was therefore whether a company in the business of making personal loans to individuals
LAW
LAW BLOG
LAW INSIGHTS
constituted a “retail and service establishment” within the meaning of the FLSA.
LAWYER
The Court’s Decision
LEGAL BLOG
The Mitchell Court held that a personal loan company and
LEGAL INSIGHTS
LEGAL
“other financial institutions” including banks, insurance companies, and credit companies were not “retail or service
MINIMUM WAGE
establishments” within the meaning of Section 13(a)(2) because “there is no concept of retail selling or servicing in
NORTH CAROLINA LAWS
these industries.” Mitchell, 359 U.S. at 295. This is the case under the FLSA even if the company might be thought of in th fi i li d t b i d i “ t il fi https://coffieldlaw.com/mitchell-v-kentucky-finance-co-overtime-protections-for-loan-officers/
i
PROTECTED CONDUCT
”
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Mitchell v. Kentucky Finance Co.: Overtime Protections for Loan Officers - Timothy Coffield
the financial industry as being engaged in “retail financing.” The Court observed:
PUBLIC EMPLOYEES
[E]nterprises in the financial field … regardless of whether
RETALIATION
they were thought of in the financial industry as engaged in ‘retail financing,’ remained unaffected by the amendment of
SCOTUS
s 13(a)(2). SEX DISCRIMINATION
359 U.S. at 294-95. The Court further observed that the legislative history of the FLSA made clear that loan
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SUPREME COURT
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companies and other financial institutions were not covered
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by the retail and service establishment exemption:
SUPREME COURT CASE
Any residual doubt on this score is dispelled by the explicit
SUPREME COURT CASES
and repeated statements of the sponsors of the amendatory legislation and in the House and Senate Reports to the effect
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that ‘The amendment does not exempt banks, insurance companies, building and loan associations, credit
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companies, newspapers, telephone companies, gas and
ATTORNEY
electric utility companies, telegraph companies, etc., because there is no concept of retail selling or servicing in
TITLE IX
VIRGINIA
these industries. VIRGINIA LAWS
359 U.S. at 295 n6 (citing H.R.Conf.Rep., 95 Cong.Rec. 14932, U.S.Code Cong.Service 1949, p. 2265; Report of Majority of
WAGE LAW
Senate Conferees, 95 Cong.Rec. 14877; and statement of Senator Holland, 95 Cong.Rec. 12505—12506.) The Court
WAGES
further held that “credit companies” covers “companies which deal in credit[.]” Under Mitchell, therefore, loan
WHISTLEBLOWER
companies, credit companies, or other financial institutions do not qualify for the retail and service establishment exemption from the FLSA’s overtime requirements.
Analysis Courts have subsequently confirmed that under Mitchell, employers selling financial products, including mortgages or other personal loans, are not retail or service establishments eligible for the overtime exemption. See, e.g., Charbonneau, 2020 WL 4334981, at *3 (collecting cases); In re Wells Fargo Home Mortg. Overtime Pay Litig., No. C 06-01770 MHP, 2008 WL 2441930, at *3-*6 (N.D. Cal. June 13, 2008) (finding exemption did not apply to bank that provides a variety of financial products and services including mortgages);
https://coffieldlaw.com/mitchell-v-kentucky-finance-co-overtime-protections-for-loan-officers/
Disclaimer The information you obtain at this site is not legal advice, is not intended to be legal advice, and does not create an attorneyclient relationship. Parts of this site may be considered attorney advertising. If you have questions about any
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financial products and services, including mortgages);
Pontius v. Delta Fin. Corp., No. 04-1737, 2007 WL 1496692, at *4-*6 (W.D. Pa. Mar. 20, 2007) (same, mortgage lender), report and recommendation adopted, No. CIV.A. 04-1737, 2007 WL 1412034 (W.D. Pa. May 10, 2007); Barnett v. Wash. Mut. Bank, FA, No. C 03-00753 CRB, 2004 WL 1753400, at *4-*6 (N.D. Cal. Aug. 5, 2004) (same, where plaintiffs were call center employees that sold mortgages and home equity loans); Casas v. Conseco Fin. Corp., No. CIV.00-1512(JRT/SRN), 2002 WL 507059, at *3-*5 (D. Minn. Mar. 31, 2002) (same, where
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plaintiffs were loan originators for lending products such as
home improvement loans, home equity loans, and manufactured and mobile home mortgages).
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In sum, Mitchell held that the business of making personal loans does not constitute “sales of . . . services” by a “retail or service establishment,” within the meaning of the retail and
Wages & Overtime
service establishment exemption to the FLSA. The case is important because it helps ensure that mortgage loan officers and other similar positions are entitled to overtime
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pay.
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