Are Originators Entitled to Min Wage, Overtime?

In the lawsuit filed against Global Executive Mortgage, the three employees allege they worked long periods of time without being paid minimum wage and overtime, according to a press release issued by James D. Keeney, P.A., one of two law firms representing the loan officers. They seek up to three years of overtime pay and liquidated damages, amounting to double the amount of overtime pay due.

Loan officers receive leads to sell mortgages over the Internet for Global, which operates out of Venice and Wesley Chapel, Fla., and Twinsburg, Ohio, the announcement said. The employees worked in the Venice and Twinsburg locations.

The workers reportedly seek to have their case certified as a collective action under the Fair Labor Standards Act, which is a type of class action that allows individuals employed in similar job positions the opportunity to pursue overtime pay claims by opting into a lawsuit filed by representative plaintiffs. Individuals who wish to participate in the lawsuit are required to have worked for Global during the past three years.

The complaint reportedly alleges that Global’s president, Kevin Parks, intentionally rejected advice by FLSA experts that the company’s loan officers were not being lawfully compensated. The brokerage required its employees to rely solely upon their commissions for compensation — a clear violation of the Act, the complaint said.

“The employer was told by an outside payroll consultant that the loan officers were non-exempt, but he just ignored the warning,” said James D. Keeney, the plaintiffs’ attorney, in an E-mailed statement to MortgageDaily.com. “That makes the case a willful violation, and extends the period of recovery to a full three years before the complaint was filed.”

The loan officers allege they routinely worked over 60 hours per week to reach goals set for them and are seeking paid overtime for all hours worked over 40 hours in any given week. The actual hours or a regular hourly rate, cannot be determined however, until full payroll and other records from Global are obtained. “Since some of the loan officers eventually earned rather large commissions, their calculated hourly rate could be far above the basic minimum wage, and thus the overtime rate (1.5 times the hourly rate) could be much higher,” Keeney said.

Two additional employees, who “also allege they have worked many hours of unpaid overtime,” have already indicated that they wish to join the suit, he added. The law firm is presently awaiting return of their formal consent forms and detailed records of hours worked and pay received. It anticipates more employees will want to join once they learn of the suit.

“We think the loan officers have a very strong case because they were not paid anything at all for the first few weeks or months they were employed, not even basic minimum wage, and based upon their statements, they were plainly non-exempt workers under the FLSA,” the lawyer said. “Their claim for overtime is also strong because the employer did not pay any type of basic salary — not even a draw against commissions.”

Because there was no salary base, “Global has virtually no defense to this case,” Keeney said in the press release.

Global declined to comment on the accusations as it has not received any formal lawsuit papers. “We don’t even know what the validity of it is,” according to company employee Kate Curran.

In January 2001, a similar case was reportedly filed against Ditech Funding Corp. in California. Loan agents and processors of the company alleged that they were misclassified as exempt and, therefore, were improperly deprived of overtime pay despite routine long hours of work on a regular basis, according to the plaintiff’s announcement. After more than one year in litigation, during which the case reportedly split into two parts against the two different companies that owned and operated ditech.com during two different parts of the liability period, the case was reportedly settled for nearly $9.7 million. The membership of the combined settlement classes exceeded 1,000 people, the statement said.

Global’s case is smaller, “but if DiTech could not defend this type of case, it shows how vulnerable this industry is to FLSA claims,” Keeney said.

ABN AMRO was also recently sued on behalf of mortgage consultants who were allegedly denied overtime compensation. Burr & Smith, LLP, which is also representing Global employees, filed the still-pending case against ABN AMRO. “[T]hese cases are merely the tip of the iceberg because the financial services industry continues to ignore the requirements of the FLSA,” the law firm said in the announcement.

Asked why he believes the problem of unpaid overtime is sprouting at mortgage companies, Keeney said, “The financial industry is generally vulnerable to FLSA claims because they have often wrongly assumed their employees were exempt.” That, however, was not the case with Global as it decided to ignore information that their employees were not exempt, he added.

In October, MortgageDaily.com reported that the mortgage industry is taking steps to ensure loan originators don’t qualify for overtime pay under new Labor Department rules that went into effect Aug. 23. Washington lawyer Bob Davis said under the new rules, mortgage originators are exempt from overtime because many of their duties are considered administrative even though the final product of their work is often a sale.

That story went on to say that many mortgage brokerages are paying their salespeople a salary of $455 a week plus commission, leaving them ineligible for overtime under the Labor Department’s rules.