$186,000 Originator OT Judgment Against Ohio Co.

But, although the company’s owner has said she wants to fight the court’s decision, the recent ruling by the Department of Labor has the owner’s attorney scratching his head over how to make the best use of the federal agency’s flip-flop on the proper pay structure for mortgage brokers.

The letter ruling is not properly subject to an appeal, said James Douglass, First National’s outside counsel. The labor department has ruled that mortgage brokers whose job tasks meet certain requirements can be paid commission under the outside sales exemption to the Fair Labor Standards Act.

Douglass had argued to the trial court that the Cleveland, Oh.-based company’s mortgage officers qualified for the exemption. Douglass said the labor department’s ruling “changes things” but he’s still exploring how that can play out in his client’s situation. Douglass pointedly said that he is hoping that the National Association of Mortgage Brokers will be willing to assist First National and other companies who are litigating similar cases with the labor department.

The U.S. District Court for the Northern District of Ohio, at the labor department’s urging, said the company violated the labor act because it did not pay its mortgage brokers the minimum wage, did not pay overtime to loan officers who worked more than 40 hours in a work week and did not keep accurate work records. The trial court released its decision before the labor department released its own opinion on the subject. Douglass explained that, with the issuance of the opinion letter, the federal agency’s attorneys reversed themselves. He said the federal attorneys took a different position in the opinion letter than they did during the trial against First National.

The trial court rejected Douglass’ argument that its loan officers are exempt from the labor act because they are independent contractors or; if found to be employees, exempt from the federal law’s minimum wage and overtime requirements because they qualify for the labor act’s “outside sales exemption.” Under the federal law, exempt employees do not have to be paid the minimum hourly wage or overtime.

The judge wrote that the workers are not independent of the company because they are not free to work for others while employed by the company and because, once a loan officer left the company, their license was sent back to the State of Ohio. In order to be judged an independent contractor of a company, a worker must not be economically dependent upon the company.

The court also found that the “outside sales exemption” was not applicable. The court said that because the loan officers worked primarily from their own homes or from First National’s offices, they are not “customarily and regularly engaged away” from the employer’s place of business — a requirement under the labor act.

The payouts range from $48 to $5,371 for each of the 70 employees involved. According to the court ruling, the company improperly paid its employees from August 2001 through December 27, 2004.

First National Lending came up on the U. S. Department of Labor’s scope after a former worker, a receptionist, complained about the company’s pay practices. Although the labor department found that the clerical worker had been properly paid, the ensuing investigation led to a determination by the labor department that the company’s loan officers should have been paid the minimum wage and overtime.

RELATED:

Mixed Opinions Over Overtime Ruling
Commissioned mortgage loan originators who generate little or no income can no longer hold their employers liable for minimum wage compensation and overtime pay. But the reprieve, which came in the form of an opinion letter recently released by a federal agency, doesn’t go far enough, according to mortgage employers with pending actions against them and attorneys.