Quicken Loans Inc. and PrimeLending have been accused in federal lawsuits of underpaying their employees. With several such lawsuits already filed, lawyers are warning that mortgage employment litigation — especially lawsuits focused on allegations of unpaid overtime under state and federal law — will see an upward spike in 2011.
According to Patton Boggs, a Washington, D.C,-based law firm, three events just in the last four weeks suggest that the worst may be yet to come for mortgage industry employers.
First, the U.S. Department of Labor has been providing since Dec. 13 a toll-free number for people who have filed a Fair Labor Standards Act complaint with the Labor Department to enable them to connect with an American Bar Association lawyer-referral network. Employees who have filed claims that the department says are “not suitable for court action” now will have greater access to a lawyer who may be willing to file suit, Patton Boggs says.
Secondly, President Obama has announced his intention to nominate an experienced prosecutor, Leon Rodriguez, to be the administrator of the Labor Department’s Wage and Hour Division.
Thirdly, in a question that has been the subject of considerable litigation, a former employee at a real estate appraisal firm whose monetary award of overtime pay was substantially limited under the “fluctuating workweek” regulation has asked the U.S. Supreme Court to review that decision.
Brenda Urnikis-Negro won her suit for overtime pay, but the federal court in Chicago used a method of calculating her damages that resulted in reducing her total recovery by more than 75 percent even though the employer was found to have willfully violated the FLSA. Urnikis-Negro filed a petition with the nation’s top court on Dec. 2 asking it to take her case.
In addition, in assessing potential legal trouble spots, employers should also consider the Labor Department’s March 2010 opinion — an abrupt reversal from previous interpretations — that loan officers are not exempt from the FLSA requirement to pay minimum wage and overtime as well as President Obama’s increased funding for the department’s investigations into employee misclassification.
FLSA Litigation
The filing of several new FLSA-related lawsuits and the filing of industry advocacy legal briefs in a series of long-litigated cases on unpaid overtime pay has been observed in the past three months.
In Henry vs. Quicken Loans, the lead case in three companion lawsuits winding their way through federal court in Michigan dealing with alleged violations of law for unpaid overtime compensation to mortgage bankers, the American Bankers Association filed a “friend-of-the-court” brief on Dec. 13. Opposing the application of overtime regulations to bank employees who originate residential mortgages, the organization argued that the Labor Department’s March 2010 interpretation marked a sudden and dramatic shift in the federal agency’s position and that the course reversal resulted in an unfair surprise to employers who have relied on the Labor Department’s prior interpretations.
The Administrator’s Interpretation — No. 2010-1, issued on March 24 by the Department of Labor’s Wage and Hour Division — concluded that the typical mortgage loan officer does not qualify for the administrative exemption from overtime requirements, a conclusion that completely contradicted two of the division’s prior opinion letters addressing this exact issue.
Nichols Kaster PLLP, the attorneys in Henry, have also filed several cases in the past three months alleging unpaid overtime wages for mortgage industry workers.
In Ahmad Gibson v. Republic Mortgage Home Loans, a former loan officer for Republic Mortgage Home Loans filed suit in federal court in Washington state seeking unpaid wages under state and federal laws.
The plaintiff alleged in the Dec. 6 lawsuit that Republic Mortgage misclassified him and other loan officers as exempt from the overtime and minimum wage requirements of the FLSA and Washington state law, and as a result, denied them proper compensation.
In Gina McKeen-Chaplin v. Franklin American Mortgage Co., a former mortgage underwriter for Franklin American Mortgage filed suit in federal court in California seeking unpaid overtime wages under state and federal laws.
The plaintiff alleged in the Nov. 18 lawsuit that Franklin American misclassified her and other mortgage underwriters as exempt from the overtime requirements of the FLSA and California state law, and as a result, improperly denied them overtime compensation. According to the complaint, Franklin American classified its mortgage underwriters as exempt from overtime pay until early 2010 when it reclassified them.
Dallas-based PrimeLending is also facing a lawsuit helmed by Nichols Kaster. On Nov. 2, Gino Scola filed a lawsuit in federal court in Illinois to recover overtime wages for himself and other loan officers employed across the country by PrimeLending. According to the complaint, PrimeLending classified its loan officers as exempt from overtime pay until May 2010 when it reclassified them all to non-exempt and began to pay overtime wages.
Plaintiff’s attorney Tim C. Selander stated, “PrimeLending reclassified these workers but did not pay them for the overtime hours they worked before the reclassification. There are hundreds if not thousands of loan officers that have worked overtime hours without compensation over the past three years and we seek to recover their unpaid wages.”
Finally, on Oct. 18, Nichols Kaster, LLP filed a potential nationwide class action lawsuit on behalf of loan officers that worked for Prospect Mortgage LLC. The lawsuit was filed in federal court in California. Prospect Mortgage is accused of violating the FSLA and California labor laws by misclassifying its loan officers as exempt from overtime pay and minimum wages. The case is Sliger et al. v. Prospect Mortgage LLC.
Nichols Kaster, LLP also represents mortgage underwriters in similar cases against SunTrust Mortgage, Residential Capital/Ally Financial, Washington Mutual, Flagstar Bank and MetLife Home Loans.
The Labor Department sued on Aug. 26 a San Jose, Calif., firm and its owner to recover workers’ retirement assets. The Labor Department sued Mili Group Inc. and its owner for allegedly misusing retirement plan assets for their own benefit, in violation of the Employee Retirement Income Security Act.
The suit alleges that between 2006 and 2009, Cuong Do and his company improperly authorized at least $297,040 in withdrawals and loans from the retirement plan and used $247,900 in plan assets to purchase a condominium in Florida. The suit also alleges they failed to deposit to the retirement plan accounts between $15,000 and $20,000 in rental income from the condominium.
Brenda Urnikis-Negro Urnikis-Negro v. American Family Property Services.
Case No. 06 C 6014, 2008 WL 5539823, July 21, 2008 (U.S. District Court for the Northern District of Illinois).
Henry vs. Quicken Loans.
Case No. 04-cv-40436, March 7, 2007 (U.S. District Court Eastern District of Michigan).
Ahmad Gibson v. Republic Mortgage Home Loans LLC.
Case No. 3:10-cv-0588, Dec. 6, 2010 (U.S. District Court for the Western District of Washington).
Gina McKeen-Chaplin v. Franklin American Mortgage Co.
Case No. 4:2010cv05243, Nov. 18, 2010 (U.S. District Court for the Northern District of California).
Scola v. PrimeLending, A PlainsCapital Company.
Case No. 1:10-cv-07072, Nov. 2, 2010 (U.S. District Court for the Northern District Illinois).
Sliger et al. v. Prospect Mortgage LLC et al.
Case No. 1:10-cv-01952-LJO-SMS, Oct 18, 2010 (U.S. District Court for the Eastern District of California).
Solis v. Do.
Civil Action No. 5:10-cv-03823-HRL, Aug. 26, 2010 (U.S. District Court for the Northern District of California).
