Chase Hit with LO OT Lawsuit

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6 · 07 · 10

A lawsuit has been filed by a Florida loan originator against JPMorgan Chase & Co.’s mortgage unit alleging unpaid overtime. The plaintiff’s lawyers hope to add other similarly situated originators as plaintiffs.

The U.S. Department of Labor issued Administrator’s Interpretation No. 2010-1 on March 24. The interpretation completely reversed a 2006 opinion from the department that loan officers were exempt from the Fair Labor Standards Act’s overtime requirements based on an administrative exemption.

The latest interpretation was expected to unleash a torrent of litigation by overzealous attorneys.

Today, Morgan and Morgan announced that it filed a collective action on May 28 in U.S. District Court for the District of New Jersey against Chase Home Finance LLC.

The Florida-based law firm claims that a class of bank branch originators worked from 9 a.m. to 6 p.m. on Mondays through Fridays, from 9 a.m. to 3 p.m. on Saturdays and another 30 minutes each day for a “morning huddle.” But they were not properly compensated for the overtime that they worked — violating the Fair Labor Standards Act.

“Instead of receiving overtime pay for these additional hours worked, the bank branch loan officers were paid either their non-refundable draw of $2,000 per month or their commissions earned, whichever was greater,” according to the announcement.

The lead plaintiff in the case, Judson Newhall, was hired by Chase in March 2009, according to the complaint. The Manatee County, Fla., resident didn’t received required overtime compensation through Jan. 1, 2010.

Citing Department of Labor Deputy Administrator Nancy J. Leppink’s recently issued letter, the law firm added, “Employers are required to compensate non-exempt workers at a rate of one-and-one-half times their regular rate for all hours worked in excess of forty hours in a week.”

Chase, which through a spokesman declined to comment, is also accused of failing to maintain proper time records for its employees as required by the act.

Doug Mishkin, a partner with Patton Boggs LLP who counsels lenders in employment cases, said employers can expect to see more FLSA lawsuits tied to originator overtime.

“As to liability for past practices, employers may be able to show that the relied in good faith on the DOL’s 2006 opinion letter saying that mortgage loan officers were exempt,” Mishkin said in a statement.

Mishkin identified three factors that lenders should use in determining whether or not to pay overtime now to originators, including whether the administrator’s interpretation is entitled to deference by the court; whether loan officers are primarily doing sales; and whether they qualify for other exemptions, such as the outside sales or highly compensated employee exemptions.

In March, a complaint was filed against Chase in U.S. District Court for the Southern District of New York claiming that the lender failed to pay its underwriters overtime. The company allegedly had a common practice of mis-classifying its loan underwriters as exempt.

Judson Newhall, on his own behalf and all similarly situated individuals, Plaintiff, v. Chase Home Finance LLC, a foreign limited liability company, Defendant.

Case 2:10-cv-02749-WJM -MF, May 28, 2010 (U.S. District Court for the District of New Jersey).

LO Compensation Gets Complicated
A number of issues have arisen as a result of a new government opinion on mortgage originator overtime — including the overtime rate for super-producing originators. A Webinar on the subject provided insight into employer liability and offered some advice about dealing with potential overtime litigation.

Chase Sued Over Underwriter Overtime
JPMorgan Chase & Co. is accused in a federal lawsuit of not paying its underwriters overtime.

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