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Rulings for Lender in LO Overtime Lawsuit

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Former loan originators in Virginia have had no success convincing a federal judge that Prospect Mortgage LLC wrongly classified them as exempt.

The Sherman Oaks, Calif.-based lender classified Alison Cougill, a former loan originator out of Virginia, as an outside salesperson.

The significance of the classification is that it makes Cougill exempt from the minimum wage and overtime requirements of the Fair Labor Standards Act.

So Cougill challenged Prospect’s classification of outside originators in federal court, according to a statement from Prospect’s counsel, Seyfarth Shaw LLP.

It was the first case challenging the classification of loan officers that had gone to trial.

The judge in the case “clarified the standard for applying the outside sales exemption, instructing the jury that a sales employee who leaves the employer’s place of business for ‘one or two hours a day, once or twice a week’ to engage in sales-related activities is ‘customarily and regularly’ engaged away from the employer’s place of business and is therefore properly exempt,” the law firm wrote.

The court adopted the standard from opinion letters issued by the Department of Labor in January 2007.

Prospect argued that even though Cougill spent most of her time in the office, she exceeded the level of outside activity necessary to meet the exemption.

The company provided evidence that Cougill attended a variety of outside events like open houses multiple times a month. It also showed how she went to weekly networking events and one-on-one meetings with realtors in addition to monthly home buyer seminars.

The employee’s former managers testified at trial how they were aware of her outside sales activities.

On Feb. 5, the jury ruled in favor of Prospect.

“Prospect’s expectations regarding its loan officers’ outside activities were further memorialized in numerous sales initiatives and communications, as well as in Prospect’s Employee Agreement Regarding Outside Sales Activities, which Ms. Cougill signed her first day on the job,” the case summary stated. “Presented with this evidence, the jury took about 40 minutes to reach a verdict that Prospect properly classified Ms. Cougill as an outside salesperson, exempt from the minimum wage and overtime requirements of the FLSA.”

Also on Feb. 5, the same judge issued a summary judgment in favor of Prospect in another FLSA case, Hantz v. Prospect Mortgage. The judge reportedly concluded that it was reasonable for Prospect to presume its practices were legal given a recent Department of Labor conclusion.

Another two recent court victories found no merit to the plaintiffs’ arguments that outside salespeople must meet with borrowers at their homes or places of business versus open houses, coffee shops or other third-party sites. The court also found no connection between FLSA exemptions and the consummation of a sale.

“This is one of multiple victories that Prospect recently enjoyed on the FLSA claims of former mortgage loan officers, which have forged new legal precedents for the mortgage industry that will further guide employers in classifying their employees and defending those classifications in court,” Seyfarth Shaw wrote.

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