ATLANTIC CITY, NJ—Mortgage company owners and managers can piece together employment agreements in a fashion where they can avoid or mitigate the damages caused by a minimum wage/overtime lawsuit, explained an attorney who is an expert in these matters.
Ari Karen, a principal in the law firm Offit Kurman, told attendees at the Regional Conference of Mortgage Bankers Associations here that now is the time to implement these agreements; however, it is risky because it could call attention to the problem.
The Federal Reserve Bank compensation rule and the implementation of the Dodd-Frank law, he added, create the “opportunity to wipe the slate clean and start over.”
The session took place the same day that Quicken Loans won a jury verdict in a minimum wage/overtime case. Karen said this was one of the first to come out positively for the industry.
In such cases, he said, the employer cannot “spin things.” The proof is on the employer, not the employee. Furthermore, “be honest with yourself,” and don’t try and fit “a round peg into a square hole,” he said. It is easy for a plaintiff’s attorney to show such a strategy to be a facade.
Regarding the debate between independent contractor status vs. employee, he said the definition of an independent contractor could conflict with the provisions of the SAFE Act. Furthermore, when state departments of labor hear about loan officers claiming to be independent contractors, it is likely to set off an investigation and it is “an uphill battle” for that status.
During his presentation, Karen provided a list of 10 scenarios on structuring agreements. The first is to include a “proper” arbitration clause in the contract.
The wording must specify the use of arbitration and include other “fair terms” such as attorney’s fees and discovery/trial forum. He added the agreement should make sure the arbitration is limited to the two parties and no third party can join.
Next is to call for the use of alternative dispute resolution before going to trial. It makes the employee disclose a claim and specify damages prior to going to trial. Karen said this gives the employer the opportunity to pick off the suit by paying the specified damages.
The third is to have the employee confirm their choice to be outside sales person in writing. This includes specifying most of the time is spent out of the office and it bars the use of a home office.
Then there is the use of the administrative exemption. Defense attorneys could argue that a person doesn’t sell but rather develops strategic relationships. Such an exemption may be more applicable to wholesale account executives. However, if it is used wrong, it could be problematic, Karen said.
Agreements for nonexempt employees can be structured in such a way to include overtime provisions. They can also establish that the employee’s salary is calculated and deducted from his or her commission.
In a net branch situation, employers need to make sure their managers are getting paid at least $455 per week. It is OK if this is deducted from the payment related to the branch’s profit.
If an employer sees the threat of a lawsuit, document things, Karen said. These include keeping track e-mail log-ins and log-in/log-out times to lead source software to show the time the person was working.
Don’t underestimate deterrence to help hold down these suits, he said.
