Lenders accused of unethical behavior amid bloodbath of layoffs
November 17, 2022 10:13 AM
Lenders have let go of tens of thousands of employees in the past couple of months and many of those out of work say they were cheated on the way out.
Some who worked for years at their respective lender have been left with no health insurance or severance pay. They accuse lenders of refusing to pay out PTO, and canceling 401k match policies.
Additionally, some of these lenders have faced legal action over their alleged failure to file legally required notifications of layoffs and axed employees at other firms say their former company purposely orchestrated small-batch layoffs in order to avoid the layoff notice requirements.
Thus far, at least two shuttered lenders have been sued for allegedly failing to follow Worker Adjustment and Retraining Notification requirements, and one has agreed to allocate up to $2.5 million for the former employees. A WARN case against Sprout Mortgage, and WARN violation allegations against Better.com in a separate lawsuit, however, remain pending.
Some who worked for years at their respective lender have been left with no health insurance or severance pay. They accuse lenders of refusing to pay out PTO, and canceling 401k match policies.
Additionally, some of these lenders have faced legal action over their alleged failure to file legally required notifications of layoffs and axed employees at other firms say their former company purposely orchestrated small-batch layoffs in order to avoid the layoff notice requirements.
Thus far, at least two shuttered lenders have been sued for allegedly failing to follow Worker Adjustment and Retraining Notification requirements, and one has agreed to allocate up to $2.5 million for the former employees. A WARN case against Sprout Mortgage, and WARN violation allegations against Better.com in a separate lawsuit, however, remain pending.
Complaints lodged against lenders
Employees that were handed pink slips in recent months say that their employers did not handle layoffs ethically.
"I was terminated on the last day of the month, effective immediately," said one loan coordinator who had worked at Texaslending.com. "This meant that my health insurance expired on the same day and I have four prescriptions I take daily. They are very expensive without insurance."
Texaslending.com had not responded to a request for comment as of deadline.
Former employees of Freedom Mortgage raised red flags that some employees did not receive severance.
"I know for a fact that in April there were employees laid off that did not receive any severance," a Freedom executive who agreed to speak anonymously said. "They gave severance in the most recent layoff to uphold their image, but to also obligate employees to sign an NDA."
A representative for Freedom didn't respond to a request for comment Tuesday.
One former employee with close to a decade tenure at Freedom Mortgage noted that they felt disposed of by their former employer in a recent layoff round, "a number on a spreadsheet."
"I understand [why the recent layoff happened], but I'm really disappointed," they said. "They told me how I was a big part of the family and it was just very disappointing to have that happen…to a family member."
Several former CrossCountry Mortgage employees claim that they did not receive severance or a payout of their paid time off. However, thelender's policies available online state unused PTO would be forfeited upon an employee's termination or resignation for any reason, unless otherwise required by applicable state law.
"I was terminated on the last day of the month, effective immediately," said one loan coordinator who had worked at Texaslending.com. "This meant that my health insurance expired on the same day and I have four prescriptions I take daily. They are very expensive without insurance."
Texaslending.com had not responded to a request for comment as of deadline.
Former employees of Freedom Mortgage raised red flags that some employees did not receive severance.
"I know for a fact that in April there were employees laid off that did not receive any severance," a Freedom executive who agreed to speak anonymously said. "They gave severance in the most recent layoff to uphold their image, but to also obligate employees to sign an NDA."
A representative for Freedom didn't respond to a request for comment Tuesday.
One former employee with close to a decade tenure at Freedom Mortgage noted that they felt disposed of by their former employer in a recent layoff round, "a number on a spreadsheet."
"I understand [why the
Several former CrossCountry Mortgage employees claim that they did not receive severance or a payout of their paid time off. However, the
Lack of WARNing
The majority of at least 58 companies, which have laid off a combined over 20,000 employees, haven't filed WARN notices, according to a National Mortgage News analysis .
Thefederal WARN Act requires a business with 100 or more full-time employees laying off at least 50 people to file notice at least 60 calendar days in advance, although the figure doesn't count employees with less than 6 months on the job and those who work fewer than 20 hours per week. Companies aren't required to file WARNs for all layoff activity, as the requirements include many exceptions, although mass terminations usually trigger a notice.
Employers who violate the reporting requirement are liable to each impacted employee for back pay and benefits for the period of the violation up to 60 days, and are subject to a civil penalty not exceeding $500 for each day of the violation. WARN reporting is enforced through U.S. District Courts, where workers and local governments can file class action suits against companies.
Some former employees have opted to legally challenge their former employers for failing to adhere to WARN guidelines.
First Guaranty Mortgage Corp. closed its doors in late June, laying off 471 workers without notice. Impacted workers whosued for WARN violations immediately after the shutdown will be allocated up to $2.5 million, according to its Chapter 11 bankruptcy plan approved by a federal judge Nov. 2.
Counsel for the parties argued in filings in recent months for the appropriate allocation for WARN claims, with plaintiffs requesting up to $6.2 million and FGMC proposing a $700,000 reserve before the judge's confirmation of the bankruptcy plan earlier this month.
"The $2.5 million is a reserve under the Plan of Liquidation in the event there is any WARN Act liability," said a spokesperson for FGMC in a statement Tuesday evening. "However, the litigation is at its early stages and no settlement has been reached."
The
Employers who violate the reporting requirement are liable to each impacted employee for back pay and benefits for the period of the violation up to 60 days, and are subject to a civil penalty not exceeding $500 for each day of the violation. WARN reporting is enforced through U.S. District Courts, where workers and local governments can file class action suits against companies.
Some former employees have opted to legally challenge their former employers for failing to adhere to WARN guidelines.
First Guaranty Mortgage Corp. closed its doors in late June, laying off 471 workers without notice. Impacted workers who
Counsel for the parties argued in filings in recent months for the appropriate allocation for WARN claims, with plaintiffs requesting up to $6.2 million and FGMC proposing a $700,000 reserve before the judge's confirmation of the bankruptcy plan earlier this month.
"The $2.5 million is a reserve under the Plan of Liquidation in the event there is any WARN Act liability," said a spokesperson for FGMC in a statement Tuesday evening. "However, the litigation is at its early stages and no settlement has been reached."
A legal challenge for severance
Sprout Mortgage fired 400 employees when it shut down in early July, and also allegedly terminated their health benefits retroactive to May 1, according to a pending lawsuit by former workers. The move left at least two employees undergoing cancer treatment without insurance to cover medical procedures between May and July.
Employees burned by Sprout Mortgage's unexpected closure are mired in their own battle for alleged lost wages in aclass action complaint against the lender pending in the U.S. District Court for the Eastern District of New York. At least 74 employees have joined the lawsuit, according to federal court records, which also accuses East Meadow, New York-based Sprout of denying them three weeks of backpay.
Sprout should have foreseen the necessity of a WARN notice as early as April 7, or 90 days prior to the layoff, due to executives' knowledge of industry conditions, the suit said. The lender also allegedly missed payments to multiple vendors prior to July 6, another indication that the company should have prepared a WARN notice.
The scope of damages is unknown, and Rabinowitz didn't return requests for comment this week. Sprout, Recovco and the named executives including former CEO Michael Strauss are amenable to mediation in settlement discussions and were scheduled to identify a mediation date last week, according to court documents.
Employees burned by Sprout Mortgage's unexpected closure are mired in their own battle for alleged lost wages in a
Sprout should have foreseen the necessity of a WARN notice as early as April 7, or 90 days prior to the layoff, due to executives' knowledge of industry conditions, the suit said. The lender also allegedly missed payments to multiple vendors prior to July 6, another indication that the company should have prepared a WARN notice.
The scope of damages is unknown, and Rabinowitz didn't return requests for comment this week. Sprout, Recovco and the named executives including former CEO Michael Strauss are amenable to mediation in settlement discussions and were scheduled to identify a mediation date last week, according to court documents.
Better’s alleged bad behavior
Better is accused by the firm's former second-in-command of violating the California WARN Act in CEO Vishal Garg's mass firing last December, in which he laid off 900 employees in a now-infamous Zoom call. Garg allegedly dismissed internal concerns about a WARN Act violation in only paying terminated employees up to $8 million, or three weeks' worth of pay, according to a lawsuit from Sarah Pierce.
The lender has refuted the claims and counsel for Pierce is awaiting a judge's approval to file an opposition to Better and Garg's motions to dismiss her suit. Better has since filed at least three WARN notices in California and New York disclosing dozens of layoffs.
Meanwhile, employees most recently impacted by embattled lender Better.com's "rightsizing" called into question the lender's tactics in laying off employees.
"The company announces that we will be working from home the next day and for us to take our computers," a former Better employee said. " The next day when we try to log in, we can't, because we've been terminated." After computers go dark, a manager calls and explains that the staffer is being let go, they said.
Some also claim that the New York-based lender, in a recent purge, has laid off employees taking paternity and maternity leave — something it's already facing litigation for allegedly doing in the past few months. Better did not immediately respond to a request for comment.
Months earlier, Better had allegedly terminated over a dozen employees in late Augusteither currently on paternal leave or slated to take the leave in the near-future, according to a recent lawsuit. Ryan Peugh, a former director at Better, claims he was terminated one late August morning, less than one hour after notifying his workplace of the birth of his daughter that morning.
Counsel for Peugh said they believe more individuals on paternal leave were targeted for layoffs. A spokesperson for Better said the decision to lay off Peugh was made "several days beforehand." A summons was issued to Better last week, according to court records.
With regards to lack of severance pay and other shortcuts, Paul Hindman, managing director at Grid Origination Services, noted that the market is currently tough and companies "do these kinds of things to survive."
"We're cutting into the core expert talent of the industry and so companies are just in survival mode, don't forget that piece of it," said Hindman. "Employers if they could afford [to give severance and other benefits], they would do it naturally. If they haven't done it, that means they're in trouble."
The lender has refuted the claims and counsel for Pierce is awaiting a judge's approval to file an opposition to Better and Garg's motions to dismiss her suit. Better has since filed at least three WARN notices in California and New York disclosing dozens of layoffs.
Meanwhile, employees most recently impacted by embattled lender Better.com's "rightsizing" called into question the lender's tactics in laying off employees.
"The company announces that we will be working from home the next day and for us to take our computers," a former Better employee said. " The next day when we try to log in, we can't, because we've been terminated." After computers go dark, a manager calls and explains that the staffer is being let go, they said.
Some also claim that the New York-based lender, in a recent purge, has laid off employees taking paternity and maternity leave — something it's already facing litigation for allegedly doing in the past few months. Better did not immediately respond to a request for comment.
Months earlier, Better had allegedly terminated over a dozen employees in late August
Counsel for Peugh said they believe more individuals on paternal leave were targeted for layoffs. A spokesperson for Better said the decision to lay off Peugh was made "several days beforehand." A summons was issued to Better last week, according to court records.
With regards to lack of severance pay and other shortcuts, Paul Hindman, managing director at Grid Origination Services, noted that the market is currently tough and companies "do these kinds of things to survive."
"We're cutting into the core expert talent of the industry and so companies are just in survival mode, don't forget that piece of it," said Hindman. "Employers if they could afford [to give severance and other benefits], they would do it naturally. If they haven't done it, that means they're in trouble."
