In a decision last month from the District Court for the District of New Jersey, Judge Irenas denied a defendant’s Motion to Decertify an FLSA Collective Action comprised of 100 loan officers and 20 loan processors.  See Garcia v. Freedom Mortgage Corp., 2011 U.S. Dist. LEXIS 62212 (D.N.J. June 10, 2011).  Conditional certification was previously granted to two subclasses – one for the loan officers and one for the loan processors.    Plaintiffs argued that under the federal Fair Labor Standards Act (FLSA) and the state New Jersey Wage and Hour Laws, they were wrongfully denied overtime compensation for hours worked over 40 within a single workweek. The loan officers were compensated either solely based on commission or through a combination of a salary and commission.  The loan processors were compensated with a salary and also by a bonus based on the number of loans successfully closed.  Generally, the loan officers would gather general information from potential customers, obtain a copy of the potential customer’s credit report, and pass the information along to a loan processor.  The loan processor generally organized the potential customer’s application after collecting information pertaining to compensation and tax history, passed the information to an underwriter, scheduled the closing, and arranged for appraisal and title work. 

In denying defendant’s motion for decertification, the court held that although there were differences between the individual plaintiffs within each subclass, the similarities outweighed such differences, and, as such, the class members were indeed similarly situated.  Moreover, the Court noted that “[a]ll Plaintiffs within each subclass had similar job duties, responsibilities and compensation structures.  All Plaintiffs within each subclass were subject to the same policy and practice of Defendant to treat such Plaintiffs as employees exempt from the overtime requirements of the FLSA.”  Also, the Court rejected defendant’s argument that damages would be “nearly impossible” to calculate.  Instead, the Court noted that it is the employer’s burden to maintain proper employee records and if the employer failed to keep such records, damages may still be calculated based upon other evidence before the Court.

Lastly, the Court also denied defendant’s motion for summary judgment noting that there were genuine issues of material fact concerning whether loan officers and loan processors were exempt from the overtime mandates because they were, as alleged by defendant, administrative employees.  Plaintiffs will be able to defeat this administrative exemption defense if they can, among other things, show that the loan officers and loan processors typically did not utilize discretion or independent judgment in their daily work.

On November 20, 2009, the Second Circuit decided Davis v. J.P. Morgan Chase & Co., 2009 U.S. App. LEXIS 25481 (2d Cir.  Nov. 20, 2009), wherein it reversed a summary judgment finding against a loan underwriters who allege that they are entitled overtime pay under the FLSA.  The Court flatly rejected the district court’s holding that such employees are covered by the FLSA’s administrative exemption.  This is an important victory for loan underwriters, loan officers, staff accountants, non-licenced accountants, bank tellers, and other financial service employees who are frequently misclassified as FLSA exempt.  The Court emphasized that, to fall within the administrative exemption, employees perform work that is related to the management policies or general business operations.  In other words, true administrative employees are “at the heart of the company’s business operations,” and those “functional” employees who perform day-to-tasks of the business – even if those tasks are comples — are not covered by the exemption.  In sum, this is a big victory for the plaintiffs and their New York overtime lawyers.