Why Lenders Should Jump at Eas­ier Fix for Back Pay Dis­putes

A De­part­ment of La­bor pi­lot pro­gram will let lenders re­solve wage and hour li­a­bil­i­ties with­out ex­pos­ing them­selves to ad­di­tional FLSA risks.

National Mortgage News - - Voices - By Ari Karen Ari Karen is a prin­ci­pal at Of­fit Kur­man and CEO of Strate­gic Com­pli­ance Part­ners.

For the bet­ter part of the last decade, lenders have been strug­gling (of­ten in vain) to com­ply with the Fair La­bor Stan­dards Act. How­ever, curing th­ese prob­lems has of­ten gone hand-in-hand with ac­knowl­edg­ing sig­nif­i­cant li­a­bil­i­ties and the risk that well in­ten­tioned changes could spark lit­i­ga­tion.

Now, the U. S. De­part­ment of La­bor has an­nounced the PAID (Pay­roll Au­dit In­de­pen­dent De­ter­mi­na­tion) pro­gram: a six-month pi­lot pro­gram where em­ploy­ers can cor­rect past wrongs with­out hav­ing to pay liq­ui­dated dam­ages and at­tor­neys’ fees. In essence, the PAID pro­gram al­lows em­ploy­ers to ad­dress and dis­charge ex­ist­ing li­a­bil­i­ties with­out the threat of lit­i­ga­tion or liq­ui­dated dam­ages.

For lenders, PAID may pro­vide a respite from the swarm of wage-hour lit­i­ga­tion that has en­veloped the in­dus­try. Be­cause the FLSA pro­vides plain­tiffs lawyers easy paths to­ward con­di­tional cer­ti­fi­ca­tion and no­tice, liq­ui­dated dam­ages and at­tor­neys’ fees, as well as em­ployee friendly pre­sump­tions, lenders fac­ing th­ese cases are of­ten in an un­fa­vor­able po­si­tion from the in­cep­tion. As such, mil­lions have been re­cov­ered by loan of­fi­cers against lenders un­der the FLSA for min­i­mum wage and over­time.

De­spite this, lenders have con­tin­ued to strug­gle in terms of FLSA com­pli­ance. There are many rea­sons for this. First, the job of loan of­fi­cers is hard to con­tain to set hours be­cause of its sales-re­lated na­ture. In other words, is a loan of­fi­cer work­ing when dur­ing happy hour with friends they are in­tro­duced to some­one who is look­ing to buy a house? In­deed, the never end­ing job of loan of­fi­cers makes de­ter­min­ing “work hours” a mere folly.

Ad­di­tion­ally, the man­ner in which over­time is cal­cu­lated — in­clu­sive of com­mis­sions and nondis­cre­tionary bonuses — ren­ders pay­roll nearly im­pos­si­ble. On top of all this, loan of­fi­cers see their po­si­tion as a com­mis­sioned sales job and thus record­ing hours is at best not a pri­or­ity and most of­ten viewed as a nui­sance they are re­luc­tant to en­gage in. Yet, even with all of th­ese chal­lenges, one of the big­gest rea­sons for FLSA li­a­bil­i­ties is that lenders rarely un­der­stand the nu­ances of the FLSA and are other un­aware of risks or be­lieve there are few ways to man­age them.

PAID gives lenders a chance to de­ter­mine and elim­i­nate their risks and cor­rect prob­lems mov­ing for­ward. Un­der the pro­gram, em­ploy­ers who are not the sub­ject of a pend­ing in­ves­ti­ga­tion or FLSA law­suit can cal­cu­late the wages owed and re­quest par­tic­i­pa­tion in the pro­gram. If ap­proved by the De­part­ment of La­bor, all back wages would be paid sub­ject to a set­tle­ment agree­ment for in­di­vid­ual em­ploy­ees to sign. While em­ploy­ees are not re­quired to do so and can es­sen­tially opt out of re­ceiv­ing the monies, most would likely ac­cept the bird in hand, en­abling the em­ployer to avoid class-ac­tion law­suits be­fore they start and at a sub­stan­tially lower cost.

The de­tails of this pro­gram are not yet fully known. Im­por­tantly, em­ploy­ers need to dis­cern the ef­fect on state law claims, and how and whether the DOL can use the in­for­ma­tion mov­ing for­ward. De­spite this, lenders — many of whom are sit­ting on sub­stan­tial li­a­bil­ity — should se­ri­ously con­sider re-eval­u­at­ing their pay prac­tices and curing past wrongs.

The PAID pro­gram is only slated to last six months. Af­ter it is over, the height­ened at­ten­tion it will bring to pay prac­tices will likely lead to more law­suits, as em­ploy­ees who be­gin re­ceiv­ing checks in the mail from one former em­ployer may re­al­ize another did not pay them cor­rectly.

Ac­cord­ingly, cor­rect­ing things mov­ing for­ward is po­ten­tially more crit­i­cal now than ever, even if an em­ployer does not want to take ad­van­tage of this op­por­tu­nity to fix the “sins of the past.” While some be­lieve ig­no­rance is bliss, in this case what you de­cide not to know may prove costly if the chance to re­solve a sig­nif­i­cant li­a­bil­ity is missed at the same time its ex­is­tence be­comes far more trans­par­ent.

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