In FLSA Misclassification Case, Fifth Third Bank Settles With Mortgage Loan Officers for Four Million Dollars

On July 11, 2014, the United States District Court for the Southern District of Ohio approved a $4,000,000 settlement in the case Swigart et al v. Fifth Third Bank. Besides the two named plaintiffs, 366 individuals opted into the lawsuit, and none of the plaintiffs has rejected the settlement.

Fifth Third Bank is accused of misclassifying its Mortgage Loan Officers (MLO’s) as exempt under Section 13(a) of the Fair Labor Standards Act, and on that basis failing to pay premium overtime pay (time-and-a-half) to hundreds of Mortgage Loan Officers (“MLOs”). The Court found that the “complexity, expense, and likely duration of litigation” weighed strongly in favor of the settlement. In addition to questions about the facts of the case and the legal status of the class of plaintiffs, based on issues raised so far there would surely be extensive motion practice relating to the exempt status of the employees.

As suggested by their decision to settle, based on previous decisions by the Court the defendants probably believe the process of litigating these issues would be not only long and costly, but likely to end in failure. On the key question in the case–whether the employers were properly classified as exempt under the FLSA from overtime pay–the Court had already rejected the defense that Fifth Third Bank had made good faith attempt to comply with the law as it had been interpreted by the Department of Justice. This defense has several problems. First, nearly all of the DOL’s pronouncements on this issue-a 1999 Opinion Letter, a 2001 Opinion Letter, 2004 Revisions to the relevant regulations all made clear that MLO’s were primarily salespeople and lacked the requisite authority and control to be exempt from the FLSA’s wage requirements.

The Defendant cited one Department of Labor statement that seemed to support the argument that MLO’s are exempt: an Opinion Letter released in 2006, which concluded that a certain group of MLO’s being considered were exempt. But, crucially, that same letter states: “if a MLO’s primary duty was selling mortgage loans,” as opposed to managerial or other duties, then “the MLO would not qualify under the exemption.” This 2006 Letter was then officially withdrawn in a 2010 Administrator’s Interpretation, owing to its “misleading assumption,” and “selective and narrow analysis.” Despite being misleading, the 2006 letter as consistent with all other DOL pronouncements in stating that MLOs are not exempt insofar as their primary job responsibility is sales.

Thus, the Court ultimately rejected the Defendant’s Motion for Summary Judgment based on the good faith defense, concluding that there was “considerable evidence” that the Defendant did in fact regard MLO’s primarily as salespeople, and that there was “no evidence that Defendant made an attempt to communicate with its MLOs or their supervisors to determine the MLOs’ primary job duties or whether they were actually performing the same job duties as the mortgage loan officers described in the 2006 Opinion Letter.”

If you are an employee and you believe your rights under the Fair Labor Standards Act have been violated, please contact The Harman Firm, LLP.