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Labor Departments About-Face on OT Muddies Quicken Lawsuits

July 8, 2010
Related Topics: Discrimination and EEOC Compliance, Labor Relations, Workforce Planning, Latest News

A recent about-face in legal analysis by the Department of Labor could prove so disruptive to a set of lawsuits facing Quicken Loans Inc. that the judge has considered ignoring the agency’s views completely.

U.S. District Judge Stephen Murphy voiced that possibility at a hearing in late June after the department’s latest determination that mortgage loan officers are not exempt from hourly overtime pay.

Livonia, Michigan-based Quicken faces four lawsuits on behalf of more than 1,000 former mortgage loan officers alleging the company misclassified them as exempt employees to avoid overtime pay under the federal Fair Labor Standards Act.

Deputy Administrator Nancy Leppink of the Labor Department’s Wage and Hour Division found in a March administrator’s interpretation that mortgage loan officers primarily serve a sales function and do not qualify as exempt administrative employees.

That is a reversal of what the Labor Department found in a 2006 letter on the same topic, and it complicates Quicken’s defense against claims for as much as nine years of hourly overtime pay.

Murphy noted that the department’s position shift follows a change in presidential administrations and raised the prospect of setting aside both opinion letters and making future court rulings based simply on labor statutes and case law.

“I think I put myself at tremendous risk of [a reversal on] appeal if I make a finding that presumes the current letter is right or that the prior letter was wrong,” Murphy said in court.

“We don’t want to have a set of cases that get resolved at trial and then in 2018, when there’s a different administration, we get a completely different finding from the Department of Labor that requires voiding or setting aside juries’ verdicts.”

The parties are headed to mediation July 29 before member Morley Witus at Detroit-based Barris, Sott, Denn & Driker. In the meantime, Murphy is weighing whether to revisit three prior decisions in Quicken’s favor, all of which came before the Labor Department reversed its position.

Paul Lukas, partner at Minneapolis-based Nichols Kaster and lead counsel for the plaintiff loan officers, estimates Quicken’s potential damages and attorney fees could exceed $10 million if the case goes to trial and it focuses only on overtime claims from 2002 to 2006.

But a reversal on the three decisions could broaden Quicken’s exposure to overtime claims from 2001 to the present, and elevate potential damages to more than $30 million, he said.

Lukas said the difference is so great that, even if the loan officers go to trial and win on the limited 2002-2006 claims, the firm would have to file an appeal on the issues that weren’t considered.

Paula Silver, Quicken vice president of communications, said in a prepared statement that “Quicken Loans has won several key victories since this weak claim was filed early last decade. The company remains strongly committed to defending this meritless claim where we expect to defeat this self-serving plaintiff law firm’s parasitic action. Quicken Loans has and does follow all labor regulations and laws, paying overtime to every team member who is morally, ethically and legally entitled to receive it.”

In court, Quicken attorney Jeffrey Morganroth, of Morganroth & Morganroth in Birmingham, Michigan, argued the new opinion does not preclude Quicken’s ability to rely on the Labor Department’s original 2006 finding—meaning Quicken still may not be subject to overtime claims for the period between the opinions.

About 1,400 former Quicken employees are rolled into one or more of four lawsuits against Quicken and its founder Dan Gilbert, Rock Financial Corp. and Quicken vice president David Carroll challenging its policy of not paying overtime to mortgage loan officers.

The first lawsuit, filed in 2004, covers 446 employees at Quicken call centers in Troy, Michigan, Cleveland and Phoenix. A second lawsuit, filed in 2007, covers employees who tried to opt in later as plaintiffs in the original suit. A third case covers a class of Rock mortgage bankers at separate branch locations, and a fourth lawsuit was filed in May to cover possible new claims stemming from the March opinion from the Labor Department.

Employees in the lawsuits allege they were instructed to work more than 55 hours a week without overtime, sometimes putting in 70- to 80-hour weeks while supervisors monitored them from an elevated platform in the same room or by listening in on sales calls to ensure they followed protocol.

Quicken co-counsel Robert Davis, a partner at Mayer Brown who works from New York and Washington and is also an attorney for the Washington-based Mortgage Bankers Association, obtained the original 2006 Labor Department opinion in response to a query for the association. Attorneys for the employees argue he actually used that role to obtain a ruling that could undercut the Quicken employees.

The 2006 Department of Labor letter was issued with caveats that the opinions were based solely on the facts presented and also that Davis had represented that the opinion was not sought by a party in pending litigation.

Nichols Kaster later notified the department that Davis was involved in the Quicken case and asked it to review the circumstances behind the 2006 letter. Labor Department officials then withdrew that finding and issued the new one. 

Filed by Chad Halcom of Crain’s Detroit Business, a sister publication of Workforce Management. To comment, e-mail


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