World’s Best Mortgage Law Blog?
I usually try to keep this blog accessible to anyone, especially people who may not be familiar with law or the mortgage industry, because 1) a lot of my family and friends read it, and 2) I want this to be the World’s Best mortgage lawyer’s blog[1]. Unfortunately, I often don’t succeed in that accessibility goal, and besides, not talking about legal stuff or the mortgage business would threaten my quest to keep this a mortgage lawyer’s blog.[2]
Furthermore, I assume it takes international acclaim to truly assert to being “World’s Best” as opposed to just, say, Europe’s favorite cookie with coffee[3]. Unfortunately, I have found that I really struggle to maintain the kind of international focus that would enable me to garner the kind of worldwide attention which I assume you need to lay claim to being “World’s Best”.[4]
I mention all that because this edition will probably disappoint my globally dispersed, non-legal/non-mortgage industry readers (if any). If, however, you live in the US and/or are a lawyer and/or are familiar with the mortgage business, read on and enjoy! Anyway, I’m starting with the stuff everyone can understand because I tend to get more parochial and/or provincial[5] as I go on.
Agency Overreach During the Pandemic
The pandemic has provided a cornucopia[6]of examples for me to criticize government agencies not staying in their lane. For example, last May, I wrote about the CDC’s eviction ban being unscientific and outside their expertise. Similar to forbearance for mortgage borrowers, the CDC’s eviction ban may have had a reasonable basis in social justice, but that’s got nothing to do with the CDC’s mandated acumen around the science of disease control. When the eviction ban legal case got to the Supreme Court, they demurred to decide since it was going to expire anyway, but it was apparent that it was headed for a rejection.
Likewise, OSHA, in promulgating its vaccine mandate for the country’s largest employers, was really seeking to regulate an issue that is not a workplace risk, but rather is a concern for the society as a whole[7]. In rejecting OSHA’s mandate in its 6-3 decision, the Supreme Court recently pretty much told OSHA what I would have echoed: “stay in your lane bro’.”
Meanwhile, CFPB had some trouble staying in its lane with the pandemic responsive foreclosure moratorium and servicing rule. I’m still chapped that the CFPB relied on COVID induced national financial dementia in justifying that rule (albeit in a lengthy footnote). The servicing rule is very prescriptive, but while the CFPB felt qualified to make a nationwide psychological diagnosis, at least the agency didn’t require every mortgage servicing employee to get vaccinated[8]. So, it’s clear that federal government agencies have no problem issuing all manner of rules to address the pandemic, whether the substance of the rule is within their province or not.
Outside Sales Exemption
Why do I reiterate all of that? Because I’m going to talk about a dog that didn’t bark. Specifically, the Department of Labor (DOL) with respect to the outside sales exemption from wage hour rules under the Fair Labor Standards Act (FLSA). For the unfamiliar, unless an employee is “exempt” they are subject to various federal and state minimum wage, overtime and clocking/break time requirements. The DOL has flip-flopped multiple times on whether retail mortgage loan originators can be classified as exempt under various FLSA exemptions. The Supreme Court even weighed in these issues when the DOL backtracked on a 2006 DOL opinion letter the industry had relied on.
This whole wage/hour area has been a massive thorn in the side of the retail mortgage industry which generally treats its LOs as exempt (now mostly using the outside sales exemption) because, for the most part, retail mortgage originators[9]are highly compensated, don’t need wage hour protections, and, frankly, getting sales-oriented LOs to clock in and out and/or limit overtime is akin to having to boil the ocean[10]. Unfortunately, the byzantine FLSA laws (designed circa 1938) and even more restrictive, but similarly crafted, state wage/hour laws have resulted in a cottage industry of class action lawsuits[11] on behalf mortgage originators that have primarily served to unjustly[12] enrich certain LOs and their attorneys. Unlike how the mortgage industry and many (but not all) state mortgage regulators are responding to the pandemic challenges, DOL doesn’t seem interested in updating the outside sales exemption for the pandemic (or the internet age).
(Mr.) Duplicity[13]
In my last Musings edition I discussed how work from home (WFH) was really a form of hidden wage inflation for mortgage workers. The massive growth in mortgage originator WFH, of course, is a direct result of the pandemic and federal, state and local health and safety rules and guidance. Critically, DOL views a home office as not qualifying for being “customarily and regularly engaged in work away from the employer’s place of business”, which is the FLSA test for the outside sales exemption.
Despite mandated and strongly encouraged social distancing and WFH directives from federal (and local) public health officials, DOL has been mostly quiet[14]about easing the outside sales exemption which requires employees to physically call on customers in person at their place of business, homes and other locations for at least “one or two hours a day, one or two times a week”[15]. With every other federal regulator literally going out of its “lane” to encourage COVID-safe home and workplace behaviors, perhaps the DOL could stay in its lane[16] and explicitly recognize that, at a minimum during the pandemic, WFH can qualify for outside sales. Unfortunately, as two outstanding California employment lawyers[17]told me;
“There continue to be very few if any cases on point, at least in California or in published federal cases I’ve seen, discussing how the outside sales exemption is applied during the pandemic. My perspective is that the FLSA standard still appears attainable, depending on the nature of the mortgage originator’s business, if they engage in sales meetings outside of the office or home office at least a couple times a week. The Department of Labor has repeatedly signaled that outside sales work away from the employer’s place of business for approximately “one or two hours a day, one or two times a week” can pass the outside sales test. It affirmed this in the midst of the pandemic in June 2020, even referencing a federal appellate court finding that performing an activity 60 times over the course of a year, i.e. slightly more than once per week, may be enough to qualify as “customarily and regularly” out of the office. WHD Op. Letter, FLSA 2020-6 (June 25, 2020) (citing Smith v. Govt. Emps. Ins. Co., 590 F.3d 886, 894 (D.C. Cir. 2010)). Of course, in states with more stringent outside sales requirements on the issue of work outside the office, those more stringent tests could be more difficult to satisfy depending on the level of sustained outside sales activity”.
Would the Biden administration’s DOL be so duplicitous as to enforce the outside sales exemption aggressively during a pandemic? How about courts in private class actions? I’m pretty sure[18] there would be some leniency afforded defendants, but just getting sued for this kind of claim almost guaranties a very costly outcome for a mortgage company regardless of the final result after appeals. Besides, I really just used that “pretty sure” reference as an excuse to look forward to this year’s Super Bowl commercials, not as any kind of legal opinion.
[1] I was inspired to be the “World’s Best” mortgage law blogger by Bob’s Oatmeal, which claims to be the World’s Best Oatmeal. I don’t know if they won a contest or something, but I’ve never tried Bob’s oatmeal and I don’t recall being asked my opinion on that either. Hat tip to Rob Chrisman for pointing out this oddity. Rob probably found that while shopping for
https://www.worldsbestcatlitter.com/
for his cat Myrtle.
[2] On a similar note, congratulations to Ballard Spahr and Senior Counsel, Alan Kaplinsky for his podcast Consumer Finance Monitor | Insights | Ballard Spahr. Truly an excellent podcast with great interviews that apparently earned just a second place award among similar financial podcasts. Should have been first place in my book-World’s Best, in fact.
[3]Did the EU actually vote on its favorite cookie with coffee or was it decided by globalists at Davos or something? Alas, we are left to wonder what Europe’s favorite cookie without coffee is. My vote, however, is for a cake-the Swedish Princess Torte. Yum!
[4] I have been known to criticize China on occasion, so I could easily come up a few billion votes shy in runoff with a Chinese mortgage law blogger if there is one. That vote would be rigged anyway because China is not a democracy.
[5] “Provincial” can mean a lot of things. Same with “parochial”. Here, I use both to mean “narrow in my focus”, but I think it also demonstrates a measure of humility since those words also imply a lack of sophistication.
[6]Once I used the words “provincial” and “parochial”, I knew that more SAT vocabulary words were needed to populate this edition. “Cornucopia” has got to be the quintessential SAT word…, whoops, other than “quintessential”, so maybe it’s the “penultimate”. Anyway, see how many you can spot.
[7]Let me be clear. I am not an anti-vaxxer, but I do believe people have the right to be wrong.
[8]One has to wonder what the CFPB might have required in the name of “COVID induced financial dementia” had OSHA not taken the lead on its overturned vaccine mandate.
[9]Inside/call center originators are in most instances non-exempt and subject to wage hour laws.
[10] I happen to be a big fan of sour beers, but not sure I’ve ever tried this one.
[11]California is ground zero for these cases since it also has other state laws that make it tougher on employers than any other state.
[12] That’s my view of it. Remember, justice is always in the eye of the beholder.
[13]Can anyone hear the word “duplicity” without thinking of this Alanis Morrisette song verse; “Did you forget about me, Mr. Du-plicity”?
[14]DOL did issue some FAQs that suggest the exemption might not be lost due to emergency duties, however, its applicability to WFH and the outside sales exemption is questionable.
[15]Per previous DOL guidance. Again, state law may require much higher thresholds for the exemption to apply.
[16] I believe OSHA is also part of the DOL, so maybe they thought the vaccine mandate was enough.
[17] https://ogletree.com/people/spencer-c-skeen/ https://ogletree.com/people/jesse-c-ferrantella/ Skeen and Ferrantella get my vote for World’s Best California employment lawyers.
[18]Here’s the link to Rocket Mortgage’s Super Bowl Squares game (no purchase required).