With rates going up, refinance volume quickly heading south and originators looking for the next shiny thing, we are bound to see movement in the industry. That means mergers, buyouts and some companies closing. Migrating originators can be a tricky challenge for the next employer. There are two issues that may surface; who owns the customer and how were the originators compensated? I’ll save the former for another time.
Last week I received a call from someone looking for originator training. During our discussion he revealed he was purchasing an existing mortgage company. To his credit, he was trying to find out how to make sure the originators do the right thing and where he might encounter issues after the purchase. When he told me the current owner claims all their employees are “independent contractors,” my advice was BUYER BEWARE! And then I let out a litany of reasons why he may be facing a problem.
The W-2 vs. 1099 argument pushes my buttons every time! “But everyone does it.” Not really! Most employers make every attempt to follow federal and state laws related to employee’s wages and safety. Just look at the compliance budgets of any mortgage lender. Yet, in all their attempts at compliance, justification for creeping over the line can push an otherwise law-abiding manager or company into dangerous territory. And when volume’s down, that line moves more.
A purchase of any business violating federal or state law brings with it potential liability and the probability of liability may just have increased.
On December 8, 2021, the National Labor Relations Board (NLRB) and the US Department of Labor, Wage and Hour Division (DOL/WHD) signed a Memorandum of Understanding (MOU). This MOU accomplishes a two primary goals:
- enhances a collaborative relationship to enhance and maximize the enforcement of the federal laws administered between the two agencies.
- strengthens the agencies’ partnership through greater coordination in information sharing, joint investigations and enforcement activity, training, education, and outreach.
The agencies will look for ways to “efficiently systematize procedures to facilitate…information and data sharing, particularly in the areas of unlawful compensation practices, such as:
- unlawful denial of minimum wages or overtime pay,
- retaliation based on exercising rights guaranteed under the NLRA or laws enforced by DOL/WHD;
- working and living conditions of employees;
- denial of required break times;
- unilateral changes to wages, benefits and other terms and conditions of employment;
- discriminatory failure to hire, retaliatory discipline or other unlawful employment practices,
- including using employee work authorization or immigration status in a threatening or retaliatory manner; and
- the identification and investigation of complex or fissured employment structures, including single or joint employer, alter ego, and business models designed to evade legal accountability, such as the misclassification of employees; or when otherwise appropriate.
According to Katherine Koop Irwin and Ryan G. Stevens of Frost, Brown, Todd, LLC, “David Weil, Biden’s pick to lead the DOL’s Wage and Hour Division, is an ardent opponent of independent contractor relationships. If confirmed by the Senate, Weil will take control of the Division at a time of expansive growth. The Division recently announced that they plan to hire 100 new investigators in the coming weeks, with “significantly more hiring activity” later this year.”
In addition to the MOU, other labor law issues are on the horizon. Check out the Top Five Labor Law Developments for January 2022 published by Jackson Lewis. This topic is gaining traction and there are plenty of resources out there to ignore or… take advantage of. I recommend the latter.
If you have questions about employee status of mortgage loan originators, feel free to contact me at email@example.com or (866) 256-3766.