FLSA Conditional Certification Denied Too

The position of mortgage loan officer has been a fertile source of wage and hour claims, but a recent case from the Central District of California reflects that certification of a class, even involving such a “target” position, is by no means guaranteed.

In Fernandez v. Bank of America, Case No. CV 17-6104-MWF (JCx) (C.D. Cal. Nov. 27, 2018), the defendant bank employed mortgage loan officers who were paid primarily by commission. Anticipating increases in the salary requirements under the FLSA, it reclassified the loan officers from exempt to non-exempt in 2016. According to the court’s opinion, between commissions and other incentives, these employees could earn between approximately $30,000 and more than $600,000 annually. The plaintiffs, a group of loan officers, brought suit, contending that they had been misclassified and that the bank had failed to provide them separate compensation for time spent in training and other activities that did not directly generate commissions. They asserted claims not only under California law but also under the Fair Labor Standards Act. They moved the court for certification of the class under California law and for conditional certification under the FLSA.

The court denied both motions, and in doing so rejected several common arguments made by plaintiffs in this arena. First, the court noted that the plaintiffs were chiefly challenging the bank’s incentive program, but that while they correctly noted that the same program applied to all the loan officers, they could not point to anything specifically illegal about it. Similarly, the court found no policy directing any particular number of hours for non-commission work. It found the reclassification of the mortgage loan officers meaningless, as reclassification could have occurred for any number of reasons. Following Ninth Circuit authority, the court also found that the potential existence of multiple exemptions would make determination of exempt status particularly difficult on a class-wide basis. It therefore refused to certify the class under California law.

For much the same reasons, the court denied conditional certification under the FLSA. While it recognized that the FLSA’s standard was lower, and although it applied the lenient standard for conditional certification, it found that there was not even enough proof of a common practice to support such an order. It noted in particular that the FLSA class extended well beyond California, and the plaintiffs had failed to account for geographic differences as well as the lack of a uniform policy containing an illegal term.

The Fernandez case is a refreshing example of a court engaging in a careful review of the plaintiffs’ allegations, and in particular whether there logically is a cohesive class, when considering class certification. It is also worthwhile because of its rejection of common arguments that fail to stand up under reasonable scrutiny.

The bottom line:

A common policy should not support even conditional certification if there is nothing illegal about it.