A former CrossCountry Mortgage employee claims the lender failed to pay workers as mortgage activity slowed last year, and is illegally forcing him to return a sizable sign-on bonus.
Paul Lundholm of Lyndhurst, New Jersey, alleged CCM violated the Fair Labor Standards Act and New Jersey state law in a class action complaint filed Tuesday in the U.S. District Court for the Northern District of Ohio. The Cleveland-based company paid personnel on a commission basis and provided no compensation for periods when staff didn’t close loans last year, the suit said.
The lender also gave sign-on bonuses to employees, known as an “unvested wage advance,” which workers had to pay back if they left the company for any reason within a 24-month period, according to court filings. Attorneys for Lundholm said they believe there were substantial weeks in which many people didn’t earn commissions. CrossCountry could then sue to get back the compensation it paid employees.
“In our view they were trying to shift all the risk of the turn of the market onto these individuals,” said attorney Brendan Sweeney of The Law Office of Christopher Q. Davis, PLLC in New York City, on behalf of Lundholm.
CrossCountry sued Lundholm earlier this month in the Cuyahoga County Court of Common Pleas in Cleveland, seeking damages of $81,371.83 related to his signing bonus. Lundholm last April signed a $135,000 sign-on bonus agreement, a sum to be delivered across two payments, according to both parties. Two earnings statements attached in CCM’s suit show payments to Lundholm totalling $81,030.46, a sum following federal and state tax deductions.
The length of a worker’s employment doesn’t reduce the repayment obligation, according to the sign-on bonus, and the agreement is a lien against any wages, accrued vacation time, incentive compensation payments, bonuses and other commissions due upon termination. Tax consequences are an employee’s responsibility, according to the text, and each party waives its right to a trial by jury for actions arising out of the agreement, a violation of the FLSA, Lundholm’s counsel said
A representative for CCM and attorney Joseph Mallernee, counsel for CrossCountry who filed the Cuyahoga County suit, both declined to comment Thursday.
Lundholm was remotely employed as a loan salesperson selling mortgages to borrowers between April 4, 2022 and Nov. 2, 2022, according to the class action complaint. CCM claims Lundholm resigned voluntarily, a statement his attorneys disputed, although their lawsuit doesn’t specify the reason for Lundholm’s exit.
The lender improperly classified Lundholm and other workers as exempt from state and federal overtime requirements, despite them working more than 40 hours per week, according to the suit. CCM also allegedly didn’t maintain accurate records of employee hours worked, did not provide a guaranteed weekly salary of at least $455.00 per state and federal laws and failed to pay workers at least twice each calendar month.
“There were frequent weeks where they weren’t closing any loans, where they were getting no compensation,” said attorney Anthony Lazzaro of Moreland HIlls, Ohio-based The Lazzaro Law Firm, LLC, on behalf of Lundholm. “So in those weeks, we’re finding minimum wage violations. Numerous people have supported those claims.”
Other members of the proposed class include loan originators, loan officers, senior loan officers. The total amount of damages is unspecified, only defined as exceeding $75,000.
The industry has seen its share of wage disputes between mortgage firms and their staff, with United Wholesale Mortgage last spring settling an overtime claim with account executives for $2.75 million.
CCM has become one of the industry’s largest lenders, counting $53.5 billion in lending volume in 2021 and, according to S&P Global data, $31.8 billion between Jan. 1, 2022 and Oct. 31, 2022. The lender had over 7,000 employees in 2021, although it’s unclear if it has since suffered layoffs as the majority of industry players did.
The company is also tangled in numerous complaints from competitors accusing it of poaching talent, which the lender has denied. It earned a victory in one of those lawsuits last week, as a federal judge dismissed Guild Mortgage’s accusations of raiding at a Washington branch in 2021.