In a case entitled Sexton v. Franklin First Financial, Ltd, a federal judge has granted conditional certification to a FLSA collective action alleging Franklin First Financial Ltd. failed to pay overtime to a class of loan officers. This is the latest (and surely not the last) of a host of class actions filed under federal and state wage-hour laws, targeted at securing overtime for employees allegedly misclassified as exempt.

The suit emanated from the Company’s West Hempstead, New York office. The primary basis of the suit is the overtime-exemption-misclassification issue. The employees involved in the suit sell residential mortgage loans. In an interesting twist, the Company allegedly paid loan officers on a commission-basis and were not paid unless they made a sale. The allegations are that these commissions did not meet the required minimum of at least $455 per week. This also raises the issue of whether the employees were paid a “salary,” which is an essential component of fitting within the exemption.

The federal judge determined that there was sufficient similarity between the single named plaintiff and others who might opt into the lawsuit. Significantly, in these early steps of class certification, the plaintiff must only make a “modest” showing of pleadings and evidence, a showing that practiced plaintiff-side attorneys are all too familiar with. If evidence of a common policy or practice is shown, the class receives conditional certification, followed by additional discovery and motions and possibly mediation.

The estimate is that there are hundreds of potential loan officers, scattered throughout several branches on Long Island.. Although the court has initially excluded outside loan officers from the suit, if subsequent discovery shows that they are also similarly situated to the inside loan officers, they will be added as well.

If this does not settle the case, or the employer wants to roll the dice on the exemption issue, then a trial ultimately ensues. Before that stage, however, a very careful analysis has to be done of whether there is a viable exemption defense. Ideally, this should be done way before a lawsuit or possible lawsuit is even on the horizon. The stakes in these cases are much too high to wait until a lawsuit explodes and thrusts the entire exemption issue into the forefront. Internal auditing and scrutiny of all salaried positions to make reasoned determinations of exempt status is what is needed, sooner, not later.