Jose Fernandez et al v. Bank of America, N.A. et al

REPLY in support of Motion for FLSA Conditional Certification

C.D. Cal.November 5, 2018

Plaintiffs’ Reply In Support of Motion for FLSA Conditional Certification 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Joshua H. Haffner, SBN 188652 (jhh@haffnerlawyers.com) Graham G. Lambert, SBN 303056 (gl@haffnerlawyers.com) HAFFNER LAW PC 445 South Figueroa St., Suite 2325 Los Angeles, California 90071 Telephone: (213) 514-5681 Facsimile: (213) 514-5682 Mark R. Thierman, Cal. Bar No. 72913 (mark@thiermanbuc.com) Joshua D. Buck, Cal. Bar No. 258325 (josh@thiermanbuck.com) Leah L. Jones, Cal. Bar No. 276448 (leah@thiermanbuck.com) THIERMAN BUCK LLP 7287 Lakeside Drive Reno, NV 89511 Paul Stevens, SBN: 207107 (pstevens@stevenslc.com) STEVENS, L.C. 700 S. Flower Street, Suite 660 Los Angeles, California 90071 Telephone: (213) 270-1211 Facsimile: (213) 270-1223 Attorneys for Plaintiffs JOSE FERNANDEZ, ET. AL. Tel. (775) 284-1500 Fax. (775) 703-5027 Attorneys for Plaintiffs JOSHUA B. BOSWELL, ET. AL. UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA JOSE FERNANDEZ, ET AL, Plaintiffs, v. BANK OF AMERICA, N.A.; and DOES 1 through 10, inclusive, Defendant. PLAINTIFFS’ REPLY IN SUPPORT OF PLAINTIFFS’ MOTION FOR FLSA CONDITIONAL CERTIFICATION AND FOR AN ORDER CIRCULATING 29 U.S.C. § 216(b) NOTICE Case No. 2:17-cv-06104-MWF-JC JOSHUA B. BOSWELL, ET. AL., Plaintiffs, v. BANK OF AMERICA CORPORATION, ET. AL.; Defendant. Consolidated with Case No.: 2:17-cv- 06120-GW-RAO Hearing Date: November 19, 2018 Hearing Time: 10:00 a.m. Courtroom: 5A (Assigned To Hon. Michael W. Fitzgerald) Case 2:17-cv-06104-MWF-JC Document 43 Filed 11/05/18 Page 1 of 22 Page ID #:863 i Plaintiffs’ Reply in Support of Motion for FLSA Conditional Certification 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF CONTENT I. INTRODUCTION ........................................................................................... 1 II. ARGUMENT ................................................................................................... 2 A. PLAINTIFFS’ MOTION IS SUBJECT TO THE MORE LENIENT FIRST-STEP STANDARD FOR CONDITIONAL CERTIFICATION AND NOTICE. ............................................................................................... 2 B. BOFA HAS A UNIFORM POLICY OF NOT PAYING MLOS ACCORDING TO THE LAW. .......................................................................... 5 1. The Outside Sales Exemption Does Not Apply Because Defendants Maintained Policies Requiring Mortgage Loan Officers To Work At Their Desks Originating Loans. ............................. 6 2. The Administrative Exemption does not apply because Defendants failed to Pay a Salary and MLOs do not Perform Administrative Tasks. ............................................................... 13 a. The Salary Basis Test ...................................................................... 13 b. The Duties Test ................................................................................ 15 C. THE COURT SHOULD TOLL THE STATUTE OF LIMITATION IN THIS ACTION FOR THE PERIOD OF TIME THAT THIS MOTION IS PENDING. ............................................................................................... 18 III. CONCLUSION .................................................................................................. 18 Case 2:17-cv-06104-MWF-JC Document 43 Filed 11/05/18 Page 2 of 22 Page ID #:864 Plaintiffs’ Reply In Support of Motion for FLSA Conditional Certification ii 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF AUTHORITIES Cases Benedict v. Hewlett-Packard Co., 2014 WL 587135 (N.D. Cal. 2014) ......................................................................................................... 5 Dalheim v. KDFW-TV, 918 F.2d 1220, 1230 (5th Cir. 1990) ........................................................................................................................16 Dunlop v. Martin Brick Co., 1981 U.S. Dist. LEXIS 16861, (N.D. Tex. 1981) ..........................................................................................13 Gerlach v. Wells Fargo & Co., 2006 WL 824652 (N.D.Cal. 2006) .......................................................................................................... 3 Helton v. Factor 5, Inc. 2012 WL 2428219, (N.D. Cal. 2012) .......................................................................................................................... 6 Koa v. Holiday, 12 Cal. App. 5th 947, 957. (2017) .................................................14 Leuthold v. Destination Am., Inc. 224 F.R.D. 462 (N.D. Cal. 2004) ................................................................................................................... 4 McKeen-Chaplin v. Provident Sav. Bank, FSB, 862 F.3d 847 (9th Cir. 2017) ...................................................................................................16 Perez v. Mortg. Bankers Ass’n –– U.S. –––, 135 S.Ct. 1199 (2015) ..............................................................................................................14 Sarviss v. Gen. Dynamics Information Tech., Inc., 663 F. Supp. 2d 883 (C.D. Cal. 2009)................................................................................... 5 Sliger v. Prospect Mortg., LLC, 2011 WL 3747947 (E.D. Cal 2011) .................................................................................................................... 5 Stitt v. San Francisco Mun. Transportation Agency, 2014 WL 1760623 (N.D.Cal. 2014) .......................................................................... 3 Takacs v. A.G. Edwards & Sons, Inc., 444 F. Supp. 2d 1100 (S.D. Cal. 2006) ..............................................................................................13 Thiessen v. General Electric Capital Corp., 267 F.3d 1095 (10th Cir. 2001) ................................................................................................. 3 Statutes Cal. Code Regs., tit. 8, § 11040 1(A)(2) ..................................................................16 Code of Civil Procedure §30(b)(6) ............................................................................ 2 Case 2:17-cv-06104-MWF-JC Document 43 Filed 11/05/18 Page 3 of 22 Page ID #:865 1 Plaintiffs’ Reply in Support of Motion for FLSA Conditional Certification 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 I. Introduction In its opposition to Plaintiffs’ Motion for Conditional Certification of the FLSA, Defendants argue the merits of the claims, including class wide defenses, instead of the “similarly situated” criteria relevant to whether or not individual potential class members receive notice of this action and an opportunity to opt in. For the nationwide FLSA class, Plaintiffs’ allege Defendants uniformly misclassified Plaintiffs and putative class members as exempt employees under federal law, which is the basis for the Defendants’ admitted failure to pay these employees overtime premium pay for working more than 40 hours in a week.. The administrative exemption and the outside sales exemption are only two exemptions from mandatory overtime provisions of the FLSA applicable to this case, the Highly Compensated Employee being simply a “short test” for the duties requirements for the white collar administrative exemption. The common question of law and fact for the class wide application of the administrative exemption is obvious: Does Defendant’s pay plan’s use of draws against commission violate the salary test requirements of 29 C.F.R. §541.602. If the “draw against commission” does not qualify as substitute for a salary as a matter of law, then all Mortgage Loan Officers (“MLOs”) who were or are currently classified as exempt and work out of financial centers are entitled to overtime. The second exemption is the “outside sales” exemption. Plaintiffs contend the outside sales exemption does not apply because Defendant maintained policies requiring MLOs to work at their desks originating loans, and there is no evidence that any MLO “customarily and regularly” engaged in sales activity ‘‘away from the employer’s place or places of business.’’ See 29 C.F.R. §541.502. The class is defined to include only those MLOs who are assigned to financial centers, which means that they spend most of their time making loans from their desks inside an office. The mere fact another plaintiff seeks mileage reimbursement for a few hours a week driving, mostly between different offices of Defendants, is irrelevant Case 2:17-cv-06104-MWF-JC Document 43 Filed 11/05/18 Page 4 of 22 Page ID #:866 Plaintiffs’ Reply In Support of Motion for FLSA Conditional Certification 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 to the merits and even more irrelevant to the question of whether the conditional class is “similarly situated.” Finally, the court should strike, or at least ignore, Defendant’s “corrections” of the deposition transcript of it Code of Civil Procedure §30(b)(6) witness, which was a wholesale re-writing of what the witnesses actually said on the record as recorded by the official stenographer. Defendants PMK Vijay Lala clearly and unequivocally stated under oath that he agreed that “all Lending Officers, both before and after November 2016, those that worked in financial centers spent the majority of their time working in those Bank of America offices. . .” (Declaration of Joshua H. Haffner In Support Of Plaintiff’s Motion For Rule 23 Class Certification And Motion For FLSA Conditional Certification (“Haffner Decl. I”), Dckt No. 36-5, 9/14/18, Exh.10 (PMK Lala depo.), 38:19 – 39:1.) There is nothing in the record at the time of the deposition to show to the contrary. The parts of Defendant’s opposition that relies on bad faith “correction” of testimony should be stricken or ignored. This sort of gamesman is as transparent as it is inappropriate. Accordingly, as set forth more fully below, this Court should grant Plaintiffs’ Motion for Conditional Certification and order the circulation of notice pursuant to 29 U.S.C. § 216(b). II. Argument A. Plaintiffs’ Motion is Subject to the More Lenient First-Step Standard For Conditional Certification And Notice. As a preliminary matter, Defendants ask this Court to apply the stricter, second-step scrutiny that is normally applied at the decertification stage based on its assertion that “the parties have conducted all necessary certification discovery” in this case. Opposition, 12:12-15. However, while Defendants may be satisfied with the limited discovery that has taken place to date, the deadline for conducting iscovery has not yet passed, and Plaintiffs are still actively engaged in certification- Case 2:17-cv-06104-MWF-JC Document 43 Filed 11/05/18 Page 5 of 22 Page ID #:867 Plaintiffs’ Reply In Support of Motion for FLSA Conditional Certification 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 related discovery in this case.1 In particular, neither party has completed class discovery, which could shed considerable light upon whether there is, in fact, any variation regarding the performance of sales activity or potential administrative activities, as suggested by Defendants in their Opposition.2 While this discovery remains outstanding, it would be inappropriate to subject Plaintiffs to the stricter decertification standard proposed by Defendants. Courts in the Ninth Circuit have consistently declined to require plaintiffs to meet a more stringent standard for conditional certification where the parties have not yet completed discovery. In Gerlach v. Wells Fargo & Co., the court reasoned, “[t]o apply the second-tier heightened review at this stage would be contrary to the broad remedial policies underlying the FLSA.” Gerlach v. Wells Fargo & Co., 2006 WL 824652, *3 (N.D.Cal. 2006) (noting that in Thiessen v. General Electric Capital Corp., 267 F.3d 1095 (10th Cir. 2001), it was only at the conclusion of discovery that the court applied the second-tier standard and declining to impose the heightened second-tier standard until after discovery was complete and defendants moved for decertification); see also Stitt v. San Francisco Mun. Transportation Agency, 2014 WL 1760623, *11 (N.D.Cal. 2014). Courts have further reasoned that a more stringent standard is not appropriate because discovery is not yet completed, potential opt-ins deserve notice of the suit before 1 For example, Plaintiff has requested in discovery the “service level agreements” Defendant’s refer to in their opposition, but none have yet been produced by Defendant. 2 Defendants suggest that Plaintiffs must have “all of the certification discovery they need” because Plaintiffs were required to submit their Rule 23 Motion on September 17, 2018. However, the standards for Rule 23 certification and decertification of an FLSA are fundamentally different, as are the elements of state and federal law underlying the claims for certification under each standard. Plaintiffs have not completed all necessary discovery for analyzing decertification under the FLSA, and it would be unfair to subject them to the stricter second-step standard at this stage in the litigation. Case 2:17-cv-06104-MWF-JC Document 43 Filed 11/05/18 Page 6 of 22 Page ID #:868 Plaintiffs’ Reply In Support of Motion for FLSA Conditional Certification 4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 final evaluation of the “similarly situated” status is made, and that no decision can be made without considering which employees have chosen to opt-in. See e.g., Gerlach, supra, 2006 WL 824652 at *9-12; Leuthold v. Destination Am., Inc. 224 F.R.D. 462, 467-68 (N.D. Cal. 2004) (applying first-stage standard, although discovery was nearly completed, where record was not complete, two-stage process should be complied with, and it was unclear who would seek to participate in the litigation). Only after the parties have had a full opportunity to exhaust the discovery process will the legal and factual issues be put before this Court of whether Plaintiffs and the putative Collective Action Class Members should be paid for all hours worked and for the appropriate overtime premium pay. Thus, opt-in plaintiffs who share common issues of law and fact must be given an opportunity to participate in the action and be bound by the result. Leuthold, supra, 224 F.R.D. at 468 (“Bypassing the notice stage altogether would deprive the court of this information and might deprive some plaintiffs of a meaningful opportunity to participate”). Here, as in Leuthold, the more stringent standard is not appropriate because discovery has not yet been completed, potential opt-ins deserve notice of the suit before final evaluation of the “similarly situated” status is made, and no decision can be made without considering which employees have chosen to opt-in. Accordingly, this Court should analyze Plaintiffs’ Motion under the more lenient initial “notice stage” for conditional certification. Defendant’s last-ditch request to apply the more stringent second-step standard to Plaintiffs’ conditional certification motion belies the weakness of their position. As Plaintiffs demonstrated in their Motion, this Court should grant conditional certification and distribute notice based on Defendant’s uniform mischaracterization of its MLO employees as exempt despite company-wide policies governing the performance of job duties that demonstrate the inapplicability of any potential exemption in this case. Case 2:17-cv-06104-MWF-JC Document 43 Filed 11/05/18 Page 7 of 22 Page ID #:869 Plaintiffs’ Reply In Support of Motion for FLSA Conditional Certification 5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 B. BofA Has A Uniform Policy Of Not Paying MLOs According To The Law. Defendants do not contest the following facts set forth in Plaintiffs’ Motion: (1) BofA pays MLOs a draw against their monthly commission for the sale of mortgage loans that do not amount to a salary of $455 a week “free and clear;” (2) BofA classified the MLOs as exempt from the overtime provisions of the FLSA; and (3) Plaintiffs and all MLOs regularly worked in excess of forty (40) hours in a workweek without receiving overtime premium pay of one and one-half times their regular rate of pay. Conceding these facts, Defendants instead build their opposition around several merits-based defenses that Defendants claim show variation amongst employees. Again, however, the ultimate question of liability -- whether Plaintiffs and the proposed Class were paid according to federal law -- is not before the Court at this time. The Court is only asked to determine that Plaintiffs and the proposed Class they seek to represent in this action are “similarly situated”—i.e., they are “victims of a single [employer] decision, policy, or plan.” Sarviss v. Gen. Dynamics Information Tech., Inc., 663 F. Supp. 2d 883, 903 (C.D. Cal. 2009) (Plaintiffs will be deemed similarly situated “when there is a demonstrated similarity among the individual situations[-]some factual nexus which binds the named plaintiffs and the potential class members together as victims of a particular alleged” policy or practice.). The initial notice stage of an FLSA collective action is not the time to evaluate the merits of plaintiffs’ claims or defendant’s possible defenses. Benedict v. Hewlett-Packard Co., 2014 WL 587135, *11 (N.D. Cal. 2014) citing Sliger v. Prospect Mortg., LLC, 2011 WL 3747947, *3 (E.D. Cal 2011) (plaintiffs exempt status was “besides the point at this [notice] stage of the proceeding. Defendants will have an opportunity to demonstrate the merits of its affirmative defenses at the second tier stage of this proceeding.”). Merits arguments are part of the court’s analysis in a second-tier determination on a motion to decertify or summary judgment after discovery is closed. Helton v. Factor 5, Inc. 2012 WL 2428219, *5 Case 2:17-cv-06104-MWF-JC Document 43 Filed 11/05/18 Page 8 of 22 Page ID #:870 Plaintiffs’ Reply In Support of Motion for FLSA Conditional Certification 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 (N.D. Cal. 2012); see also Leuthold, supra, 224 F.R.D. at 467-68. Accordingly, at this early stage in the litigation, Defendants’ argument regarding the merits of claimed exemptions is premature. As discussed below, Defendants maintained company-wide policies governing the performance of job duties that preclude Defendants’ claimed exemptions as a matter of law. The existence of these uniform policies governing employee conduct, regardless of the ultimate merits of the claimed exceptions, shows that class employees are similarly situated and supports conditional certification and circulation of notice. 1. The Outside Sales Exemption Does Not Apply Because Defendants Maintained Policies Requiring Mortgage Loan Officers To Work At Their Desks Originating Loans. In support of their Motion for Certification, Plaintiff produced uncontroverted common evidence that the outside sales exemption does not apply to Plaintiff or any other MLO. Specifically, Plaintiff produced evidence of (1) company-wide policies governing how employees spend their time, such as Defendants’ requirement that MLOs “physically report to and work in the Mortgage Hub in order to coordinate and manage loan operations and to attend appointments and meetings” and Defendants’ requirement that “MLOs who are assigned to a branch . . . be physically present at the branch to handle potential walk-in clients and to coordinate and manage mortgage efforts within the branch;” and (2) uniformity in work duties and experiences that diminish the need for individualized inquiry. See Boswell Dec. at ¶ 43 (“I estimate that I worked at either the Defendants’ mortgage hub or branch locations at least 95% of the all the time I worked for Defendants. . . all MLOs assigned to a BofA branch or other corporate location are required to work similar hours at those locations.”); Popescu Dec. at ¶ 3 The Boswell and Popescu declarations referred to were submitted in support of Plaintiffs’ Motion for Class Certification in Boswell before the case was transferred and consolidated. See Boswell, Doc. Nos. 26-4 & 26-5. Case 2:17-cv-06104-MWF-JC Document 43 Filed 11/05/18 Page 9 of 22 Page ID #:871 Plaintiffs’ Reply In Support of Motion for FLSA Conditional Certification 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4 (same); Fernandez Dec. at ¶ 5 (“While employed at Bank of America, I was required and expected to be physically present at the branch almost all the time I was working, and would get into trouble if I was not present in that manner. I spent the vast majority of my time working in the Bank of America branch, far more than 50% of my work time.”); Young Dec. at ¶ 4 (same). Defendants’ PMK, Vijay Lala, confirmed Plaintiffs’ testimony and further confirmed that Plaintiffs’ experience is typical of other MLOs employed by Defendants at their financial centers during the relevant period.4 PMK Lala testified that all financial center Lending Officers “have a desk at that Financial Center,” are “expected to be there daily,” and for the bank-sourced loans there was not “any need for a Lending Officer to be outside of the office.” (Haffner Decl. I, Dckt No. 36-5, 9/14/18, Exh.10, 16:12-17, 22:17-21, 25:11-2) As Defendants admit, the loans are almost always originated by the Loan Officer sitting at his or her desk in a bank facility. To qualify for the “outside sales” exemption, the employee’s “primary duty” must be to sell at the customer’s home or place of business. See 29 C.F.R. §§ 541.500, 541.700 (2003). But Defendants’ PMK, Mr. Lala, testified that Mortgage Lending Officers don’t spend their time originating 4 In their Opposition, Defendants falsely claim that Mr. Lala “did not testify that LOs who cover Financial Centers spent the majority of their time at these Financial Centers” and contends that “Plaintiffs mischaracterize the deposition testimony of the Bank’s 30(b)(6) designee on the topic of LO job duties, Vijay Lala.” Opposition, p. 2. Mr. Lala’s testimony speak for itself. Mr. Lala’s deposition was recorded, and there is no dispute that the transcript accurately transcribes his testimony. Nonetheless, following Mr. Lala’s deposition, Defendants attempted to rewrite Mr. Lala’s testimony by submitting a long list of “corrections” to the transcript that completely change and fundamentally conflict with what Mr. Lala actually said at his deposition. Defendants’ attorneys cannot simply rewrite deposition answers that they do not like. However, to the extent Defendants’ “corrections” to the transcript change the effect of Mr. Lala’s testimony, they conflict between the two versions presents a question of fact that is inappropriate for resolution through a conditional certification motion. Indeed, whether the change in testimony is credible is a common issue applicable to all class members. Case 2:17-cv-06104-MWF-JC Document 43 Filed 11/05/18 Page 10 of 22 Page ID #:872 Plaintiffs’ Reply In Support of Motion for FLSA Conditional Certification 8 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 loans at the customer home or business but in the office. Q. So for all Lending Officers, both before and after November 2016, those that worked in financial centers spent the majority of their time working in those Bank of America offices; correct? A. Generally. Q. "Yes"? A. Yes. Haffner Decl. I, Dckt No. 36-5, 9/14/18, Exh.10, 38:19 – 39:1.5 29 C.F.R. § 541.502 states that: An outside sales employee must be customarily and regularly engaged ‘‘away from the employer’s place or places of business.’’ The outside sales employee is an employee who makes sales at the customer’s place of business or, if selling door-to-door, at the customer’s home. Outside sales does not include sales made by mail, telephone or the Internet unless such contact is used merely as an adjunct to personal calls. Thus, any fixed site, whether home or office, used by a salesperson as a headquarters or for telephonic solicitation of sales is considered one of the employer’s places of business, even though the employer is not in any formal sense the owner or tenant of the property. However, an outside sales employee does not lose the exemption by displaying samples in hotel sample rooms during trips from city to city; these sample rooms should not be considered as the employer’s places of business. 5 Defendants’ PMK Lala admits that Lending Officers worked at the office and were not engaged in “outside sales” of any sort. As the deposition testimony continues: Q. So for the Lending Officers that work in financial centers, they spend most of their time in the financial centers; correct? A. Correct. Id. at 19:17-20. * * * Q. And did -- did the LO duties change at all before to after November 2016? A. No. Id. at 21:11-13. Case 2:17-cv-06104-MWF-JC Document 43 Filed 11/05/18 Page 11 of 22 Page ID #:873 Plaintiffs’ Reply In Support of Motion for FLSA Conditional Certification 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Similarly, an outside sales employee does not lose the exemption by displaying the employer’s products at a trade show. If selling actually occurs, rather than just sales promotion, trade shows of short duration (i.e., one or two weeks) should not be considered as the employer’s place of business. (emphasis supplied). Again, and again, Defendants’ PMK admits that most, if not all, Mortgage Loan Officers do not leave their offices to make sales. As stated by PMK Lala: Q. And did the Lending Officers who worked in financial centers, did the time that they spent in those centers change at all from before November 2016 to after? A. It shouldn't have, no. Q. And before November 2016, the Lending Officers who worked in financial centers spent over 50 percent of their time there. Fair? A. They're supposed to. Q. Okay. And as far you know, they did; correct? A. As far as I know. Q. Meaning "yes"? A. Yes. Haffner Decl. I, Dckt No. 36-5, 9/14/18, Exh.10, 21:14 – 22:1. * * * Q. And prior to November 2016, it's your understanding that it was the same situation, that those Lending Officers that were tied to Home Loan Centers are the ones that were self-sourced, and those that were tied to financial centers spent the majority of their time working in those financial centers; correct? A. Correct. Id. at 38:8-14. Defendants’ Area Lending Manager, Bill Greene, who oversees a team of class member MLOs, further confirmed that “since November 2016 Lending Officers have been expected to spend a certain amount of time covering the Financial Center.” Greene Dec., at ¶ 4. Finally, the few Mortgage Loan Officers who do not work at financial centers, but instead originate loans away from their own offices of Defendants’ home loan centers, are easily identifiable and can be carved out by using a carefully worded class definition that limits the class to MLOs working out of Case 2:17-cv-06104-MWF-JC Document 43 Filed 11/05/18 Page 12 of 22 Page ID #:874 Plaintiffs’ Reply In Support of Motion for FLSA Conditional Certification 10 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 financial centers. Q. Is there a list of which Lending Officers work out of Financial Centers versus which are self-sourced? A. Yeah, there's a list. Q Okay. And that would include a list of the California Lending Officers? A. I have a list of my own. I don't have the ones for all of California. Q. I know. But you're testifying as the person most knowledgeable for Bank of America. Is there such a list, as far as you understand? A. There will be, yes. Haffner Decl. I, Dckt No. 36-5, 9/14/18, Exh.10, 16:25 – 17:10. * * * Q. For before November 2016, can you identify which Lending Officers worked at financial centers versus which worked at Home Loan Centers? A. I could for my population of Loan Officers, yes. Q. But you're testifying for Bank of America as the person most knowledgeable. Can Bank of America do that for all California Lending Officers? A. They should be able to, yes. Q. Prior to November 2016? A. Yes. Id. at 37:23 – 38:7. Mr. Lala’s testimony directly refutes Defendants’ reliance on the outside salesperson exemption. Indeed, the Ninth Circuit in In Re Wells Fargo explicitly held that this is the type of common evidence supporting class certification as to the validity of an exemption: “A centralized policy requiring employees to be at their desks for 80% of their workday would change this individual issue into a common one. Therefore, such a corporate policy would be highly relevant to the predominance analysis.” In re Wells Fargo Home Mortg. Overtime Pay Litig., 571 F.3d 953, 959 (9th Cir. 2009) (emphasis added). Because Defendants’ PMK has admitted it was Defendants’ policy and expectation “both before and after November 2016” that Lending officers spend a majority of their time at the financial centers, and because class member testimony Case 2:17-cv-06104-MWF-JC Document 43 Filed 11/05/18 Page 13 of 22 Page ID #:875 Plaintiffs’ Reply In Support of Motion for FLSA Conditional Certification 11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 confirms and clarifies the uniform applicability and effect of this policy, the outside salesperson exemption can be determined on predominately common evidence in line with the Ninth Circuit holding in In Re Wells Fargo. In their Opposition, Defendants fail to identify any policy or practice that would require an MLO to spend any significant amount of time engaged in sales activity away from Defendants’ business locations. And more importantly, Defendants fail to provide a single example of any employee who actually spent any significant amount of time engaged in outside sales. Defendants’ inability to identify a single employee who falls within the exemption is telling. Instead of attempting to show that any putative class members actually fall within the exemption, Defendants merely cite to declarations from MLO employees in an unrelated case seeking reimbursement for personal vehicle expenses.6 In those declarations, the MLO employees state that they drove personal vehicles to complete certain activities and to travel to and between Defendants’ various corporate locations. However, the declarants do not say how much time they spent working away from their office locations, how much of that time was spent engaged in sales activities,7 or what percentage of their total working time 6 Similarly, Defendants cite to unsupported allegations in an unrelated case, Uong, et al. v. Bank of America, et al., Case No. 30-2018-01004646-CU-OE-CXC, recently filed in state court. However, Defendants do not support their Opposition with any declarations, deposition testimony, or other evidence regarding these allegations. 7 A significant portion of the declarants’ time away from the office appears to have been spent in transit to and between Defendants’ office locations, as opposed to time spent making sales or conducting business or management operations. See, e.g., ECF No. 29-1, Ex. A, McLeod Declaration at ¶ 13 (in seeking reimbursement, Ms. McLeod “specifically asked about mileage between our retail branches and the financial centers”); McLeod Depo., 126:10-24 (testifying regarding travel to Defendants’ financial centers). Case 2:17-cv-06104-MWF-JC Document 43 Filed 11/05/18 Page 14 of 22 Page ID #:876 Plaintiffs’ Reply In Support of Motion for FLSA Conditional Certification 12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 was spent on such activities.8 In particular, time spent away from the office would not support application of the exemption unless that time was spent engaging in sales activities. Ultimately, it will be Defendants’ burden to show that their employees fall within the claimed exceptions. Again, however, the merits of this defense are not at issue in this Motion. But even if this Court were to consider the merits of the outside sales exemption, and even if the Court were to accept as true all evidence submitted by Defendants on this point, such evidence would be insufficient to show that MLOs assigned to financial services branches actually fall within the claimed exemption. If anything, Defendants’ reliance on out of context statements and unsupported allegations from unrelated cases, which do not actually address the relevant question at hand, further demonstrates the need for additional certification discovery, and illustrates why it would be inappropriate to apply the stricter second-step standard for certification to the instant Motion. Finally, Defendants’ uniform policy classifying all MLOs as exempt regardless of potential variations in job duties also weighs in favor of certification: “An internal policy that treats all employees alike for exemption purposes suggests that the employer believes some degree of homogeneity exists among the employees. This undercuts later arguments that the employees are too diverse for uniform treatment. Therefore, an exemption policy is a permissible factor for consideration under Rule 23(b)(3).” In re Wells Fargo Home Mortg. Overtime Pay Litig., supra, 571 F.3d at 957. 8 Moreover, none of the declarations even distinguish between whether the declarant is a financial center Lending Officer (who are required to spend the majority of time at a branch and primarily handle bank sources loans), or a self- sourced Lending Officer (who are not tied to a financial center and self-source loans). Id. The sales activity of self-sourced Lending Officers is wholly irrelevant to this case, since the class is limited to those MLO’s who worked at the Defendant’s financial centers. Case 2:17-cv-06104-MWF-JC Document 43 Filed 11/05/18 Page 15 of 22 Page ID #:877 Plaintiffs’ Reply In Support of Motion for FLSA Conditional Certification 13 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 While Defendants’ uniform classification of all MLOs as exempt, standing alone, is not independently sufficient for certification, when paired with Defendants’ company-wide policies governing how employees spend their time, and the uniformity in work duties and experiences of MLOs, Defendants’ uniform classification policy is properly considered as an additional factor weighing in favor of conditional certification. As all of these factors show, conditional certification is proper in this case. 2. The Administrative Exemption does not apply because Defendants failed to Pay a Salary and MLOs do not Perform Administrative Tasks. a. The Salary Basis Test The Administrative exemption to the FLSA has a “salary test” as well as a duties test. To fall within the meaning of an “employee employed in a bona fide administrative capacity” the employee must be compensated on a salary or fee basis as defined in the regulations at a rate not less than $455 per week. In order to satisfy the salary basis test, an employee must receive a predetermined amount “free and clear,” without regard to his or her productivity. (See December 11, 1996 Wage Hour Opinion Letter, 1996 DOLWH LEXIS 41; May 4, 1971 Wage Hour Opinion Letter, 1971 DOLWH LEXIS 22; Dunlop v. Martin Brick Co., 1981 U.S. Dist. LEXIS 16861, *9 (N.D. Tex. 1981).) A recoverable draw does not satisfy the salary text because it is not free and clear. In Opinion Letter WH-129, 1971 DOL WH LEXIS 22 at *2 (March 4, 1971), the DOL opined that a draw arrangement such as that used here would violate the salary basis test as stated by the DOL, and relied upon in the case of Takacs v. A.G. Edwards & Sons, Inc., as follows: “In order to meet the requirement of employment ‘on a salary basis,’ the employees in question must be paid not less than $200 per week, free and clear, on the payday for that week. The employer may not satisfy the salary requirement by adopting an offset method whereby deficits in earned commissions are carried forward or earned commissions are held in reserve.” Takacs v. A.G. Edwards & Sons, Inc., 444 F. Supp. 2d 1100, 1109-1110 (S.D. Cal. 2006). Case 2:17-cv-06104-MWF-JC Document 43 Filed 11/05/18 Page 16 of 22 Page ID #:878 Plaintiffs’ Reply In Support of Motion for FLSA Conditional Certification 14 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Here, the proposed Class was admittedly paid on a commission basis only, with a draw advanced against commissions. This is not a salary, and the administrative exemption does not apply. See Koa v. Holiday, 12 Cal. App. 5th 947, 957. (2017) (“The [administrative] exemption is also inapplicable to Kao’s employment . . . because he did not receive the minimum salary required for exempt status”). In an attempt to circumvent the salary-basis requirement, Defendants rely on a 2006 DOL opinion letter that has since been withdrawn. In 1999 and again in 2001, the Department’s Wage and Hour Division issued letters opining that mortgage-loan officers do not qualify for the administrative exemption. See Opinion Letter, Loan Officers/Exempt Status, 6A LRR, Wages and Hours Manual 99:8351 (Feb. 16, 2001); Opinion Letter, Mortgage Loan Officers/Exempt Status, id., at 99:8249. (May 1205 17, 1999). In 2006, the Department issued the opinion letter, relied on by Defendants, finding that mortgage-loan officers fell within the administrative exemption under the 2004 regulations. Four years later, however, the Wage and Hour Division again altered its interpretation of the FLSA’s administrative exemption as it applied to mortgage- loan officers. Id., at 49a–69a. Reviewing the provisions of the 2004 regulations and judicial decisions addressing the administrative exemption, the Department’s 2010 Administrator’s Interpretation concluded that mortgage-loan officers “have a primary duty of making sales for their employers, and, therefore, do not qualify” for the administrative exemption. Id., at 49a, 69a. The Department accordingly withdrew its 2006 opinion letter, which it now viewed as relying on “misleading assumption[s] and selective and narrow analysis” of the exemption example in § 541.203(b). Id., at 68a. Like the 1999, 2001, and 2006 opinion letters, the 2010 Administrator’s Interpretation was issued without notice or an opportunity for comment. In 2015, the Supreme Court in Perez v. Mortg. Bankers Ass’n –– U.S. –––, 135 S.Ct. 1199, 1206 (2015) upheld the last opinion letter wherein the Department Case 2:17-cv-06104-MWF-JC Document 43 Filed 11/05/18 Page 17 of 22 Page ID #:879 Plaintiffs’ Reply In Support of Motion for FLSA Conditional Certification 15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 of Labor stated that typical mortgage-loan officers are not covered by the Administrative exemption to the FLSA’s overtime requirements. Since before the applicable statute of limitations, this issue was completely and clearly resolved by the Department of Labor. Accordingly, this Court should reject Defendants’ misguided attempt to rely on the withdrawn 2006 Opinion Letter in order to avoid the salary basis test. More importantly, however, Defendants do not contest that all class members were similarly regarding the applicability of Defendants’ commission- based pay scheme. Accordingly, the legal question of whether Defendants’ draw against commission pay plan can meet the salary basis test for the administrative exemption will be resolved through common proof and supports conditional certification and circulation of notice. b. The Duties Test In addition to failing the salary basis test, common evidence establishes that MLOs also fail the duties test for application of the federal administrative exemption. It is undisputed that “[t]he primary duty of an MLO is the origination of mortgages and other loan products. An MLO is expected to and does in fact spend the majority of his or her working time originating mortgages and other loan sales and is therefore primarily engaged in the sale of financial products including mortgages. MLOs are not expected to and do not perform tasks relating to bank management or general business operations.” Boswell Dec. at ¶ 5; see also Popescue Dec. at ¶ 5 (same). Because this fact is undisputed, MLOs do not fall within the administrative exemption as a matter of law and application of the exemption is capable of class-wide resolution. To qualify for the administrative exemption, an employee must be paid on a salary basis and must perform as a primary duty “office or non-manual work directly related to the management or general business operations of the employer or the employer's customers” and as part of that primary duty exercise “discretion Case 2:17-cv-06104-MWF-JC Document 43 Filed 11/05/18 Page 18 of 22 Page ID #:880 Plaintiffs’ Reply In Support of Motion for FLSA Conditional Certification 16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 and independent judgment with respect to matters of significance.” 29 C.F.R. § 541.200; Cal. Code Regs., tit. 8, § 11040 1(A)(2). In McKeen-Chaplin v. Provident Sav. Bank, FSB, 862 F.3d 847 (9th Cir. 2017), cert. denied, 138 S. Ct. 471 (2017), the Ninth Circuit recently applied the duties test to determine whether the administrative exemption applied to a class of mortgage underwriters, who were “responsible for thoroughly analyzing complex customer loan applications and determining borrower creditworthiness in order to ultimately decide whether Provident will accept the requested loan.” McKeen- Chaplin, supra, 862 F.3d at 849. The court concluded that “because the underwriters’ duties go to the heart of Provident’s marketplace offerings, not to the internal administration of Provident’s business . . ., Provident cannot prove that the mortgage underwriters qualify for the administrative exemption.” Id. at 851. The court explained that, to qualify for the administrative exemption: “an employee must perform work directly related to assisting with the running or servicing of the business, as distinguished, for example, from working on a manufacturing production line or selling a product in a retail or service establishment.” 29 C.F.R. § 541.201(a). Courts of appeal commonly refer to this framework for understanding whether employees satisfy the second requirement as the “administrative-production dichotomy.” Its purpose is “to distinguish ‘between work related to the goods and services which constitute the business’ marketplace offerings and work which contributes to ‘running the business itself.’ ” DOL Wage & Hour Div. Op. Ltr., 2010 WL 1822423, *3 (Mar. 24, 2010) (quoting Bothell, 299 F.3d at 1127 (quoting Bratt, 912 F.2d at 1070)). In our own words, “[t]his requirement is met if the employee engages in ‘running the business itself or determining its overall course or policies,’ not just in the day-to-day carrying out of the business' affairs.” Bothell, 299 F.3d at 1125 (quoting Bratt, 912 F.2d at 1070); see also Dalheim v. KDFW-TV, 918 F.2d 1220, 1230 (5th Cir. 1990) (describing the dichotomy as distinguishing between Case 2:17-cv-06104-MWF-JC Document 43 Filed 11/05/18 Page 19 of 22 Page ID #:881 Plaintiffs’ Reply In Support of Motion for FLSA Conditional Certification 17 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 “employees whose primary duty is administering the business affairs of the enterprise from those whose primary duty is producing the commodity or commodities, whether goods or services, that the enterprise exists to produce and market”). Id. at 851–52. McKeen-Chaplin’s holding echoes the language of 29 C.F.R. § 541.203, which provides that “an employee whose primary duty is selling financial products does not qualify for the administrative exemption.” Here, while an MLO may analyze financial data in the context of attempting to sell a home mortgage loan, MLOs only do so to support their sales activity.9 This activity is ancillary to their primary duty of selling financial products. In other words, to the extent an MLO may analyze or advise a customer regarding financial products, this work is “work related to the goods and services which constitute the business’ marketplace offerings” (i.e., mortgage loans) as opposed to “work which contributes to ‘running the business itself.’” Id. Accordingly, for the same reasons the Ninth Circuit rejected application of the administrative exemption in McKeen- Chaplin, Defendants cannot claim the administrative exemption in this case. But more importantly, for the purposes of this Motion, class members are similarly situated regarding the work activities they perform for Defendants, and the legal question of whether such activities fall within the administrative exemption is capable of resolution through common proof.10 9 In this regard, the work of an MLO is fundamentally different from the work of a financial advisor. The primary duty of a financial advisor is to advise regarding financial products; the primary duty of an MLO is to sell financial products. All other work performed by an MLO is aimed at accomplishing this goal. 10 The FLSA’s exemption for Highly Compensated Employees is derivative of the administrative. For the same reasons expressed above, Defendants’ arguments concerning this exemption are also meritless. Case 2:17-cv-06104-MWF-JC Document 43 Filed 11/05/18 Page 20 of 22 Page ID #:882 Plaintiffs’ Reply In Support of Motion for FLSA Conditional Certification 18 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 C. The Court Should Toll The Statute Of Limitation In This Action For The Period Of Time That This Motion is Pending. Defendants do not advance any compelling arguments against equitable tolling of Plaintiffs’ FLSA claims. As set forth in Plaintiffs’ Motion, a toll on the statute of limitations would prevent Defendants from receiving any benefit from unsuccessfully opposing Plaintiffs’ motion to circulate notice. In opposition, Defendants contend that Plaintiffs should have filed their conditional certification motion sooner. However, Defendants stipulated to continue briefing on the certification issue to allow the parties to “(a) define the scope of the class and/or any subclasses, and (b) agree to an exchange of information between the parties to further define the scope and parameters of the discovery process.” Boswell, Doc. No. 23. The consolidation of the two cases further drew out this process. And, through its meritless Opposition, Defendants continue to attempt to limit putative class members’ opportunity to opt in to this litigation. Accordingly, equity demands a tolling be applied to preserve the FLSA statute for the benefit of the putative collective class members. III. Conclusion For all the foregoing reasons, Plaintiffs’ Motion for Conditional Certification and for an Order to circulate notice of the pendency of this action should be granted in its entirety and the statute of limitations should be tolled with any other further relief the Court deems proper and necessary. Respectfully submitted, DATED: September 17, 2018 HAFFNER LAW PC By: /s/ Joshua H. Haffner Joshua H. Haffner Graham G. Lambert Attorneys for Plaintiffs Jose Fernandez Case 2:17-cv-06104-MWF-JC Document 43 Filed 11/05/18 Page 21 of 22 Page ID #:883 Plaintiffs’ Reply In Support of Motion for FLSA Conditional Certification 19 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 and Alex Yong DATED: September 17, 2018 STEVENS, L.C. By: /s/ Paul D. Stevens Paul D. Stevens Attorneys for Plaintiffs Jose Fernandez and Alex Yong DATED: September 17, 2018 THIERMAN BUCK LLP By: /s/ Mark R. Thierman Mark R. Thierman Joshua D. Buck Attorneys for Plaintiff Joshua Boswell Case 2:17-cv-06104-MWF-JC Document 43 Filed 11/05/18 Page 22 of 22 Page ID #:884