On September 17, 2013, the U.S. Department of Labor released its final rule extending federal minimum wage and overtime protections to approximately two million home care workers who care for the disabled, ill, and elderly.  The new rule narrows the companionship exemption under the Fair Labor Standards Act (“FLSA”).  The final rule was announced nearly two years after the Obama administration first proposed the rule and after receiving approximately 26,000 public comments.  The Department of Labor issued the new rule because the home care industry has radically changed and grown since Congress created the companionship exemption.

Since 1974, “domestic service” employees have been covered by the FLSA and have included cooks, housekeepers, maids, and gardeners.  However, there were three exemptions under the FLSA relating to “domestic service” workers: (1) casual babysitters, (2) those providing “companionship services” such as companions for elderly persons or persons with an illness, injury or disability and (3) live-in domestic workers.

The final rule contains significant changes from the prior regulations, including: (1) the tasks that comprise “companionship services” are more clearly defined and (2) exemptions for live-in domestic service employees and companionship services are limited to the family, household, or individual using the services.  The new rule prohibits third party employers, including home care agencies, from claiming live-in or companionship exemptions.  The final rule with become effective on January 1, 2015 in order to give Medicaid programs and families who use these home care workers time to prepare.

Abbey Spanier, LLP, located in New York City, is a well-recognized national class action and complex litigation law firm.

The Fifth Circuit held that Signal International will have to pay a class action judgment because the company violated the Worker Adjustment and Retraining Notification Act (the “WARN Act”).  The WARN Act requires that certain employers provide written notice within 60 days in advance of any “mass layoff” at a “single site of employment.”  The Fifth Circuit agreed with the district court’s ruling that Signal International’s two facilities were a single site of employment for purposes of determining whether there had been a mass layoff.  Generally, two locations are considered separate sites, however, this case qualified under the exception for “truly unusual organizational situations” since the employees had been moved to two locations after Hurricane Ike.

From July to September 2009, Signal International laid off 159 employees without providing advance written notice.  Signal International argued that the WARN Act was inapplicable for two reasons.  First, Signal argued that the company’s two facilities were not a single site of employment.  The Fifth Circuit rejected this argument noting that the sites shared employees and used the same security, payroll, and other staff.  The Circuit Court also rejected the argument that the sites had different operational purposes.  The Fifth Circuit explained that “[o]f course it is true that different units within the same operation will have different purposes if one dissects those purposes finely enough. However, what matters in determining whether separate facilities constitute a single site of employment is not the immediate purpose of this or that facility, but rather what ultimate operational purpose is served by the facilities.”

Signal International also argued that the district court chose the wrong date as the “snapshot” date for measuring employment levels to determine whether the layoff was large enough to trigger the WARN Act.  The Fifth Circuit concluded that the district court had “plenty of reasons” to use this date including that the date was based on a specific example from the WARN Act preamble in which the Labor Department embraced the use of the date immediately preceding the first layoff (“Day 1”) and the date was relied on by the district court and parties for over two years.

Abbey Spanier, LLP, located in New York City, is a well-recognized national class action and complex litigation law firm.

We have another update regarding litigation involving the United States Treasury’s Home Affordable Modification Program (“HAMP”).  See some of our HAMP related posts here, here and here. As explained in some of our prior posts, the HAMP was created by the federal government to combat the national foreclosure crisis. The program was specifically designed to allow eligible homeowners who are about to default on their mortgages to save their homes by modifying the terms of their loans.

The HAMP was supposed to work in the following way. Under the program, mortgagors seeking to reduce their monthly mortgage payments, make an application to their loan servicer and request a loan modification. After a borrower applies for a loan modification, loan servicers are required under HAMP regulations to determine, based on all financial information submitted by the borrower, whether the borrower is eligible for a loan modification which would reduce the borrower’s monthly loan payment. Before a borrower receives a permanent modification, a loan servicer and a borrower enter into a three-month trial period, during which the borrower makes lower monthly payments towards his/her mortgage.

In most cases, the terms of the trial period are governed by a form trial period payment contract (the “TPP”). The TPP usually explains that the lender will send the borrower a permanent modification agreement if: (i) the borrower’s representations about his financial state continue to be true, and (ii) the borrower complies with the terms of the TPP (including making three timely trial payments). The TPP also states that at the end of the three month trial period the loan servicer will provide the borrower with a permanent modification if he/she is qualified, or will send the borrower a written denial if he/she does not qualify.

Back in May 2012, several plaintiffs filed a putative class action complaint in the Eastern District of Pennsylvania alleging that defendants Saxon Mortgage Services, Inc. (“Saxon”) and Ocwen Loan Servicing, LLC failed to permanently modify their mortgage loans after they fully complied with all of their obligations under the TPP. The complaint included claims for breach of contract, breach of the duty of good faith and fair dealing, promissory estoppel, violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law, and Violation of the Fair Debt Collection Practices Act.

In its motion to dismiss, defendant Saxon argued that plaintiffs’ had failed to adequately allege that it had a duty under the TPP to provide plaintiffs and other homeowners with permanent modifications.  Based on Saxon’s interpretation of the TPP, it was not obligated to permanently modify plaintiffs’ mortgages until it determined after the trial period was complete that plaintiffs were qualified under the HAMP guidelines.

In an opinion dated May 9, 2013, the Honorable John Padova rejected Saxon’s argument finding that the TPP obligated Saxon, after it returned the executed TPPs to plaintiffs, to provide plaintiffs with permanent modifications as long as the plaintiffs made all of their trial payments on time and their financial information continued to be true and accurate. In his ruling, Judge Padova stated, “[i]n sum, we conclude that Saxon’s theory that the TPP permitted it to determine whether Plaintiffs qualified under HAMP guidelines after the trial period began conflicts with the plain terms of the TPP.”

As part of Saxon’s motion to dismiss, it also argued that plaintiffs’ alleged damages (i.e. payment of increased interest, longer loan payoff times, higher principal balances, deterrence from seeking other remedies to address their default and/or unaffordable mortgage payments, damage to their credit, additional income tax liability and costs and expenses incurred to prevent or fight foreclosure) were not the result of its refusal to provide plaintiffs with permanent modifications, but instead resulted from plaintiffs’ default on the terms of their original mortgages.  The Court rejected Saxon’s argument holding plaintiffs had adequately alleged damages:

If Saxon had provided Plaintiffs with permanent modifications, it is reasonable to infer that they would not have incurred, inter alia, increased principal, interest, and longer loan payoff times that accrued after the end of their trial periods, and may have sought other remedies to address their unaffordable mortgage payments.

Saxon’s motion to dismiss was denied in its entirety and the plaintiffs will now seek class certification.

Abbey Spanier, LLP, located in New York City, is a well-recognized national class action and complex litigation law firm.  Abbey Spanier is following many of the HAMP related class action lawsuits and will report on any significant litigation developments.