United States District Court, D. Colorado
ORDER
Scott
T. Varholak United States Magistrate Judge
Magistrate
Judge Scott T. Varholak This matter comes before the Court on
Plaintiff's Motion for Summary Judgment
(“Plaintiff's Motion”) [#33] and
Defendant's Motion for Summary Judgment
(“Defendant's Motion”) [#32] (collectively,
the “Motions”). The Motions are before the Court
on the parties' consent to have a United States
magistrate judge conduct all proceedings in this action and
to order the entry of a final judgment. [##15, 16] This Court
has carefully considered the Motions and related briefing,
the entire case file, and the applicable case law, and has
determined that oral argument would not materially assist in
the disposition of the Motions. For the following reasons,
Plaintiff's Motion [#33] is GRANTED IN
PART and DENIED IN PART and
Defendant's Motion [#32] is GRANTED IN
PART and DENIED IN PART.
I.
BACKGROUND[1]
Plaintiff
Erin Easter was employed by Defendant Zions Bancorporation,
d/b/a Zions Management Services Company, from November 7,
2015 to November 12, 2017 as a Quality Control Analyst II
(“QC Analyst”). [#42-1, ZSOF2] Defendant is a
national bank and an employer within the meaning of the Fair
Labor Standards Act (“FLSA”). [Id. at
ZSOF1] Plaintiff was assigned to the Risk Management Unit
within Defendant's Enterprise Mortgage Lending division.
[Id. at ZSOF2]
Plaintiff's
department was responsible for reviewing the work of the loan
originators, processors, underwriters, and closers. [#43-1,
ESOF3] As a QC Analyst, Plaintiff performed audit and quality
control functions for loan originations. [#42-1, ZSOF3] The
job description for the QC Analyst position sets forth the
job duties as follows:
Performs audit functions for both risk controls and
regulatory Quality Control to ensure compliance and provide
framework for management to examine and adjust policy and
procedures. Validates standards, measures performance and
determines compliance with mortgage originations, which
includes trending, reporting loan defects and ensures that
loans delivered to investors meet agency guidelines and sound
underwriting decisions. Identifies and assesses operational
risk and impact and makes recommendations for effective
policies and controls to manage risk within various
operational functions. Re-underwrites original credit and
collateral lending decisions, identifying red flags, and
determining if targeted loan selections met the terms,
conditions, representation and warranties of the applicable
contractual documents and underwriting guidelines relevant to
the origination of the loan file(s). Additional activities
include preparation of written loan summaries. Other duties
as assigned.
[Id. at ZSOF8; see also #32-7]
The
parties dispute whether Plaintiff's duties differed from
those set forth in the job description. [#42-1, ZSOF10]
Nonetheless, the parties agree that, due to Plaintiff's
expertise in the specialized area of flood insurance,
Plaintiff spent most of her time reviewing individual
mortgage loan files for properties located in flood
zones.[2] [Id. at ZSOF30] This was the only
task that she performed on a daily basis. [Id.]
For
properties located in flood zones, an underwriter would need
to send the file to a QC Analyst for review before the loan
could be funded. [#43-1, ESOF5] The QC Analyst would consult
lengthy checklists to determine whether certain conditions
were satisfied. [#42-1, ZSOF38; see also #32-13 at
21-24; #33-7] Defendant provided Plaintiff with these
checklists. [#43-1, ESOF17] Plaintiff had some role in
modifying the checklists, though the parties dispute the
extent of that role. [Id. at ESOF18-19; #42-1,
ZSOF36] There was a general pre-funding checklist that
appears applicable to all mortgage loans, and a separate
checklist that was specific to loans for properties located
in flood zones. [#43-1, ESOF20; see also #32-13 at
21-24; #33-7]
Some of
the questions on the checklists were straightforward and
easily answered. For example, the checklists asked whether
the initial application was in the file, whether the initial
application was signed and dated by all parties, whether the
income documentation was less than 120 days old, and whether
certain notices had been provided at least ten days prior to
closing. [#32-13 at 21-24; #33-7] Other questions, however,
appear to involve more subjective evaluations. For example,
the checklists ask whether adverse credit history was
“adequately explained, ” whether the income
documentation was “sufficient and from acceptable
sources, ” whether the appraiser “adequately
described” the neighborhood and site, and whether there
was “adequate evidence” of flood insurance
coverage in the file prior to closing. [Id.]
Plaintiff did not have any authority to deviate from the
checklists. [#43-1, ESOF41]
In
reviewing flood insurance issues, Plaintiff was making
determinations about “Level 3 issues, the most serious
from a risk-perspective analysis.” [#42-1, ZSOF#34]
Whenever there was a grey area, and Plaintiff was unsure
whether her flood analysis complied with federal regulations,
she would consult either higher management or the Compliance
Department. [Id. at ZSOF37; #43-1, ESOF40] Plaintiff
testified that she consulted the Compliance Department about
once a month and consulted higher management about twice a
week. [#42-1, ZSOF41-42]
Upon
completing the flood review checklist, Plaintiff would email
the checklist to the loan originators and
processors.[3] [#43-1, ESOF23; see also #33-2 at
¶ 7] If Plaintiff noted an error, known as an
“exception, ” during her pre-funding review, she
would escalate that exception to her managers and the
Compliance Department. [#42-1, ZSOF20; #43-1, ESOF24; see
also #33-2 at ¶¶ 7, 16] Such an exception
could prevent the funding of the loan. [#43-1, ESOF6] On the
other hand, if a file was approved by Plaintiff's
department, the loan was typically funded and closed.
[Id. at ESOF3] Despite the fact that her review
could impact whether a loan was approved or funded, Plaintiff
herself could neither approve a loan nor make decisions
regarding whether Defendant should take on certain kinds of
credit risk. [Id. at ESOF36, 38] Of her flood review
work, Plaintiff spent approximately 75 percent of her time
reviewing files before the loan closed. [Id. at
ESOF10]
The
remaining 25 percent of Plaintiff's flood review work
involved reviewing files after the loan closed.
[Id.] After a loan in a flood zone closed, the
Quality Control Department would review some files to ensure
full compliance. [Id. at ESOF7] As she did with her
pre-closing reviews, Plaintiff utilized a checklist to
conduct the post-closing reviews. [#42-1, ZSOF40; see
also #32-13 at 4-6] The post-closing checklist asked
similar questions to the pre-closing checklists.
[Compare #32-13 at 4-6, with Id. at 21-24]
The post-closing checklist was promulgated by a third-party
vendor, Banker's Advisory, but Plaintiff and her
co-workers made some revisions to the checklist. [#42-1,
ZSOF17, 40] The parties dispute whether Plaintiff's
revisions were substantive or merely stylistic. [Id.
at ZSOF40]
As part
of her post-funding review, Plaintiff would look for red
flags, which were extreme errors. [Id. at ZSOF29;
#43-1, ESOF15] One example of a red flag would be when a file
closed without a pre-funding flood review. [#43-1, ESOF15]
Such red flags were rare, generally occurring only a couple
of times per month. [Id.]
In
addition to directly reviewing loan files, Plaintiff was also
involved in the review of loan audits conducted by
Banker's Advisory. [#42-1, ZSOF17] Plaintiff conducted a
monthly “post-closing” review of Banker's
Advisory's loan audits. [Id.] This post-closing
review appears to have two primary components. First,
according to Plaintiff, she and another employee would review
the loan documentation presented by Banker's Advisory for
any findings that Banker's Advisory would point out.
[#32-4 at 61 (240:11-21)] If Plaintiff and the other employee
agreed with the findings, they would not make any changes.
[Id. (240:21-22)] If they disagreed, Plaintiff would
tell Banker's Advisory about the disagreement and
Banker's Advisory would have an opportunity to respond.
[Id. at 61-62 (240:22-241:3)] Second, Plaintiff
would take a limited sample of the loans audited by
Banker's Advisory and conduct a complete due diligence
review of those loans. [#42-1, ZSOF17]
In
addition to her review of loan files, Plaintiff was also
responsible for aggregating the number of exceptions and
providing the monthly aggregate to management. [Id.
at ZSOF21; #43-1, ESOF12] Management told Plaintiff which
numbers to aggregate. [#43-1, ESOF13] Management likewise
decided whether any action should be taken based upon the
numbers Plaintiff provided. [Id. at ESOF14] Some of
these reports would eventually go to Defendant's Board of
Directors. [#42-1, ZSOF21; see also #32-4 at 47
(195:2-6)] The results of the reports would be used to guide
bank policy for Sarbanes-Oxley compliance. [#42-1, ZSOF44]
Nonetheless, Defendant is unaware of any specific policy
changes that resulted solely from Plaintiff's actions.
[#43-1, ESOF34]
As a QC
Analyst, Plaintiff earned an annual salary of between $70,
000 and $72, 000. [#42-1, ZSOF5] Defendant classified
Plaintiff's QC Analyst position as an exempt
administrative position under the FLSA. [#42-1, ZSOF6]
Defendant made the classification before it had hired anyone
to fill the position and, as a result, Defendant primarily
relied upon the QC Analyst job description in concluding that
the position was an exempt administrative position.
[Id. at ZSOF12; #43-1, ESOF53] Because Defendant
determined that the position was exempt from FLSA's
requirements, Defendant did not pay Plaintiff overtime
despite knowing that Plaintiff occasionally worked more than
forty hours per week. [#43-1, ESOF43-44]
In
August 2017, Plaintiff raised concerns with human resources
that her position was misclassified as exempt. [#42-1,
ZSOF47] Plaintiff's concerns were brought to the
attention of Jonathan Hart, the human resources professional
who originally classified the position as exempt. [#32-6 at
7-8 (194:20-195:5), 11-12 (204:22-205:5)] According to Mr.
Hart, he “reviewed the job in . . . with the management
team to make sure that the job description accurately
reflected the job duties of what the quality control analysts
were doing, and [he] received an answer that . . . the job
description was accurate.” [Id. at 13-14
(206:22-207:2)] Following Mr. Hart's discussions,
Defendant did not change Plaintiff's classification to
non-exempt. [#42-1, ZSOF48]
In May
2018, Defendant hired an outside law firm to independently
review whether the QC Analyst position was properly
classified as exempt. [Id. at ZSOF49; #43-1, ESOF58]
This law firm did not interview Plaintiff, though it did
interview three other QC Analysts regarding their job duties.
[#43-1, ESOF59] While ultimately concluding that the QC
Analyst position should remain exempt, the outside firm
acknowledged that “the position does not so obviously
exceed the requirements for the administrative exemption such
that any risk of an opposite determination is entirely
foreclosed.” [Id. at ESOF62; #32-14 at 3]
During
the relevant time-period, Defendant had an Employee Handbook.
[#42-1, ZSOF51; see also #32-15; #36-5] Section 3-2
of the Employee Handbook described the differences between
exempt and non-exempt employees. [#36-5 at 6] It explained
that exempt employees do not receive overtime pay, while
non-exempt employees were entitled to overtime pay for hours
worked in excess of forty per week. [Id.] For
non-exempt employees, the Employee Handbook provides that
“all time worked will be paid when required by
applicable law at the appropriate overtime rate.”
[Id. at 9] The Handbook Overview section of the
Employee Handbook states: “This Handbook is intended to
be an outline of policies and procedures only and, except for
the arbitration provisions (which do create a binding dispute
resolution contract), does not create a contract of continued
employment, nor does it create any enforceable contractual,
equitable, or other rights.” [#32-15 at 6 (emphasis
omitted)]
On
April 6, 2018, Plaintiff initiated this action in the
District Court for the City and County of Denver. [#3]
Defendant removed the matter to this Court on June 29, 2018.
[#1] The Amended Complaint brings two causes of action: (1)
violation of the FLSA for failing to pay overtime
compensation, and (2) breach of contract. [#4] On June 21,
2019, Defendant moved for summary judgment [#32] and
Plaintiff moved for partial summary judgment [#33]. Each side
has responded to the other party's motion [##36, 37], and
each side has filed a reply in support of their motions
[##42, 43].
II.
...