HUD Sets Dynamex Policy For Management And Marketing Contracts

Litigation Inevitable Against HUD M&M FSM Prime Vendor In California Under Dynamex

The US Department of Housing and Urban Development (HUD) has officially waded into the landmine field of a post Dynamex landscape. Foreclosurepedia asked a Senior HUD Official about whether or not HUD Management and Marketing (M&M) Field Service Manager (FSM) Prime Vendors were responsible for employee misclassification of independent contractors under Dynamex. This was the answer,

The simple answer is that the FSMs, regardless of state, are required to abide by all state and local laws. Since the California court has issued the Dynamex decision, the FSM contractors would be required to follow it.

I want that to sink in for just a moment. HUD is stating that there will be no safe haven for its Prime Vendors. Regardless of whether or not the HUD M&M FSM Prime Vendor in California — or any state which follows the ABC Rule — is sued in court, state governments have standing to bring a plethora of bankrupting actions against firms operating in the Mortgage Field Services Industry. One large firm was recently hit for nearly One Million Dollars in fines and penalties for misclassifying employees under the Dynamex ruling.

While we will not get into it in this article, the HUD M&M Asset Manager (AM) Contract determination is identical with respect to Dynamex. Two things to note. First, there is no legal requirement to be a real estate agent or broker to win the contract. And second, the Realtors whom sell those assets could become employees. For those whom believe that the National Association of Realtors (NAR) have the matter under control, I strongly recommend that they take a look at the Coldwell Banker payment of $4.5 Million to settle claims that Realtors were employees and not independent contractors.

For those whom are not familiar with the Dynamex ruling issued earlier this year by the California Supreme Court, it was a case which sent shockwaves throughout not only the Mortgage Field Services Industry, but every industry which employs independent contractors. Officially codified as Dynamex Operations West v. Superior Court, Foreclosurepedia’s dire predictions over the past five years finally came to fruition.

The San Francisco Chronicle put it like this,

Companies like Dynamex, as well as Uber and Lyft, have classified their drivers as contractors and argued that they have enough control over their working lives — setting their own hours, with the freedom to drive for other companies — to be called independent.

But the court said the company, to justify contractor status, must prove, first, that the worker is free, in everyday tasks, from the company’s “control and direction”; second, that the work is “outside the usual course of the hiring entity’s business”; and third, that the worker is regularly engaged in an independent occupation or business of the same type he or she is performing for the company.

You may ask yourself how Dynamex is impacting our Industry. I am glad that you did. As early as 2010, the National Association of Mortgage Field Services (NAMFS) knew that the entirety of their Membership were misclassifying employees. In fact in 2012, Brad Hurst sued Buczek  Enterprises, a NAMFS founding member, claiming to be an employee as opposed to being an independent contractor. That case was Hurst v Buczek Enterprises. Brian Drain, the former CTO of Buczek Enterprises told Foreclosurepedia that Buczek Enterprises paid “… six figures[,]” to make the case go away; however, not before the federal court issued a scaything Opinion. Buczek Enterprises, then a national service provider, is now out of business due to millions of dollars owed to Minority Females and Labor and their inability to pay. Following on the heels of the Hurst Settlement came Fred Bowerman whom sued then Field Asset Services (FAS) now Assurant Field Asset Services in federal court. That suit was codified as Bowerman v Field Asset Services.  The 51 page ruling which the Court handed down not only reaffirmed the Hurst Decision, it chastised AFAS in not to friendly terms. In only seven of 154 cases — the rest are still pending as Assurant forced singular cases hoping to forestall damages — the jury handed down $2.2 million in verdicts. Recently, Assurant Field Asset Services sold to Nationstar, vis-à-vis Xome, for pennies on the dollar. Happening nearly simultaneously, Bennett Vinson sued then Asset Management Specialists (AMS), now owned by Mortgage Contracting Services (MCS). That case was codified as Vinson v AMS – MCS. Seeing the writing on the wall, MCS paid millions in settlements and as opposed to correcting issues, MCS took a far different approach in attempting to obey the law,

MCS rewrote their Master Services Agreement (MSA) with language so draconian in its forbidding of any future class action litigation that many within the California legal community have questioned the constitutionality of the MSA itself.

Former Lender Processing Services (LPS), now ServiceLink, was just sued in San Diego County District Court for identical issues presented in the above captioned matters in Collins v ServiceLink Field Services. And while all of the aforementioned litigation has occurred in a pre Dynamex environment, the ServiceLink case will be ruled upon in a post Dynamex setting. Why is this serious? First, let’s understand what Dynamex is and means. Here is how the US Chamber of Commerce laid it out,

In its April 30 decision, the California supreme court abandoned its so-called Borello test, which consisted of eleven factors established by the court’s 1989 decision in S. G. Borello & Sons, Inc. v Dept. of Industrial Relations.  That decision complicated matters in its own right—a dissenting justice even referred to it as “one of the sadder episodes in the history of this court”—by abandoning longstanding precedent to make it more difficult for employers to establish an independent contractor relationship.

Under the court’s new, more expansive ABC test, a purported employer must satisfy all three of the following conditions in order prove an individual is an independent contractor rather than employee:

(A) that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;

(B) that the worker performs work that is outside the usual course of the hiring entity’s business; and

(C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

As the court noted, in many states an employer may satisfy part B by establishing that the work in question is performed outside all its places of business.  Not to be outdone, the court deliberately removed that element from part B of its new standard, thereby forcing employers to classify an individual as an employee unless that person has essentially no connection to the employer’s business.

To truly understand the ramifications of what the Industry is facing, here is a White Paper which I wrote for the International Association of Field Service Technicians (IAFST) earlier this year,

What we do know is this, those Minority Females and Labor whom are currently performing services upon HUD post conveyance assets have standing to file litigation against the HUD M&M FSM Prime Vendor. The question is whether or not they will chose to do such. If you are one of them, feel free to reach out to Foreclosurepedia to discuss your situation and let us work together to help you continue doing what you do at your best!

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