Are New Home Sellers Exempt from Overtime?
KB Home sales representatives say they don't get their commissions until a house sale closes.
Derek Queen typically worked 75 hours a week as a salesman for KB Home. He was a top seller and eventually was promoted to regional manager. But his time selling new homes in subdivisions that ring Houston was brutal.
"You don't have days off," said Queen, who stood before a microphone Thursday morning with other former KB Home employees to focus attention on an industry practice of treating employees in new-home sales centers as outside sales representatives who aren't entitled to the minimum wage or overtime. During his 3½ years with the company, Queen sometimes didn't earn more than $30,000 a year.
Some employees earned nothing for weeks at a time, and their pay worked out to less than $3 an hour, said lawyer Rhonda Wills, who said she filed the case and others like it to change the "outrageous" way the homebuilding industry pays its workers.
Wills is representing 406 former and current sales KB Home employees, including 75 in the Houston area, who contend they were classified improperly as outside salespeople to run the seven-day-a-week operation. The case is scheduled for trial before U.S. District Judge Gregg Costa in December.
Employees earn $1,000 to $2,500 commission for each sale, depending upon the size of the house and the neighborhood, Wills said. She believes KB Home owes more than $10 million in back wages.
The homebuilder, headquartered in Los Angeles, said in a written statement that it cannot comment on pending litigation.
In court documents, however, KB Home maintains it classifies its salespeople properly as exempt employees ineligible for overtime or minimum wage.
The KB Home case is similar to others Wills has filed against large builders over how they pay their sales representatives, including Meritage Homes, Ryland Homes and Perry Homes. All three made confidential settlements.
"Meritage was very pleased with the settlement," said Scott McLaughlin, an employment lawyer with Jackson Walker, who represents the homebuilder. The company always has classified salespeople as exempt, and still does, McLaughlin said.
Ryland Homes and Perry Homes representatives declined to comment.
KB Home sales representatives said they don't receive their commissions until a house they sell is built and the sale closed, a wait of four months or more.
"You feel stuck." said Lacy Vinson, who worked seven years for KB Home.
When Ryan Walters left the company, he departed before earning commissions on several houses he sold but hadn't closed yet. Walters said he relied on advance draws against his commissions and never earned more than $29,000 a year.
The sales employees also obtained mortgage applications, ran credit checks and prepared sales documents, according to the lawsuit originally filed in 2011. They did all the work in KB offices.
Employees were required to make cold calls for two or more hours each night, according to the suit, but were not compensated for participating in what the suit referred to as "call-a-thons." Nor were they paid to attend mandatory sales meetings and training seminars.
Houston employment lawyer Ed Sullivan of Oberti Sullivan is not familiar with the specific circumstances in the KB Home case. But he has been reluctant to take on clients with similar complaints because of a 2007 opinion by the U.S. Department of Labor.
The opinion addressed a question from an unnamed trade association about whether new-home sales employees who work out of model homes or temporary trailers would be considered exempt outside salespeople. In light of the facts presented - which included working in temporary quarters away from the company's primary place of business - the Labor Department determined that the sales employees were likely exempt.
But the letter also noted "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."
L.M. Sixel
Business Writer / Workplace Columnist, Houston Chronicle
Read the original article at the Houston Chronicle.