Ex-Sprout Mortgage staff sue for three weeks of owed back pay

Former Sprout Mortgage workers are suing the lender over its abrupt closure last week, alleging CEO Michael Strauss denied employees their final three weeks of pay.

Nathaniel Agudelo and Helen Owens, both former closing disclosure specialists, filed the class action suit Friday in the Eastern District of New York U.S. District Court against Sprout and its parent company, Recovco Mortgage Management. The East Meadow, New York-based lender shut down July 6, one day before payday, according to former workers. 

“These employees are now left holding the bill for the company’s decision to take this drastic action without warning, which we believe violates federal and state law,” said attorney Brenna Rabinowitz of New York-based Menken Simpson & Rozger, in a statement on behalf of plaintiffs. “We hope the federal lawsuit we have filed on behalf of Sprout Mortgage’s employees secures justice for those affected.”

Strauss allegedly instructed unnamed employees not to issue paychecks to impacted staff for the pay period between June 16 and June 30. At least nine workers according to the suit said they also haven’t been paid for July 1 through July 6, which would be due July 22.

Sprout hasn’t commented publicly since last week’s alleged shutdown, although staff including at least three executives have posted about the closing on LinkedIn. Websites for both the lender and its parent company have no announcements, and their phone lines do not connect to a live person. Strauss and company president Shea Pallante didn’t immediately respond Monday to messages seeking comment. 

At least 300 employees were told they were terminated in a videoconference last week by Pallante, according to the complaint citing media reports. Pallante allegedly told staff their health benefits would run through the end of July but refused to confirm whether they would be paid.

The former employees, in addition to suing for unpaid wages, also accuse Sprout of violating federal and New York Worker Adjustment and Retraining Notification Acts, in which the lender was obligated to provide advance notice of its layoff and shutdown.

Sprout is the second mortgage company to face lawsuits over WARN Act violations, after Plano, Texas-based First Guaranty Mortgage Corp. laid off nearly 80% of its staff in late June. The PIMCO-backed firm is facing at least four class action complaints in a Texas federal court, and filed for bankruptcy July 1.

Thousands of mortgage professionals have been laid off since the beginning of the year as the industry responds to a declining mortgage market, although many cuts haven’t been disclosed through their respective states’ WARN disclosures.