The attorney representing two former Prudential Douglas Elliman agents suing the company for unpaid earnings is expected to depose several executives at Elliman, including president and CEO Dottie Herman, her partner, Howard Lorber, and top broker Dolly Lenz by the middle of this month.
The two agents, Jane Klaris and Diana Cannon, filed a federal lawsuit claiming that they were treated by the firm as full-time employees but didn’t receive the annual salary plus commissions they expected for working on-site at a new development.
On-site work is a gray area, with some firms hiring agents as employees and
others bringing them on as independent contractors.
Klaris, now a sales agent at the Marketing Directors, and Cannon, no longer working as an agent, claimed in the suit filed in September 2006 and amended May 16, 2007, that they deserved “compensatory damages, liquidated damages, punitive damages and other relief” for working on-site at Cipriani Club Residences at 55 Wall Street.
“As a general matter in the real estate industry as a whole, on-site sales should comply with federal and state wage hour laws, as the brokerage model of compensation will not work on-site,” said the plaintiffs’ attorney, Jeffrey Pagano, partner and co-chair of the labor and employment group at Crowell & Moring. “The reason usually is, the hours and methods are controlled in the on-site context by the selling broker.”
Elliman’s attorney, John Snyder, a partner in the New York City office of Jackson Lewis, said that Elliman’s policy is not to discuss pending litigation.
Cannon and Klaris claim that Elliman enticed them to work on-site at 55 Wall Street, where Elliman is the exclusive sales and marketing agent, with the promise of an $85,000-per-year salary, sales commissions and other payments including coverage of Cannon’s parking expenses. The suit said that Lenz, a vice chairman referenced in the suit, told Cannon and Klaris that “top people doing that work make in excess of $400,000-plus per year.” The suit does not cite any written contracts.
Without a written contract, the plaintiffs have an uphill battle.
“They should have gotten something in writing,” said Stuart Saft, a real estate partner at the law firm of Dewey & LeBoeuf, who has nothing to do with the lawsuit. “If it’s oral, who do you believe?”
Saft said that two-thirds to three-quarters of on-site agents are considered employees and receive an annual salary and health benefits while the rest serve as
independent contractors, earning only a commission.
In Cannon and Klaris’ case, the $85,000 a year they said their salaries were supposed to be was an amount “substantially more than we usually see,” Saft said.
Cannon worked on-site at 55 Wall Street from Feb. 1, 2006, to July 14, 2006. Klaris worked there from Feb. 1, 2006, to May 10, 2006.
They were treated as employees, the suit said, being “required” to work “in excess of 40 hours during the work week, at least six days per week, and often seven days per week.” Both women said that they were only paid twice during their tenure at 55 Wall Street, at a total of $17,500 to Cannon and $20,000 to Klaris.
“Didn’t they realize after the first week that they didn’t get a salary?” Saft asked. The class action lawsuit further alleges that Cannon and Klaris made repeated requests and complaints for payment “through” Lenz; Laura Cordovano, then a managing director; and Karen Chesleigh, director of human resources. As executive and managerial employees of Elliman, the three were not named as defendants.
Cannon maintained in the suit, which leaves to the jury the amount of compensation, that after pressing for payment, Elliman “retaliated against her by terminating her employment at the sales office and purporting to terminate her separate salesperson agreement” with the firm. The suit also said that following termination, she did not receive commissions on transactions on which she worked prior to termination, in violation of her Jan. 9, 2004, contract with the company.
Commission disputes are nothing new. “These types of lawsuits are not uncommon,” said Terrence Oved, a partner at Oved & Oved law firm, who is not involved in the lawsuit.
In another case, real estate broker Wilbur Gonzalez, now at Brown Harris Stevens, filed a state lawsuit in January against the Corcoran Group and the Sunshine Group, or Corcoran Sunshine Marketing Group, for unpaid commissions and merit bonuses earned while selling condos at the André Balazs-designed 40 Mercer Street. The suit, filed Jan. 8, says the company failed to give Gonzalez $525,134.20 in commissions and “an agreed-upon merit bonus of $250,000.” Gonzalez’s attorney, Debra Guzov of Guzov Ofsink, said they are waiting for the judge to rule on Corcoran Sunshine’s motion to dismiss the complaint. Corcoran declined to comment on the suit.
In yet another case, former Core Group Marketing agent Joseph Bongiovanni is suing the company and its key people for allegedly keeping more than $51 million in his commissions (see Web hits, first item). The suit was filed in New York State Supreme Court March 7. Shaun Osher, co-founder and CEO of Core, wrote in an e-mailed statement: “We look forward to the permanent resolution of Mr. Bongiovanni’s claims in court in our favor.”
A new state law, which was not yet in effect at the time the Elliman employment dispute arose, attempts to stave off commission disputes by requiring employers to draw up a written document outlining the terms of employment for commissioned salespersons, signed by both sides. The law, which became effective Oct. 16, 2007, mandates that the contract describe how money paid is calculated and how commissions will be paid upon termination of employment or resignation. If an employer fails to comply, the Department of Labor will assume that the terms outlined by the commissioned salesperson are the agreed-upon terms of compensation.
Cannon was terminated from Elliman, and her license expired as of Jan. 9, 2008, according to the New York State Department of State, the agency that issues real estate licenses. Klaris left the company of her own accord and is now a sales agent at the Marketing Directors, working on-site at the Setai. On-site sales agents at the Marketing Directors are paid as employees with salary plus commissions and health benefits.
When Elliman filed a motion to dismiss, the judge rejected five counts as well as all claims against co-developers of the project Cipriani USA and the Witkoff Group. The plaintiffs are sticking with the remaining six counts against Elliman, Pagano said. “We’re prepared to go to trial,” he added.
Because the complaint survived Elliman’s motion to dismiss and because the judge dismissed the remaining co-defendants from the case, Oved of Oved & Oved said the case is likely to be settled.
“The financial costs and attendant negative publicity to both sides of fully litigating this matter relative to the amounts sought by the plaintiffs make it particularly well suited for settlement at this juncture,” he said.