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Former Employees Sue Sprout Over Unpaid Wages

David Krechevsky
Jul 12, 2022
Court Justice

Lawsuit seeking class action status names Sprout, CEO, and affiliate Recovco Mortgage Management as defendants.

Two former employees have filed a lawsuit against Sprout Mortgage on behalf of all former staff seeking to recover unpaid wages and other compensation from the mortgage lender that abruptly closed last week.

The lawsuit, which seeks class action status, was filed July 8 in U.S. District Court for the Eastern District of New York by the law firm Menken Simpson Rozger LLP on behalf of plaintiffs Nathaniel Agudelo of Florida and Helen Owens of New Jersey. Both are described as former closing disclosure specialists employed by Sprout Mortgage.

The lawsuit names as defendants Recovco Mortgage Management LLC, Sprout Mortgage LLC, and Michael Strauss, Sprout’s CEO. The lawsuit states that both Recovco and Sprout are incorporated in Delaware but have offices at 90 Merrick Ave. in East Meadow, N.Y. 

“Upon information and belief, at all relevant times, Corporate Defendants operated as a single integrated enterprise and held themselves out as Recovco and Sprout interchangeably,” the lawsuit states. “For example, upon information and belief, employees of Corporate Defendants received paychecks and offer letters purporting to be from Sprout, but employees’ ADP benefits accounts are affiliated with Recovco.”

The suit further notes that a filing with the Rhode Island Secretary of State office indicates that Recovco Mortgage LLC “used the fictitious name of ‘Sprout Mortgage’ in that state from September 2018 to April 2020,” and that while “no entity named ‘Sprout Mortgage LLC’ is registered with the New York Secretary of State, ‘Recovco Mortgage LLC’ is registered" and has the same address as Sprout.

The lawsuit also states that Strauss, “directed various other individuals not to pay the outstanding wages owed to the terminated employees,” and “directed the closure of Defendants’ business and the non-payment of all employees’ paychecks from New York.”

Sprout abruptly closed on July 6 following a short, virtual meeting held via Microsoft Teams at 4:30 p.m. Company President Shea Pallante hosted the meeting, informing the company’s more than 300 employees, “So, it’s with heavy heart I come to you to announce that Sprout is closing its doors today. So, effective today everyone is laid off.”

The closing and layoff came just one day before payday, and employees said their pay was not deposited the following day. 

The lawsuit states that paychecks scheduled to be delivered on July 7 would have covered the work period from June 16-30. It adds that employees also are due paychecks for work from July 1 through their termination on July 6, which would have been scheduled to be paid on July 22.

The lawsuit states that the action has been filed on behalf of the two plaintiffs, Agudelo and Ownes, “and all similarly situated current and former employees pursuant to the Fair Labor Standards Act (FLSA) and, specifically, the collective action provision of the FLSA, to remedy violations of the wage and hour provisions of the FLSA by Corporate Defendants that have deprived Plaintiffs and others similarly situated of their lawful wages.”

The lawsuit also cites violations of the federal Worker Adjustment and Retraining Notification Act (WARN Act), claiming the defendants failed to provide the required notice of a closing or mass layoff. Under New York state’s more strict version of the WARN Act, companies are required to provide 90-days written notice of a closing or mass layoff.

The lawsuit seeks to recover “unpaid wages, back pay, front pay, compensatory damages, punitive damages, attorneys’ fees, costs, and interest.”

Neither company nor Strauss have commented on the lawsuit.

The law firm Menken Simpson Rozger LLC states on its website that any former Sprout employee affected by the company’s closing may contact them via email at brabinowi[email protected] and should include a name and phone number.

The New York Attorney General’s office said former employees also may filed complaints with its office via its website.

Jul 12, 2022
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