Stockbrokers May not Be Exempt Employees

Recently, several large financial services firms, including Merrill Lynch, Morgan Stanley and UBS, have paid more than $160 million to settle state and federal overtime lawsuits brought by stockbrokers and financial advisors. The core issues in these cases suggest the risks employers face in classifying employees as “exempt” from federal and/or state minimum wage and overtime statutes.

The plaintiff stockbrokers and advisors involved in these actions alleged that they were falsely classified as “administrative” employees, exempt from overtime pay requirements pursuant to the so-called “white collar” exemptions from the Fair Labor Standards Act. The administrative exemption is available for employees who are:

1. salaried, at a rate of no less than $455.00 per week;
2. primarily engaged in “the performance of office or non-manual work directly related to the management or general business operations of the employer or [its] customers”; and
3. able to exercise “discretion and independent judgment with respect to matters of significance” in the fulfillment of their primary activities.

Plaintiffs asserted that their duties made them internal salespeople, and that they were unable to exercise the degree of discretion and independent judgment required under the exemptions.

Each of the firms involved in these settlements continue to maintain that employees were exempt. The remaining cases, or future actions, may provide guidance regarding the proper classification of stockbrokers, financial advisors and similar employees.