Are Financial Advisors Entitled to Overtime Pay?

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Successful financial advisers work hard for their money, but should that money include overtime pay?

Depending on the facts of a situation, a person working as a financial adviser may or may not be considered a nonexempt, hourly employee who qualifies for overtime pay if he or she works more than 40 hours a week. Numerous lawsuits have been filed by financial advisers and financial advisers in training seeking overtime pay.

  • In June, Morgan Stanley agreed to pay $6 million to resolve four legal actions accusing the company of wrongly denying financial adviser trainees overtime pay, according to documents filed in Florida federal court.
  • Bank of America Corporation and its Merrill Lynch unit were sued in 2015 by a former financial-adviser trainee who claimed she wasn’t paid overtime for long days and weekend work, according to Bloomberg. Ronni Reiburn worked for Merrill Lynch’s Practice Management Development Program while in training. She claimed she worked more than 60 hours a week on average but wasn’t paid the overtime rate for the hours in excess of 40, violating the federal Fair Labor Standards Act (FLSA). The case later settled.
  • JPMorgan Chase & Co was the target of a 2006 lawsuit by brokers claiming the financial firm denied them overtime pay and illegally made deductions from their commissions. In 2008, the judge in the case denied the defendant’s attempts to have the case dismissed, according to Reuters, and ruled the plaintiffs could bring claims under the FLSA and New York labor law.
  • A 2015 class action case against Bank of America and Merrill Lynch Pierce Fenner & Smith settled earlier this year for $14 million. The case involved 9,500 former trainees who alleged they were denied overtime pay, according to AdvisorHub. Merrill was accused of violating the FLSA by regularly requiring the plaintiffs to work 60 hours and more per week, then put in more hours at client prospecting events and on weekends, without overtime pay.

Federal Law and Exemptions

The FLSA states that most U.S. employees should be paid at least the federal minimum wage for all hours worked and receive overtime pay (at one and one-half the regular rate of pay) for hours worked in excess of 40 hours within a workweek. However, Section 13(a)(1) of the FLSA has an exemption from both minimum wage and overtime pay for those working as bona fide executive, administrative, professional, and outside sales employees. To qualify for an exemption, employees must meet certain tests regarding their job duties and be paid on a salary basis at not less than $913 per week (starting in December 2016).

Those working in the financial services industry may qualify for the administrative employee exemption. To qualify, their primary duties must be as follows:

  • the performance of office or nonmanual work directly related to the management or general business operations of the employer or the employer’s customers, and
  • the exercise of discretion and independent judgment with respect to matters of significance.

financial-advisorFinancial services workers generally fall into this exemption. They are not entitled to overtime pay if their duties include work such as the following:

  • collecting and analyzing information on a client’s income, assets, investments, or debts;
  • deciding which financial products meet the customer’s needs and financial circumstances;
  • advising clients on the advantages and disadvantages of different financial products; or
  • marketing, servicing, or promoting the employer’s financial products.

If employees’ primary duty is selling financial products, they would not qualify for the administrative exemption. When deciding whether this exemption may apply, the focus is on the duties that are performed, not on the identity of the customers they serve.

In the cases above, financial adviser trainees are often filing the lawsuits. Depending on the situation, trainees may not be given the same discretion or duties as a financial adviser and likely would not fall within the exception. A major issue that may come up is how much discretion and analysis the job requires. The more discretion and analysis that is necessary, the more likely the employee is exempt and not eligible for overtime. Jobs that mostly involve selling financial products strengthen an argument that overtime should be paid.

The federal Department of Labor issued an Opinion Letter in 2006 stating that, based on the facts presented, a financial adviser would fall within the FLSA’s administrative exception and would not qualify for overtime pay.

Summing It Up

If you work as a financial adviser or as a trainee, you may or may not fall into the administrative exemption. This decision would be based on the duties of your job.

There are many prior legal opinions on the topic, but each is driven by the facts of the particular case, which may or may not be the same as yours.

Because your right to be paid overtime is based on your actual job duties, if you think you should be paid overtime, get a copy of your job description. Write down what you do and how much time you actually spend doing it. The job description and your actual duties may not match. If it appears that your main function is sales, you might have a valid claim for overtime and treatment as an hourly employee.

If you have any questions about qualifying for overtime pay, contact our office so we can talk about what you do and how the law may apply.