Federal law requires employers to pay minimum wage and overtime to all non-exempt employees. Overtime pay is calculated as one and one-half times the workers’ normal rate of pay for any time worked above 40 hours per week. Thus, employers have an incentive to misclassify employees as exempt. The most commonly used exemption in the financial services industry is for “administrative employees.” However, if any of the three requirements for the exemption are not satisfied, the employee is not administrative, and the employer may be violating federal law in order to avoid adequately compensating its workers.
Call The Lore Law Firm today to speak with a financial services workers overtime pay lawyer about your rights. If you choose to pursue legal action, our contingency fee arrangement guarantees you won’t pay anything unless we secure the compensation you deserve.
How Are You Compensated
First, the employee must be compensated on a salary or fee basis of at least $455* ($684 as of 1/1/2020) per week. This means that an individual paid only in commission but designated an administrative employee must be guaranteed a minimum of $455* each week ($684 as of 1/1/2020), or the arrangement is illegal. Arrangements in which employees are paid this minimum amount as a “draw” or “a loan against future commission” violate this requirement.
Administrative Functions Defined
Second, the employee’s primary duty must be to perform work directly related to the management or general business operations of an employer. The marketing, sale, and servicing of financial products and services is the business of financial services employers, and therefore these employees are engaged in production or selling, rather than administrative functions.
Discretion & Judgment
Finally, the employee’s primary duty must include the exercise of discretion and independent judgment with respect to matters of significance. If the employee must adhere to strict and detailed guidelines, he is not administratively exempt. Specifically, commissioned mortgage loan officers are not administrative employees, regardless of what the employer says. Likewise, employees engaged in the marketing or sale of financial products and services do not qualify for the exemption. Even well-paid employees may be misclassified and entitled to overtime. “Highly compensated employees” are another group of exempt employees. But the employee must be paid at least $100,000* ($107,432 as of 1/1/2020) per year in guaranteed compensation, in addition to satisfying either the second or third requirements of the “administrative employee” exemption related to an employee’s duties.
Misclassification of Financial Service Industry Employees
Financial service industry employers across the country have for years misclassified thousands of employees, depriving them of wages to which they are entitled under the Fair Labor Standards Act. Misclassified employees have begun to fight back in recent years and have recovered significant sums of money, including:
- August 2020: U.S. Bank settles with a class of mortgage loan originators in California who claimed they did not receive overtime pay, earned commissions, proper meal and rest breaks, or timely final payment of commissions when they left the bank.
- September 2011: TopDot settles with a class of mortgage loan officers for $9,000,000 .
- June 2009: Morgan Stanley settles with a class of financial advisors for $50,000,000.
- May 2009: Wachovia settles with a class of brokers for $39,000,000. Additionally, Prudential Financial Inc., which sold its retail brokerage division to Wachovia in 2003, settles with a class of its former brokers for $11,000,000.
- February 2006: UBS Financial Services settles with a class of stockbrokers for $89,000,000.
- May 2006: Citigroup’s Smith Barney brokerage unit settles with a class of brokers for $98,000,000.
- September 2005: Merrill Lynch settles with a class of stockbrokers for $37,000,000.
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