Labor & Employment Law

The Financial Services Industry: Easy Target For Class Actions

By Mark E. Tabakman, Esq.

The financial services industry has been and will continue to be, in my view, hard hit by wage-hour class actions.  The attack will be and has been that these employees are non-exempt and therefore entitled to overtime.  These employees also, typically, work much more than forty hours in a week.  A bad mix for a class action.  This is what has just happened (again) to JP Morgan.

Loan officers filed suit in federal court in New York City.  They claim that as commission employees, they cannot be exempt under federal and state wage-hour law.  One of the fundamental tenets of classifying someone as exempt is paying him on a salary basis.  If the facts show that they were solely commission based, they are, in fact, correct that they are non-exempt.  They could arguably fit within the commission exemption of the FLSA, under Section 207(i) of the Act, but they would not fit the Part 541 exemption tests of the federal regulations.

This attack is but one of many coming against financial houses.  Under the revised FLSA regulations, financial people who have selling as their primary duty are non-exempt.  Although the regulations do enumerate many functions performed by financial people that are exempt, e.g., analyzing information regarding a customer''s income, investments, assets and debts, advising the customer regarding the advantages and disadvantages of certain financial products, once the conversation turns to sales, which it almost inevitably must, that is non-exempt selling work. 

Where bright lines will be drawn in this area is anyone's guess and I believe there really are no bright lines.  Given the hours worked by many, if not all, of these folks and the compensation that many of them earn, the overtime exposure is astronomical.  Employers in this industry are duty-bound to make a careful analysis of the "true" job duties of financial service employees so re-classifications of wrongly classified employees can take place.  Or, cut the hours they work to forty (if operationally possible).  Put bluntly and simply---get out in front of it!

Full post as published by Wage & Hour - Development & Highlights on February 29, 2008 (boomark / email).