Introduction:
There is
a common practice among banks to classify their brokers in such a way
that makes them ineligible to receive overtime pay, and now their
brokers are fighting back to receive the pay that they feel is
rightfully theirs. Morgan Stanley, Citibank, Wachovia, and Bear Steams
have all been sued for failing to pay overtime to eligible employees.
The U.S. Department of Labor is now chiming in to say which employees
must be paid overtime, and it is not looking good for the banks.
Morgan
Stanley has agreed to pay up to $42.5 million to settle a class action
suit against 4,000 of their employees and former employees for failing
to pay overtime to them even though they were eligible for overtime pay
under the law. [1] Similar cases have been filed against Citibank,
Wachovia, and Bear Steams Cos. [2]
The plaintiffs alleged that improper deductions were taken for their
wages and that they were not compensated for overtime performed at
Morgan Stanley. [3] Morgan Stanley defends itself by alleging that the
company should not have to pay overtime to financial advisors because
financial advisors are exempt professionals under the law. [4] The
attorney for Morgan Stanley says that if their classification of
brokers is wrong now, "this means the industry has to start treating
brokers more as advisors whose primary duty must be advising clients
and not as sales people if they want to avoid paying overtime." [5]
Wachovia has also had to pay back wages to its brokers for the same
issue when an audit showed that they had not paid overtime to qualified
workers. [6] They performed the audit themselves in cooperation with
the U.S. Department of Labor. [7] Some of their employees in
operations, technology, and other divisions had jobs that were
improperly categorized as being salaried when they were actually not.
Those people received a lump sum from the company in back wages. [8] A
Wachovia spokes woman, Christy Phillips, said that Wachovia would be
taking a proactive stance about classifying jobs in the future. [9]
According to the U.S. Department of Labor, employees that are
permitted or required to work more than forty hours per week are
generally owed premium premium pay for such overtime work. [10] Their
website says that, "employees covered by the Fair Labor Standards Act
(FLSA) must receive overtime pay for hours worked in excess of 40 in a
workweek of at least one and one-half times their regular rate of pay."
[11] Banks have tried to get around this by classifying jobs so that
employees don't qualify under the FLSA, but unfortunately for those
companies, the Department of Labor looks at the work actuality
performed and not how the bank classifies the position when determining
who should earn overtime. [12]
Firms that purposely try to get around employment laws by
misrepresentation should not only have to pay back wages, but should
also pay punitive damages to the government. When an employer knows
that if sued, it only has to pay the money that it owed the employee in
the first place, the employer is less likely to pay initially and
instead waits to see if anyone challenges them. In that situation, if
the bank is eventually made to pay, it has not lost anything. The law
would be more effective if employers knew that they could be punished
for misrepresentations they make in order to get around paying their
employees in accordance with FLSA laws.
[1] Juan, Evelyn, Morgan Stanley Settles Overtime Claims for 42.5 mln (Labor Lawyer.net), available at http://laborlawyer.net/Marketwatch-Morganstanley..pdf#search='Wachovia%20not%20paying%20overtime'.
[2] Id.
[3] Id.
[4] Id.
[5] Id.
[6] Charlotte Business Journal, Wachovia Pays Back Wages (BizJournals.com), available at http://www.bizjournals.com/charlotte/stories/2003/02/24/dailey19.html .
[7] Id.
[8] Id.
[9] Id.
[10] Department of Labor, Overtime Pay, (DOL.gov), available at http://www.dol.gov/dol/topic/wages/overtimepay.htm .
[11] Id.
[12] Id.