The case for overtime pay for brokers just got a little bit stronger. On July 31, U.S. District Judge John Houston “denied in its entirety” a motion for summary judgment by A.G. Edwards, which sought to throw out overtime-pay claims by two former brokers. The judge said there were enough issues in dispute for the case to proceed.
“There is genuine dispute” as to whether the firm intentionally misclassified its reps as “non-exempt” from the Fair Labor Standards Act of 1938 — a Depression-era law that was crafted to protect blue-collar workers — and failed to pay them overtime, the judge wrote. A.G. Edwards is the first firm to try to have an overtime-pay case dismissed, and it is the first time a judge has ruled on the arguments surrounding the recent wave of overtime suits facing Wall Street firms.
Since 2005, four major Wall Street firms have settled overtime cases outside of court. Morgan Stanley and Merrill Lynch settled in California for $42.5 million and $37 million, respectively. And UBS and Smith Barney settled on a nationwide basis, paying $89 million and $98 million, respectively.
“Before we were dealing with people about ifs and buts,” says Mark Thierman, the Reno, Nev.-based labor lawyer representing the plaintiffs in this and other overtime cases. “The arguments the defense raised have been reduced to rubble. The value of the case has definitely gone up,” he says, indicating that brokers may be in an even better position now to demand compensation for missed overtime. If the A.G. Edwards case is class-action certified by a court, it would represent about 9,000 reps, according to Thierman.
During oral arguments in April, A.G. Edwards claimed that its highly compensated stockbrokers are exempt from overtime under the Fair Labor Standards Act (FLSA) because they are paid a “draw.” But plaintiffs' lawyers argued that draws do not exempt employees from overtime pay, and that the firm failed to pay plaintiffs on a “salary basis,” as required by the FLSA, in order to classify employees as exempt. The court sided with the plaintiffs, saying the defendants failed to meet the requirements established under the FLSA for exempt employees.
Thierman says the summary judgment motion may have backfired for A.G. Edwards, giving brokers the upper hand. The firm can now either risk seeing the case through in court, or settle for what is likely to be a handsome sum outside of court. (For more on the overtime pay wars, please read Registered Rep.'s May cover story, “Wall Street Wage Fight”.)