Last week, Morgan Stanley rounded out the last of the national overtime settlements among wirehouse firms with a $50 million deal.
The settlement covers all financial advisors, trainees, producing branch managers, assistant branch managers and sales managers who live outside of California and were employed with the New York-based firm between Sept. 1, 2002, and April 21, 2008. The national settlement comes over two years after Morgan settled with about 5,000 brokers in California for $42.5 million in overtime pay. The $50 million deal also includes producing branch managers in California who were not included in the state settlement.
Morgan was the last among Merrill Lynch, UBS, and Smith Barney to settle with its brokers nationally. (UBS and Smith Barney had paid its brokers $89 million and $98 million respectively by mid 2006. Merrill’s national amount was not disclosed.) Morgan’s late deal may have paid off in dollars given that there has been a bump (or two) in the road in the last two years since those firms settled.
In December 2006, the same week Merrill’s national settlement was announced, the Department of Labor, in response to a request by the Securities Industry and Financial Markets Association, issued an eight-page letter stating brokers are not entitled to overtime pay after all. Paul Decamp, administrator of the Wage and Hour Division of the DOL, says that brokers are not covered by the Fair Labor Standards Act of 1938 under the “administrative exemption.” Essentially, those who fall under this exemption deal primarily with performance of office or nonmanual work directly related to the management or general business operations of the employer or the employer’s customers, and exercise discretion and independent judgment. Non-exempt employees, on the other hand, must be guaranteed a weekly salary of $455 per week.
Further, UBS advisors who got word their firm settled back in February, 2006 have yet to see their money because of a dispute among plaintiffs’ lawyers regarding the settlement amount. One lawyer says, in light of the DOL letter, plaintiffs risk getting a smaller deal the longer it takes to get the amount approved by a judge.
A lawyer familiar with the Morgan settlement case says advisors should receive checks in the mail by year’s end—given there’s no UBS-like hold-ups. Morgan Stanley will pay each broker, broker trainee and assistant branch manager $50.93 to $85.57 per month on unpaid overtime wages depending on the state of residence, and which applicable periods are covered in their states. Monthly payment for producing branch managers and sales managers are lower.
RBC Wealth Management (formerly RBC Dain Rauscher) and Wachovia Securities are among firms that have yet to settle with brokers alleging they’ve failed to pay overtime wages, and made unlawful deductions from their salary.
Click here for more information on the overtime battle.