Workplace Hazards - Written by Beasley Allen on Monday, July 10, 2006 8:23 - 0 Comments
Citigroup Unit To Settle Overtime Claims
Citigroup’s Smith Barney brokerage unit has agreed to pay $98 million to settle claims on behalf of thousands of current and former brokers that they are owed overtime pay and other reimbursements. The proposed settlement is the latest and largest by securities firms that claim brokers are exempt from state and federal overtime laws because they are salaried, administrative employees. Brokers’ draw on commissions, a monthly loan most receive, qualifies as a salary. It’s rather interesting that the securities industry would make the argument that brokers are salaried employees, because it portrays them as “trusted financial advisors,” not mere administrators.
The primary argument for the plaintiffs was that brokers are not salaried, but instead receive incentive-based compensation, such as commissions, that is tied to sales. They also countered the brokerage firms’ claims that the Fair Labor Standards Act exempts salespeople from overtime because the exemption applies only to store sales, not trades of securities. The preliminary settlement was reached, but it must have final approval by a federal district court in San Francisco. It affects about 11,000 full-time equivalent employees at Smith Barney, which translates to many more individuals who worked as far back as six years from the final settlement date. Citigroup’s proposed nationwide settlement is higher than others reached to date because of the number of employees affected and because of its national breadth.
In February, the UBS Wealth Management unit of UBS AG agreed to pay $89 million in a nationwide settlement to financial advisors who sued for overtime pay and to recover charges assessed by the firm for sales assistants, computers, and trading errors. Last year Morgan Stanley agreed to pay $42.5 million and Merrill Lynch & Co. acceded to pay $37 million to settle claims involving only California brokers. Additional claims against the firms are pending in Connecticut, New York, and New Jersey. The number of people eligible for compensation from the settlements, and the amounts they can receive, depend on statutes of limitations in individual states and court approvals of the settlement formulas.
There will most likely be similar lawsuits brought against other large brokerages. Wall Street firms, meanwhile, are working to revamp their compensation schemes to retail brokers. I understand that brokerage firms don’t want to give brokers fiduciary control over client assets because it would expose them to greater liability and to additional regulation as investment advisors.
Source: Associated Press
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