Despite court ruling, overtime for financial advisers still requires case-by-case consideration

By Shawnna Stiver | Apr 25, 2016

SAN FRANCISCO – A ruling earlier this year by a California federal district court held that licensed financial advisers are exempt from overtime laws. But one legal expert said that doesn't mean the issue is so cut and dry. 

The U.S. District Court for the Northern District of California in Tsyn v. Wells Fargo Advisors LLC confirmed that licensed financial advisers qualified for the administrative exemption under the Fair Labor Standards Act (FLSA). 

The FLSA says all employees are entitled to overtime unless they fall into a category of exemption. Financial institutions claim that financial advisers fall under the “administrative” exemption, which classifies the employee’s primary duty as “the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers,” and “includes the exercise of discretion and independent judgment with respect to matters of significance.” The employee must also earn a weekly salary of at least $455 per week under federal law ($675 for New York state law).

The gray area that exists for financial institutions is that an employee whose primary duty is selling financial products does not qualify for the administrative exemption.

Thomas Wassel of Cullen and Dykman LLP says the problem for financial institutions is that it is hard to classify employees who may do both. 

“If an employee’s primary duties were to give advice based on their knowledge and training, but part of their duty was to also sell products, the way the law works is that people who sell products are not generally considered to be exempt,” Wassel told the Northern California Record. “The question remains, do they spend more time selling products or giving advice?”

In the Tsyn case, the court’s decision declared that a financial adviser, “who primarily advises customers on financial matters, even while engaging in sales of securities for the institution, should be considered exempt.”

Wassel says that although the outcome this time leaned more in favor of financial institutions, each case is going to depend on the facts. 

“If a particular financial institution could make a good showing that an adviser was involved in high-level decision making related to business operation, it’s possible to have a different outcome,” he said.

Wassel encourages financial institutions to review their job descriptions and the actual conditions of employment in order to properly classify their financial advisers as exempt.

“Going forward, it will be handled on a case-by-case basis," Wassel said. "It really has to be."

The Department of Labor has a pending rule change that will revise an important aspect of the exempt rule. The rule may increase the minimum salary to approximately $50,000, which will increase the weekly amount to $975 per week, possibly as soon as this year. The rule would take a lot of non-exempt employees and make them exempt. It could have a significant impact on businesses that have a number of non-exempt employees now.

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