Merrill Lynch agreed to pay $4.9 million to settle a class action brought by current and former salaried advisors who claimed they were wrongfully denied overtime pay.

The settlement, approved by a Florida state judge, will be distributed to financial solutions advisors ("FSAs") who worked at Merrill in the past three years. FSAs are typically broker trainees or work with mass affluent customers at Merrill's consumer-bank based Merrill Edge unit.

The lawsuit was led by former Merrill FSA Florence Grosch, who alleged that Merrill failed to pay for all the overtime logged by FSAs and trainees beyond their 40-hour work weeks. Grosch filed the lawsuit December 03 in Broward County, Florida, after nearly a year of negotiation and mediation with Merrill. Both sides agreed that the settlement represents a fair, adequate, and reasonable compromise.

Current and former Merrill FSAs who meet the class's eligibility requirements can opt out of the settlement and pursue claims on their own. Any unpaid funds from the settlement amount will be returned to Merrill. Grosch's lawyers are scheduled to receive one-third of the settlement as attorney fees.

Overtime lawsuits are unusual for traditional brokers who are paid a portion of the fees and commissions they generate but are more commonly brought by their salaried counterparts and client associates. Merrill has faced similar lawsuits in the past, including a $14 million settlement in 2016 for financial advisor trainees and a $550,000 settlement in 2019 for compliance personnel. https://www.advisorhub.com/merrill-to-pay-4-9-million-to-settle-overtime-suit-from-salaried-advisors-trainees/ (Dec. 13, 2024).

Commentary

The above matter centered on whether FSAs where exempt from overtime. Exempt employees are not paid overtime. Non-exempt employees are paid overtime.

The assumption of the DOL and the IRS is that all employees are non-exempt. Exempt employees should be few in number in most industries, including financial organizations.

Exempt employees are those who meet certain wage levels and meet required duties tests, such as:

• Executives: Employees whose primary duty is managing the enterprise or a recognized department or subdivision, and who regularly direct the work of at least two other full-time employees.
• Administrative: Employees whose primary duty is performing office or non-manual work directly related to the management or general business operations of the employer or the employer's customers, and who exercise discretion and independent judgment with respect to matters of significance.
• Professional: Employees whose primary duty is performing work that requires advanced knowledge in a field of science or learning, typically acquired through prolonged education.
• Computer: Employees who work as computer systems analysts, computer programmers, software engineers, or other similarly skilled workers in the computer field.
• Outside sales: Employees whose primary duty is making sales or obtaining orders or contracts for services or for the use of facilities, and who are customarily and regularly engaged away from the employer's place of business.

The final takeaway is that these categories are defined by specific, statutory criteria, including job duties and salary thresholds. If an employee meets the criteria for one of these categories, and the required wage level, they are considered exempt from overtime pay requirements.