MARCH 2013
LITIGATION
>> ALERT
RECENT CLASS ACTION SETTLEMENT
UNDERSCORES EMPLOYER OBLIGATIONS
UNDER WAGE AND HOUR LAWS
A recent multimillion dollar wage and hour class action settlement by major investment bank Merrill Lynch
serves as an important reminder to employers of their obligations under federal law to properly classify,
and pay overtime wages to, all eligible employees who work more than 40 hours per week.
BACKGROUND
An employee of Merrill Lynch sued
the bank on behalf of a class of
employees for failure to pay overtime
wages in violation of the Fair Labor
Standards Act (FLSA) and state wage
and hour laws. The suit alleged that
Merrill Lynch improperly classified
client associates – full-time employees
who provide service and assistance
to the company’s financial advisors
– as exempt. The complaint also
accused the bank of failing to maintain
records of overtime worked by client
associates and modifying or deleting
time records.
According to the complaint, client
associates at Merrill Lynch have
primarily administrative responsibilities.
Their typical job responsibilities
include sending faxes, covering
the switchboard, and making
photocopies. Some client associates
are “registered,” meaning that they
have obtained regulatory licenses
after passing examinations and
meeting other regulatory requirements.
Registered client associates may have
closer dealings with clients and even
THE BOTTOM LINE
As this recent case demonstrates, lawsuits for unpaid overtime are susceptible to
the potential risks and costs of class action litigation. Accordingly, it is critical for
companies both large and small to evaluate their current human resources practices
and employee classifications. An evaluation of employee classifications should
include a review of employee job duties to ensure that duties of exempt employees
meet FLSA requirements. Job descriptions should also be analyzed to confirm that
actual duties of both and exempt and non-exempt employees match position
descriptions. In addition, for non-exempt employees, employers must be mindful of
timekeeping and recordkeeping practices to ensure that all hours worked are properly
recorded and that employees receive overtime pay for all overtime hours worked.
execute trades. The lawsuit alleged
that Merrill Lynch was obligated to
pay overtime to all client associates,
regardless of their registration status.
Rather than incur the costs often
associated with protracted class action
litigation, Merrill Lynch agreed to settle
the dispute soon after discovery
began. Under the terms of the
proposed settlement, the bank will
create a $12 million common fund to
settle the claims of over 5,000 class
members.
OBLIGATION TO PAY OVERTIME
This settlement should remind
employers that their obligation to pay
overtime extends to all non-exempt
employees of the company, regardless
of the employees’ educational
background and qualifications. Under
federal law, a company is not required
to pay overtime if an employee’s job
duties satisfy a specific exemption.
The mere fact that an employee has a
college degree or other educational
training does not, by itself, satisfy an
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MARCH 2013
LITIGATION
>> ALERT
exemption. The “administrative
exemption” in the federal overtime law
applies only if three requirements are
met:
>>> the employee must be
compensated on a salary or fee
basis;
>>> the employee’s primary duty must
be 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
>>> the employee’s primary duty must
include the exercise of discretion
and independent judgment with
respect to matters of significance.
Merrill Lynch settled this action
before the court had an opportunity
to address the merits of the claims.
One can speculate, however, that the
court would not have dismissed the
claims, in light of the clear obligation
under federal law to pay overtime
to employees whose administrative
duties do not include the exercise of
discretion and independent judgment.
It would have been a closer question
whether “registered” client associates,
who exercised more discretion in
their day-to-day roles, are entitled to
overtime pay under the law. Ultimately,
Merrill Lynch chose to settle the suit
rather than litigate these issues.
FOR MORE INFORMATION
Michael C. Lasky
Partner/Co-Chair, Litigation
212.468.4849
mlasky@dglaw.com
Shira Franco
Counsel, Labor & Employment
212.468.4839
sfranco@dglaw.com
Jason A. Roth
Associate, Litigation
212.468.4971
jroth@dglaw.com
or the D&G attorney with whom you
have regular contact.
Davis & Gilbert LLP
T: 212.468.4800
1740 Broadway, New York, NY 10019
www.dglaw.com
© 2013 Davis & Gilbert LLP