When people think about employees who are eligible for overtime pay, we typically picture hourly workers who perform blue-collar work and traditional “9-to-5” jobs. However, certain employees, some of whom are highly compensated and work in white-collar professions, may also be entitled to overtime pay. One example of these non-traditional overtime earners is the financial advisor or analyst.
But how can someone with a job title like “Financial Advisor”, who sometimes makes $100,000 or more per year, be entitled to overtime pay? To start, it’s important to correct the common misconception that employees can be ineligible for overtime based solely on their job title or how much money they make. Although how much the employee is paid can play a significant role in determining whether the employee is entitled to overtime pay, the most important question in determining overtime eligibility is whether the employee’s job duties fall within one or more exemptions to federal or state overtime laws.
Employers typically claim that financial advisors fall under the Administrative Exemption of the Fair Labor Standards Act (FLSA), and are therefore not entitled to overtime pay. The Administrative Exemption includes employees whose primary duty is the management or general business operations of the employer, involving the exercise of discretion and independent judgment in matters of significance.
However, the Administrative Exemption, like several other exemptions, has a salary requirement, meaning that the exemption only applies if the employee receives guaranteed compensation of at least $455.00 per week under federal law, and between $780.00 and $975.00 per week under New York State law, depending on the size and location of the employer. The salary requirement does not include commissions or other payments towards the employee’s total earnings: if the employee is not guaranteed to earn at least the minimum salary threshold each week, then the employee is entitled to overtime pay. If the employee meets the salary requirement, then the analysis turns on the employee’s individual job duties.
While many financial advisors are highly compensated, often their earnings come in the form of commissions, rather than as a guaranteed salary, or they are paid a “draw”, which is like a salary except that they are required to pay the money back to the company unless the advisors meet certain performance criteria. As a result, these employees do not receive a guaranteed weekly salary, and therefore fall outside of the Administrative Exemption and are entitled to overtime pay for all hours worked over 40 per week, regardless of how much money they make in commissions.
Over the years, financial advisors have brought cases against investment banks and financial consulting firms such as Bank of America, Merrill Lynch, JP Morgan Chase, Wells Fargo, and deVere USA, Inc.. Often, these cases are initially brought by only a few employees, but can later become collective or class action lawsuits which allows many other employees to join.
The issue of overtime pay for financial advisors is well-known throughout the financial and investment services industry, but is often ignored or left unresolved. Financial advisors should be aware of their rights and ensure that their employers are paying them properly, regardless of how much they earn in commissions. Financial advisors who do not receive a guaranteed weekly salary in excess of the federal and state thresholds are likely entitled to overtime compensation for all hours worked in excess of 40 hours per week, and should seek the advice of an attorney to ensure they are properly compensated for their work.