Banking Industry Targeted for Misclassification of Employees
Over the last year or so, the Department of Labor has been focusing on the banking and finance industries, with lawsuits being filed against the nation’s largest banking institutions for misclassifying employees. Many companies are settling out of Court for staggering amounts, some near $100MM.
The class of employees being scrutinized are stockbrokers, financial analysts, traders and similar positions. The issue is that they are being incorrectly classified as exempt under the administrative and/or highly compensated exemptions.
Under the FLSA, an employee is exempt under the administrative exemption if they are compensated at a rate not less than $455 per week, performs work directly related to the management or operations of the business, and exercises discretion and independent judgment.
A common mistake employers make is with the definition of the highly compensated exemption. To qualify this exemption an employee’s compensation must be $100,000 or more. Employers often think this means total compensation, so this would include discretionary bonuses, commissions, etc. In reality, the compensation must be guaranteed compensation, so these other types of income would not qualify under the highly compensated exemption.
Employers who hire these types of workers should review their compensation structure and job duties, and make adjustment accordingly.
For more information, see FLSA Fact Sheet #17A,
Exemption for Executive, Administrative, Professional, Computer & Outside Sales Employees Under the Fair Labor Standards Act (FLSA), at http://www.dol.gov/esa/whd/regs/compliance/fairpay/fs17a_overview.pdf.