Minnesota Federal Court Discusses Applicability of White Collar Exemptions in the Financial Services Industry
On March 31, Magistrate Judge John Tunheim of the United States District Court for the District of Minnesota issued a lengthy opinion in several consolidated FLSA actions brought by a group of securities brokers who alleged they were misclassified as exempt under the FLSA. In re Rbc Dain Rauscher Overtime Litig., 2010 U.S. Dist. LEXIS 32413 (D. Minn. March 31, 2010). The opinion addresses several issues relevant to financial services industry employers including:
- The applicability of the “learned professional exemption – the Court denied summary judgment to the Defendant on this issue as to one broker because based on the record the Court could not determine that the knowledge utilized by the broker (who possessed a Series 7 license and an MBA) to perform his job was customarily acquired via academic instruction. Id. at * 30-36;
- Whether a “non-forgivable” but recoverable draw satisfies the salary basis payment requirement - the Court held that a non-forgivable but recoverable draw that never fell below the minimum salary required for exemption ($455 per week under federal law) satisfied the salary basis, even though the draw was reconciled in calculating commissions. Id. at * 37-43. In reaching this finding the Court cited a United States Department of Labor opinion letter issued by then-Wage and Hour Administrator and current Jackson Lewis partner and head of the Jackson Lewis Wage and Hour Practice Group, Paul DeCamp; and
- Impact of the “Highly Compensated” exemption test – the Court held that brokers who met the “highly compensated” threshold set forth in 29 C.F.R. § 541.601 (i.e., payment of the salary basis minimum and total compensation of at least $100,000/year) were exempt, as they customarily and regularly performed exempt administrative duties by providing financial advice and analysis. Id. at * 86-105.
In re RBC serves as a valuable primer for financial services firms seeking to identify and review the exemption issues that often arise in the financial services industry. Unfortunately, the industry is under attack despite the high levels of compensation received by many industry employees.