Financial Services Companies Coming Under Attack

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<p><strong>Philadelphia &mdash; Oct. 3 </strong><br />The recent explosion of overtime-related lawsuits and alleged violations of the Fair Labor Standards Act (FLSA) against financial services companies have raised the need for them to be more proactive in defending themselves, according to Pepper Hamilton, a multipractice law firm.<br /><br />Several recent large damage awards against financial services companies have made the industry particularly vulnerable to lawsuits by employees claiming they were improperly compensated for overtime work.<br /><br />&ldquo;Plaintiffs&rsquo; lawyers have found new and creative ways to apply this70-year-old statute, which was born in the industrial age, to today&rsquo;s service economy,” said Sean McDevitt, Pepper Hamilton partner and leader of the law firm&rsquo;s new FLSA Audit Practice. “Plaintiffs&rsquo; attorneys have also used technology, primarily the Internet, to find new clients to help extend the FLSA&rsquo;s legal doctrines to unprecedented areas.</p><p>&ldquo;Financial services companies need to be more proactive in defending themselves against FLSA lawsuits. The best way to do this is to conduct a comprehensive audit of the entire company before any issues are raised.&rdquo; </p><p>There are typically two types of FLSA claims affecting financial services companies:<br /></p><ul><li>In &ldquo;classification cases,&rdquo; where employees claim they were improperly classified under executive, professional, or administrative exemptions, despite not performing duties to justify these exemptions.</li><li>In &ldquo;hours shaving&rdquo; claims, nonexempt employees, such as tellers, administrative support personnel or other hourly workers, claim managers eager to meet personal bonus requirements improperly lower expenses by coercing them to work &ldquo;off the clock.&rdquo;<br /></li></ul><p>&ldquo;If a financial services employer intentionally misclassifies an employee, or fails to properly pay for hours worked, the employee may be awarded damages equal to twice the improperly paid wage,&rdquo; McDevitt said. &ldquo;The FLSA also provides for &lsquo;reasonable attorney&rsquo;s fees&rsquo; if the employee&rsquo;s suit is successful. This fee often dwarfs the amount of an underlying claim, providing a significant incentive for plaintiff&rsquo;s attorneys to accept any relevant case.&rdquo;<br /><br />The FLSA does offer certain exemptions that absolve employers from the legal obligation to pay overtime.  </p><p>But the exempt/nonexempt distinctions are much less obvious in today&rsquo;s&ldquo;white-collar&rdquo; economy, McDevitt said.<br /><br />Current FLSA exemptions include:<br /></p><ul><li><strong>Executive Exemption:</strong> Employees who fall under this exemption have a primary duty of management in the company and direct the work of at least two full-time employees. &ldquo;These employees should also have the ability to hire and fire other employees, and their voice within the company should be given a particular weight,&rdquo; McDevitt said.</li><li><strong>Administrative Professional Exemption: </strong>&ldquo;Individuals whose jobs consist of performing office or non-manual work that is directly related to management or the general business of the employer are usually not eligible for overtime pay,&rdquo; McDevitt said.</li><li><strong>Professional Employee Exemption:</strong> &ldquo;An employee who performs work requiring advanced knowledge of science or learning, and has acquired this through extended courses of instruction, is also exempt,&rdquo; McDevitt said.<br /></li></ul><p>&ldquo;Financial services companies that are vulnerable to lawsuits related to overtime pay should assess their business to ensure they are meeting FLSA standards,&rdquo; McDevitt said. &ldquo;Once this is complete, the company should establish a compliance program to oversee the proper handling of overtime pay.&rdquo;<br /><br />The compliance program is designed to:<br /></p><ul><li>Ensure proper employee classification as either exempt or nonexempt</li><li>Ensure proper computation of overtime premiums</li><li>Develop a reliable record-keeping system </li><li>Review overtime policies</li><li>Document FLSA compliance with evidence that would be admissible in court</li><li>Properly train managers to comply with the FLSA<br /></li></ul>

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