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Bank fights back - and wins!

 Bank's first-round victory in wage-and-hour case carries lessons

I have written about the growth in the number of wage-and-hour cases filed under the federal Fair Labor Standards Act (FLSA). Indeed, federal court filings have tripled over the last decade, according to data collected by the law firm Seyfarth Shaw.

Most of the cases assert claims of unpaid overtime based on the allegation that the employer misclassified positions as exempt. In the last few years, financial institutions have been a particular target.

  • A federal appeals court affirmed a finding that JP Morgan Chase had misclassified its loan underwriters as exempt, leading to a multi-million dollar settlement.
  • Bank of America faced a claim for over $200 million in unpaid overtime for workers at more than 6,000 retail banks and call centers.
  • A federal court certified two separate classes, totaling 1,342 employees, with a variety of job titles in a suit against Charter One Bank.

A complicating factor for employers is state law. Many states have their own wage and hour statutes. These often go beyond federal protections. Joining a state law claim, for example, about meal or rest breaks, to a claim for unpaid overtime under the FLSA provides state court jurisdiction, along with some procedural advantages for plaintiffs.

All in all, it is not surprising that most defendants choose to settle these claims.

But Citizens Financial stood its ground

Fighting FLSA

On April 19, after a three-week trial, a jury in federal district court in Pittsburgh returned a verdict in favor of RBS Citizens Financial Group.

The verdict came in a suit alleging that assistant branch managers were misclassified as exempt because they routinely performed customer service or other functions normally performed by non-exempt employees. The suit had 491 plaintiffs and sought damages in excess of $14 million.

Citizens Financial's persistence in defending this claim through to a jury verdict should be applauded. No doubt the legal fees were huge: nine lawyers from Proskauer Rose are listed as appearing for the defendant. There are other, less quantifiable costs, too. Suits like these often have a corrosive effect on employee morale, and certainly absorb executive time and energy over a lengthy period of time.

Don't break out the champagne yet. The plaintiffs' attorney, Brendan Donelon, has wage-and-hour suits pending against Citizens Financial and related companies in a number of state and federal courts in Illinois, New York, and Massachusetts, as well as another case in Pennsylvania. The verdict in favor of the bank in Pittsburgh does not determine the outcome in these other cases, and that verdict may yet be appealed.

Not coincidentally, Donelon was the lawyer representing the plaintiffs against Bank of America cited earlier.

What you can learn from Citizens Financial case

This case demonstrates that an employer can win a wage-and-hour case in front of a jury in the right circumstances. However, few banks will have the resources and determination to take that risk.

I advocate a preventive approach: Carefully review all positions where classification as exempt may be problematic.

  • Job title is not determinative.

The fact that the position is labeled "manager" or "officer" does not mean the employee is exempt from overtime pay, unless the duties actually performed by the incumbent fit a specific exemption.

  • Which exemption applies?

There is no "white collar exemption." This comes as a surprise to some bankers. The term "white collar exemption" has been used to cover three specific exemptions commonly claimed for bank positions: executive, administrative and professional. However, there are other exemptions that might also apply: outside sales, highly compensated, computer professional.

  • What are the tests that must be met?

Each exemption has its own elements, each one of which must be complied with. For example, the executive exemption applies if the employee is paid at least $455 a week on a salary basis, and his/her primary duty is the management of a department or business unit, and involves the supervision of at least two fulltime employees.

What constitutes "salary basis,"  "department," and "supervision" is defined in detail by the regulations. Similarly elaborate tests exist for every exemption.

  • Review the job description.

Does it describe the duties actually being performed? Do the duties described reflect the exemption being claimed?

  • Review payroll records. 

For those exempt positions that must be paid on a salary basis, have any improper deductions been made? This may get tricky for employees earning commissions.

  • Know your state's law.

Are paid or unpaid breaks required? At what intervals? Is there a daily maximum number of regular hours for non-exempt workers, as well as the federal 40 per week?

Warning for community banks

The cases I've referred to involve large banks and significant numbers of plaintiffs. Don't think that because you are a community bank with only a few branches that you will escape the notice of the plaintiffs' bar, or the Department of Labor's Wage & Hour Division.

A little attention to this issue now may prevent expensive litigation down the road.

Marian Exall

Marian Exall (marian.exall@gmail.com) is an employment lawyer and HR professional with more than 25 years' experience advising banks and other employers on compliance issues. She is a principal and co-founder of Employment Law Compliance, Inc. which provides HR compliance solutions to banks exclusively through the American Bankers Association. She is a frequent speaker and writer on human resources compliance in the banking industry, on association briefings and webinars, and at national and state bankers' association conferences. For more information on this or other employment compliance topics, please call Employment Law Compliance at 866-801-6302 or go to www.employlawcompliance.com.

Marian also writes fiction. Her latest novel is a mystery called A Slippery Slope. For more information and to order, go to www.marianexall.com

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