Bland v. Edward D. & Co., LP
Posted on Categories Class Actions, Court Decisions

By James L. Komie

Allegations that new financial advisors were rigidly controlled in the products they could sell and spent most of their time generating new sales leads are sufficient to state a claim that they should have been classified as non-exempt salespeople rather than exempt professionals and paid overtime under the FLSA.

Bland vs. Edward D. Jones & Co. LP, No. 18-cv-1832 (N.D. Ill., 3/30/20).

Plaintiffs are former trainee brokers of defendant Edward D. Jones & Co. In this putative class action, plaintiffs allege Jones violated the minimum wage and overtime requirements of the Fair Labor Standard Act (“FLSA”) and state law through its administration of its broker training program and its classification of new financial advisors as exempt employees after graduating from the training program. Plaintiffs allege that, during the training program, they routinely studied/worked more than 40 hours per week and were not paid overtime. Plaintiffs also challenge the provision for repayment of training costs if they leave Jones within three years of graduating from the program. With respect to their work as new financial advisors, plaintiffs allege they should have been classified as non-exempt employees and paid overtime.

The Court dismissed plaintiffs’ first amended complaint on a variety of grounds, including that it lacked sufficient detail. Plaintiffs filed a second amended complaint, which the Court now dismisses in part and sustains in part. The Court reaffirms its prior ruling that plaintiffs’ allegations regarding the training costs repayment provisions of their trainee agreements do not state an FLSA minimum wage claim. Plaintiffs’ theory is that allowing Jones to recover training costs would cause their effective rate of pay to fall below the minimum wage. Plaintiffs do not have standing to assert this claim since Jones did not recover training costs from any of them. Moreover, a training costs repayment provision works effectively as a loan and does not constitute a minimum wage violation.

The Court finds plaintiffs adequately allege an overtime claim for their time as trainees. Jones classifies trainees as non-exempt employees under the FLSA and thus must pay them overtime. The second amended complaint contains sufficient detail showing that plaintiffs worked more than 40 hours per week during specific weeks during their training period, including on self-study and practical training knocking on doors.

The Court also finds plaintiffs have stated a claim for overtime violations for their work as new financial advisors. Jones asserts that new financial advisors – unlike trainees – are exempt employees and thus are not entitled to overtime pay. Plaintiffs, however, adequately allege that their authority and discretion were rigidly circumscribed by Jones, making them more akin to non-exempt salespeople than exempt professionals under the “administrative” exemption to overtime rules. While most financial professionals are exempt professionals, the severe controls imposed by Jones on new financial advisors – including limiting investment options to one product for each category of customer – mean that new financial advisors are not truly analyzing and advising on customer financial needs. The Court notes new financial advisors at Jones spend the “majority of time trawling for sales leads” and don’t have “dedicated office-space, further corroborating their allegations that they were more analogous to door-to-door salespeople than bona-fide managers.” Under these facts, plaintiffs have stated a claim for non-payment of overtime wages.

(J. Komie: Requiring trainee brokers to sign training costs repayment provisions has long been an iffy practice in the industry. As noted in the opinion, there are few arbitration awards involving training costs provisions. Most firms would have a hard time showing that the training costs number specified in the agreement bears any relation to the actual costs of training. Edward Jones’ provision setting training costs at $75,000 has always been an outlier – most firms’ contracts were $40,000 or less – and was ripe for challenge.)

(SOLA Ref. No. 2020-18-05)

NOTICE: The court decision synopsis published above represents an abbreviated description of the actual decision and is re-printed here for its educational value. The author's effort is to report concisely the substance of the decision or a selected portion of the decision; commentary or analysis is generally reserved for the italicized section at the bottom of the summary. Subscribers to SAC's Online Litigation Alert (SOLA), from which this synopsis is excerpted, have immediate access to the full decision, in addition to the synopsis. 

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