A $450 million class-action lawsuit filed in New York against Morgan Stanley on Friday could have major implications for brokerages’ pay practices in the state. Filed by a former Morgan Stanley broker, the lawsuit claims the firm failed to pay its brokers for overtime, and improperly deducted certain business expenses from their earnings. A Morgan Stanley spokeswoman declined to comment on the case.

It is not the first lawsuit of its kind, but it is the first case in New York, which has perhaps the highest concentration of stockbrokers in the country. The Morgan Stanley case comes just a little over a month after Merrill Lynch paid $37 million to settle claims that it owed brokers overtime pay and reimbursement for certain business expenses in California. (For more, see Ready to Punch a Time Clock.) Merrill said at the time that the settlement was due to particular quirks in California law, but employment lawyers argued that similar cases could be won in other states. Max Folkenflik, the lawyer representing the Morgan Stanley lawsuit, says he expects to file another similar lawsuit within the next two weeks, and possibly a third later this year.

If the case is resolved in favor of the brokers, as it was in California, brokerage houses may decide they need to revise their pay practices. “If they become convinced that they can be held liable, one would think it’s foolhardy to continue these practices,” says Folkenflik. “On the other hand, do I expect them to resist changing their business practices? Yes. They could just as easily seek a legislative solution,” he says. Indeed, the industry is said to be lobbying Congress right now to get the laws changed.

In the complaint, former broker David Andrew Gasman claims that he and other brokers “regularly” worked 45 to 50 hours a week on a commission basis and never received overtime pay. The suit also claims that the firm deducted a number of expenses from brokers’ wages, including the amounts paid to cold callers, secretaries and sales assistants; the costs of marketing materials; and losses from “broken trades”—trades that clients canceled and resulted in a loss.

It’s the business expense deductions, or chargebacks, that really bother brokers. According to Gasman’s complaint, New York Labor law explicitly prohibits employers from making deductions from an employee’s wages. “The interpretation of the statute is awfully strict, and would not apply to the kind of deductions they make,” says Folkenflik.

The issue of overtime pay is a little bit murkier. Morgan Stanley, Merrill Lynch and other brokerage firms have long treated brokers as though they were exempt from overtime pay. Under federal and state labor laws, exemptions exist for executive, administrative and professional employees, as well as “outside salesmen.” As “commissioned salesmen,” the complaint argues that none of these categories apply to stockbrokers. “If they try to assert administrative or managerial exemptions, we’ll have to look at their actual activities,” says Folkenflik. “They’re salespersons, selling product to customers.”

Those whose primary business is providing advice, who actually are registered investment advisors, could be considered administrative employees, however. To the extent that brokers wish to get the benefit of the so-called Merrill Lynch Exemption, which excuses them from adhering to the Investment Advisers Act of 1940, they must argue that the practice of giving advice is only “incidental” to their primary job of selling securities.