The man who led the overtime wage battle against wirehouses (and won millions for reps) is now making the argument against the largest independent broker/dealer in the nation.
On July 22, Mark Thierman, a labor lawyer in Reno, Nevada, filed a complaint against LPL Financial for violating New York State overtime laws by not paying its reps overtime wages. The complaint, which Thierman is requesting become a class action case, is on behalf of all New York based LPL advisors retained by LPL within the last six years who worked in banks, credit unions and other financial institutions and were paid as independent contractors. Thierman estimates there are about 3,000 such LPL reps in the country and about 1,000 in New York.
Unlike Thierman’s overtime cases against wirehouses like Citigroup Smith Barney, Merrill Lynch, Morgan Stanley and UBS, where the brokers are employees of the firm, the FAs he is arguing for this time around are independent contractors—not employees. In which case, Thierman’s first and foremost argument in the complaint, which was filed in the U.S. District Court in the Southern District of California, is that these LPL brokers are not independent contractors at all. He argues that the reps are misclassified and that LPL has too much control over the reps for them to be independent contractors.
LPL says it has not received or reviewed the complaint and therefore could not comment. On June 4, LPL filed Form S-1 with the SEC stating its intent to become a public company.
Thierman says, “I realize that the broker who makes up his own name, hires his own staff and can pick up his book of business and move easily to another broker/dealer is probably an independent contractor. But for the LPL reps who work in banks and are told by the managers what to wear, when to show up to work, how to talk and not talk to customers, there is nothing independent contractor about them.”
The complaint reads, “The time of work were set by LPL managers to the schedules dictated by either banks in which the employees were located, or whatever the LPL manager decided was in the best interest of LPL.”
Scott Smith, associate director at Cerulli, says, “In these types of set ups, the bank typically has the option of how much control it has in the relationship; how the rep is branded, whether it wants the rep to appear as part of the bank or not, and what time the rep should be there.” He adds, “The hours are a big deal. Independent contractors are supposed to work when they want to work. Other than being paid on a 1099 form, everything else for these types of advisors seems to fall into the circumstances of an employee.”
The complaint lists eleven ways LPL controls its independent contractor reps including, “LPL possesses the complete authority to hire and fire these independent contractors; LPL is liable for its financial advisors’ acts and omissions; LPL is responsible for monitoring and supervising the financial advisors’ work; LPL approves all trades and business written by the financial advisors; revenue generated by the advisors is first paid to LPL before it is paid to any individual advisor.”
Smith says there are at least three other IBDs with a similar setup for their reps including PrimeVest of St. Cloud, MN, Tampa, FL-based Invest Financial Corporation, and Investment Centers of America in Bismarck, ND.
