In its February 16, 2017 decision in Tsyn v. Wells Fargo Advisors, LLC, Case No. 14-cv-02552-LB, the federal district court for the Northern District of California confirmed that licensed financial advisors qualified for the administrative exemption under the Fair Labor Standards Act (FLSA). Specifically, the plaintiffs’ primary duties fell within the examples of exempt duties in the first sentence of 29 C.F.R. § 541.203(b). That regulation (“Section 203(b)”), which comports with nearly 70 years of regulatory practice, states that “[e]mployees in the financial services industry generally meet the duties requirements for the administrative exemption if their duties include work such as collecting and analyzing information regarding the customer’s income, assets, investments or debts; determining which financial products best meet the customer’s needs and financial circumstances; advising the customer regarding the advantages and disadvantages of different financial products; and marketing, servicing or promoting the employer’s financial products.”
The U.S. Department of Labor (DOL) confirmed the effect of Section 203(b) in a 2006 opinion letter, concluding that licensed financial professionals who mainly perform the duties listed in the first part of Section 203(b) qualify for the FLSA’s administrative exemption, even if as an incident to providing their clients investment advice, the financial advisors bring about the purchase or sale of such investments for their clients and execute the actual transactions that result from their financial advice. (See DOL Op. Ltr. FLSA2006-43 (Nov. 27, 2006).) In other words, that the interaction between financial advisor and client often results in a purchase or sale of securities or other investment products does not render the primary duties of the financial advisor non-exempt.
The DOL’s guidance is the right one on this issue. Indeed, as early as 1949, the agency’s explanatory bulletin interpreting the FLSA regulations included as an example of discretion and independent judgment under the administrative exemption “the kind of discretion and independent judgment exercised by a customer’s man in a brokerage-house in deciding what recommendations to make to a customer for the purchase of securities.” (14 Fed. Reg. 7738 (Dec. 28, 1949).)
The decision in Tsyn comports with the Ninth Circuit’s ruling in In re Farmers Ins. Exchange, Claims Reps. Overtime Pay Litig., 481 F.3d 1119 (9th Cir. 2006) (insurance claims adjusters qualify for the administrative exemption), as well as with the opinions of other courts that have considered the exempt status of financial advisors.