Registered Person Wins Labor Law, Overtime, and Wage Case

March 7, 2014

Wall Street ain't always a happy place when it comes to labor relations. You got hundreds of thousands of registered persons lacking union representation (for better or worse) or even an effective trade group. Worse, FINRA, the so-called industry's self-regulatory organization, is essentially run on the revenues from its member firms, which have the exclusive vote franchise in all the regulator's elections and rulemaking.  In the end, Wall Street's registered persons are confronted by financially powerful and politically connected employers, bereft of their own membership organization, and forced to deal with what looks like a biased regulator that runs the arbitration forum where industry disputes must be litigated. Today's BrokeAndBroker Blog examines a somewhat typical employment dispute.

In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in December 2012, Claimant Ramsey asserted violations of New York Labor Law, failure to pay overtime, failure to provide claimant with notice, retaliation against claimant, and failure to pay wages. In addition to costs, interest and attorneys' fees, Claimant Ramsey sought the following additional damages per cause of action:
  • NYL Law: $13,817.25 compensatory damages, liquidated damages in an amount equal to 100% of such actual damages;
  • Overtime: $1,500.00 compensatory damages;
  • Notice: $2,500.00 compensatory damages, interest,
  • Retaliation: lost back pay, front pay in lieu of reinstatement, lost compensation and damages, and liquidated damages in an amount of not more than $10,000.00;
  • Unpaid wages: as determined by the Arbitrator.
In the Matter of the FINRA Arbitration Between Benjamin Scott Ramsey, Claimant, vs. Nyppex, LLC, ACP Investment Group, LLC, and Laurence Geoffrey Allen, Respondents (FINRA Arbitration 12-04283, February 25, 2014).

Respondents generally denied the allegations and asserted various affirmative defenses.


The FINRA Arbitration Panel found Respondents jointly and severally liable and ordered them to pay to Claimant Ramsey:
  • NYL Law: $3,658.26 plus 9% per annum interest from March 1, 2012 until paid in full; and $3,658.26 in liquidated damages;
  • Overtime and Notice: $4,150 compensatory damages;
  • Unpaid Wages: $855.77 liquidated damages plus interest in the amount of $38.51 for a total amount of $894.28.
Additionally, the Panel found Respondents jointly and severally liable for payment to Claimant of $48,027 in attorneys' fees pursuant to the Fair Labor Standards Act of 1938, Section 16(b), 29 U.S.C.A. Section 216(b). Finally, the Respondents were ordered to pay to Claimant $809.05 in costs.

29 U.S. Code § 216 - Penalties
. . .

(b) Damages; right of action; attorney's fees and costs; termination of right of actionAny employer who violates the provisions of section 206 or section 207 of this title shall be liable to the employee or employees affected in the amount of their unpaid minimum wages, or their unpaid overtime compensation, as the case may be, and in an additional equal amount as liquidated damages. . . in addition to any judgment awarded to the plaintiff or plaintiffs, allow a reasonable attorney's fee to be paid by the defendant, and costs of the action. . .

Bill Singer's Comment

What can I say?  Not much. Claimant Ramsey alleged all sorts of workplace horrors: labor law violations, unpaid overtime, unpaid wages and retaliation.  Sounds more like the stuff of Norma Rae than Wall Street.  Note that Claimant Ramsey won, and did so decisively.

Ah, but then comes the whole closing of the ranks thing that makes mandatory intra-industry arbitration so unpalatable for me.  How convenient that the FINRA Arbitration Decision is so short on disclosure.  We don't really know jack about anything that went on between the parties. We aren't offered a clue as to specifics and why this Panel found in the employee's favor.  Why is that?  Why has darkness descended over this lawsuit in a way that would rarely, if ever, occur in the civil courts?  Why is so much of FINRA's intra-industry arbitration docket shrouded in shadows?

One conspiracy theory, to which I whole-heartedly ascribe, is that this is exactly what the industry wants, and with an overly compliant self-regulator, this is exactly what the industry gets. This is why we have mandatory arbitration involving labor disputes. This is why so much of what really goes on in the branches and trading desks remains hermetically sealed from the prying eyes of the public.

How lovely and convenient for the powerful FINRA member firms that they get to force their employees and customers to give up their right to litigate in the courts and compel them to arbitrate in a forum operated by FINRA, where, as I noted above, not one of the customers or employees has a single vote on anything, in contradistinction to where the member firms have a vote on everything.

And puhlease . . . don't even suggest that this mandatory intra-industry arbitration is freely bargained for. Not only is it mandated in FINRA's rules but it is embedded in the regulatory form that constitutes the application for registration: Uniform Application for Securities Industry Registration or Transfer ("Form U4").

FINRA Code of Arbitration Procedure

13200. Required Arbitration

(a) Generally
Except as otherwise provided in the Code, a dispute must be arbitrated under the Code if the dispute arises out of the business activities of a member or an associated person and is between or among:
•  Members;
•  Members and Associated Persons; or
•  Associated Persons.

(b) Insurance Activities
Disputes arising out of the insurance business activities of a member that is also an insurance company are not required to be arbitrated under the Code.

13201. Statutory Employment Discrimination Claims and Disputes Arising Under a Whistleblower Statute that Prohibits the Use of Predispute Arbitration Agreements

(a) Statutory Employment Discrimination Claims
A claim alleging employment discrimination, including sexual harassment, in violation of a statute, is not required to be arbitrated under the Code. Such a claim may be arbitrated only if the parties have agreed to arbitrate it, either before or after the dispute arose. If the parties agree to arbitrate such a claim, the claim will be administered under Rule 13802.

(b) Disputes Arising Under a Whistleblower Statute that Prohibits the Use of Predispute Arbitration Agreements
A dispute arising under a whistleblower statute that prohibits the use of predispute arbitration agreements is not required to be arbitrated under the Code. Such a dispute may be arbitrated only if the parties have agreed to arbitrate it after the dispute arose.

Form U4:
. . .

5. I agree to arbitrate any dispute, claim or controversy that may arise between me and my firm, or a customer, or any other person, that is required to be arbitrated under the rules, constitutions, or by-laws of the SROs indicated in Section 4 (SRO REGISTRATION) as may be amended from time to time and that any arbitration award rendered against me may be entered as a judgment in any court of competent jurisdiction.

No, I am not a fan or proponent of mandatory arbitration. It stinks when this unfair bargain is forced upon public customers. It stinks, just as badly, when it's forced upon industry registered persons.  And the byproduct of all this forced dispute resolution is far too much secrecy and non-disclosure that always seems to further the best interests of FINRA's largest member firms to the detriment of the individual men and women who work at those firms and to the detriment of public customers who feel defrauded by those firms.  If you really believe that arbitration is freely bargained for, do me a favor, try and open a brokerage account after you crossed out the arbitration clause -- and if you're seeking employment, let me know how that also goes when you decline to be subject to the intra-industry dispute resolution provisions.