FINRA Arbitrators Slam Wedbush In Pay Dispute

January 10, 2017

As the Blog often laments, a lot of what gets published as a FINRA Arbitration Decision requires the reader to fill in the blanks. We are teased with a list of titillating causes of action only to find nary a word as to the underlying activity at issue. They allege wrongful termination but we can't find any explanation of who did what and when and why there was a problem. It's all conclusory. Similarly, we often learn of a stunning award but it is presented without arbitrators' rationale. Sadly, today's featured article present yet another in an overly long line of cases that initially elicit a "WOW!!!" but ultimately end an explanation as to how it was calculated or why the arbitrators came ups with the sums. All of which reminds me of how T. S. Eliot so aptly and poetically phrased it:  

This is the way the world ends

Not with a bang but a whimper.

Case In Point

In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in September 2015, former Wedbush Securities registered representative Claimant Murphy alleged failure to pay all wages due in violation of the California Labor Code § 204, 510 & 1194; breach of contract; and conversion. As set forth in the FINRA Arbitration Decision, Claimant Murphy sought: 

  1. Minimum wages for all hours worked by Claimant pursuant to California Labor Code §§ 204, 1194 and 1194.2; 
  2. Monetary damages for unpaid incentive pay; 
  3. Interest on his unpaid incentive pay pursuant to California Labor Code § 218.6; 
  4. Attorneys fees and costs incurred to recover his unpaid incentive pay pursuant to California Labor Code § 218.5 and other applicable statutes or FINRA rules or procedures; 
  5. General damages, including emotional distress, as a result of the wrongful conversion of his unpaid incentive pay; 
  6. Punitive damages as a result of the wrongful conversion of his unpaid incentive pay; and 
  7. Such other and further relief as this Panel may deem proper and just.

In the Matter of the FINRA Arbitration Between Thomas Joseph Murphy, Claimant, vs. Wedbush Securities Inc., Respondent (FINRA Arbitration 15-02449, December 28, 2016).

Respondent Wedbush generally denied the allegations and asserted various affirmative defenses.

According to the Law

California Labor Code

Section 204:

(a) All wages, other than those mentioned in Section 201, 201.3, 202, 204.1, or 204.2, earned by any person in any employment are due and payable twice during each calendar month, on days designated in advance by the employer as the regular paydays. Labor performed between the 1st and 15th days, inclusive, of any calendar month shall be paid for between the 16th and the 26th day of the month during which the labor was performed, and labor performed between the 16th and the last day, inclusive, of any calendar month, shall be paid for between the 1st and 10th day of the following month. However, salaries of executive, administrative, and professional employees of employers covered by the Fair Labor Standards Act, as set forth pursuant to Section 13(a)(1) of the Fair Labor Standards Act, as amended through March 1, 1969, in Part 541 of Title 29 of the Code of Federal Regulations, as that part now reads or may be amended to read at any time hereafter, may be paid once a month on or before the 26th day of the month during which the labor was performed if the entire month's salaries, including the unearned portion between the date of payment and the last day of the month, are paid at that time.

(b) (1) Notwithstanding any other provision of this section, all wages earned for labor in excess of the normal work period shall be paid no later than the payday for the next regular payroll period.

(2) An employer is in compliance with the requirements of subdivision (a) of Section 226 relating to total hours worked by the employee, if hours worked in excess of the normal work period during the current pay period are itemized as corrections on the paystub for the next regular pay period. Any corrections set out in a subsequently issued paystub shall state the inclusive dates of the pay period for which the employer is correcting its initial report of hours worked.

(c) However, when employees are covered by a collective bargaining agreement that provides different pay arrangements, those arrangements shall apply to the covered employees.

(d) The requirements of this section shall be deemed satisfied by the payment of wages for weekly, biweekly, or semimonthly payroll if the wages are paid not more than seven calendar days following the close of the payroll period.

Section 218.5: 

(a) In any action brought for the nonpayment of wages, fringe benefits, or health and welfare or pension fund contributions, the court shall award reasonable attorney s fees and costs to the prevailing party if any party to the action requests attorney s fees and costs upon the initiation of the action. However, if the prevailing party in the court action is not an employee, attorney s fees and costs shall be awarded pursuant to this section only if the court finds that the employee brought the court action in bad faith. This section shall not apply to an action brought by the Labor Commissioner. This section shall not apply to a surety issuing a bond pursuant to Chapter 9 (commencing with Section 7000) of Division 3 of the Business and Professions Code or to an action to enforce a mechanics lien brought under Chapter 4 (commencing with Section 8400) of Title 2 of Part 6 of Division 4 of the Civil Code.

(b) This section does not apply to any cause of action for which attorney s fees are recoverable under Section 1194.

Section 218.6:

In any action brought for the nonpayment of wages, the court shall award interest on all due and unpaid wages at the rate of interest specified in subdivision (b) of Section 3289 of the Civil Code, which shall accrue from the date that the wages were due and payable as provided in Part 1 (commencing with Section 200) of Division 2.

Section 1194:  

(a) Notwithstanding any agreement to work for a lesser wage, any employee receiving less than the legal minimum wage or the legal overtime compensation applicable to the employee is entitled to recover in a civil action the unpaid balance of the full amount of this minimum wage or overtime compensation, including interest thereon, reasonable attorney's fees, and costs of suit.

(b) The amendments made to this section by Chapter 825 of the Statutes of 1991 shall apply only to civil actions commenced on or after January 1, 1992.

Section 1194.2

(a) In any action under Section 98,1193.6, or 1194 to recover wages because of the payment of a wage less than the minimum wage fixed by an order of the commission or by statute, an employee shall be entitled to recover liquidated damages in an amount equal to the wages unlawfully unpaid and interest thereon.  Nothing in this subdivision shall be construed to authorize the recovery of liquidated damages for failure to pay overtime compensation.

(b) Notwithstanding subdivision (a), if the employer demonstrates to the satisfaction of the court or the Labor Commissioner that the act or omission giving rise to the action was in good faith and that the employer had reasonable grounds for believing that the act or omission was not a violation of any provision of the Labor Code relating to minimum wage, or an order of the commission, the court or the Labor Commissioner may, as a matter of discretion, refuse to award liquidated damages or award any amount of liquidated damages not exceeding the amount specified in subdivision (a).


The FINRA arbitrators found Respondent Wedbush liable to and ordered it to pay to Claimant Murphy:

  • $145,833.00 for nonpayment of wages plus interest at the rate of 10% per annum from February 1, 2015, until paid;
  • $221,060.00 for unpaid trading incentive for fiscal year 2013;
  • $208,000.00 for unpaid trading incentive for fiscal years 2015;
  • $6,640.00 for unpaid override for fiscal year 2013;
  • $160,465.30 for unpaid override for fiscal year 2014;
  • $300,000 in punitive damages pursuant to Haigler v. Donnelly, 18 CaL2d 674 (1941).
  • $82,500 in attorneys fees pursuant to the California Labor Code § 218.5; and
  • $800.00 in costs.
Bill Singer's Comment

Really??? This is how a FINRA Arbitration Decision explains itself? Conclusory causes of action without any explanation of what actually transpired. A breath-taking award adding up to over $1 million but without so much as a word of substantive rationale beyond, yet again, conclusory characterizations of how the dollars were allotted. What about the "nonpayment of wages"? Wages for what? What was the basis for the firm's nonpayment? What was the issue with the unpaid trading incentives? Was Murphy paid any incentives? Why did Wedbush refuse to pay the incentives in 2013 and 2015, but, apparently, did so in 2014 (or not?).  If both parties requested confidentiality as to the above points, that's fine with me, but would you at least disclose that so we're not left hanging.

The FINRA Arbitration Decision cites Donald Potter, Esq., Law Office of Donald Potter, Pasadena, California, as Claimant Murphy's lawyer. Nice job Mr. Potter!