Brokerage Morgan Stanley has agreed to pay as much as $42.5 million to settle a lawsuit demanding overtime pay for its California brokers.
The suit, which was filed on behalf of about 5,000 current and former commission-based brokers and broker trainees in the state, claimed that New York-based Morgan Stanley failed to pay required overtime and improperly deducted money from paychecks.
"I think that there's got to be a change in the way the industry pays brokers," said Mark Thierman, a lawyer who represents brokers in the case.
The agreement is the third to win overtime pay for stockbrokers, following multimillion-dollar settlements with Merrill Lynch & Co. and UBS. Court victories for the brokers may force firms to change their compensation policies.
Morgan Stanley failed to pay overtime to brokers, who frequently worked more than 40 hours a week, and improperly deducted money from their paychecks to cover administrative expenses, according to the lawsuit filed in U.S. District Court in San Diego. Both sides told U.S. District Judge Roger T. Benitez in December that they had reached a settlement without providing details of the pact.
Morgan Stanley declined to comment.