Wells Fargo Advisors to Pay $3.5 Million to Settle Trainee Class-Action
Wells Fargo Advisors has agreed to pay $3.5 million to former employees who sued the broker-dealer for requiring them to reimburse their training costs if they sought to work in the financial services industry within five years of leaving or being fired.
The tentative settlement of the class-action suit also will require the retail brokerage unit of Wells Fargo Corp. to release all claims and end collection efforts against former trainees and to end its reimbursement policies for current and future participants, according to papers filed on Thursday in federal court in Chicago. As a condition of employment in Wells’ private client group training program, participants agreed to pay as much as $45,000 or $55,000 in reimbursement.
People who have already paid the firm for outstanding costs are entitled to repayment, according to Linda Friedman of the law firm Stowell & Friedman that was co-counsel on the wage-and-hour case. The settlement reserves $300,000 for such claims.
“The decision to resolve these matters took into account a number of factors, including the substantial costs to defend these claims and a desire to move Wells Fargo Advisors forward without the distraction of ongoing litigation,” Helen Bow, a spokeswoman for the broker-dealer said in an e-mail.
The four named plaintiffs who filed the training cost lawsuit in March 2014 alleged violation of state and federal labor laws. They also claimed that Wells pressured training program participants to work overtime without pay (“off the clock”) during the 31 weeks of the two-year training program that they did not have a “production number” entitling them to traditional broker compensation.
The settlement, which awaits court approval, affects some 2,000 individuals who worked at Wells Fargo Advisors between November 2011 and the end of 2016. Some who were in the program as early as January 2009 are also eligible for payment, depending on the state where they worked.
“What we were looking primarily was to enjoin the practice and then recover the lost overtime,” Friedman said.
Wells Fargo neither spent an amount on training candidates that was “commensurate with the ‘training cost’ obligation, nor offset the FA trainees’ obligation for the assets and commission revenue they developed that remained with the firm after their departure, the plaintiffs argued in seeking support of the settlement.
The agreement with Wells will establish a fund of $3.5 million for compensation for lost overtime pay, training losses, attorneys’ fees and fund administration costs. All class members will automatically receive a check based on how many weeks they worked in non-exempt positions, with a minimum of $100 per person.
Contrary to most wage-and-hour settlements, Wells will not be able to collect any unusued money in the funds, according to the papers.
The plaintiffs’ lawyers plan to seek 25% of the settlement fund, or $875,000, as attorney fees, which they say is than the standard one-third contingent fee negotiated by the plaintiffs. They also are asking $50,000 in service awards.
Erika Williams, one of the four trainees who brought the lawsuit, was also a lead plaintiff in a discrimination suit that settled in January for $35.5 million. She and other African American financial advisors claimed in that suit that Wells Fargo’s policies, including the training cost reimbursement, disproportionately affected minorities because they had higher failure rates in the training programs.