New York Employment Lawyer Blog

Brokerage firms often expect experienced financial advisers to generate more business than less experienced ones. However, the EEOC is now investigating whether these brokerage firms discriminated against older brokers who didn't meet that higher standard.

In a letter dated Nov. 6 obtained by Dow Jones Newswires and sent to hundreds of former Morgan Stanley brokers, the U.S. Equal Employment Opportunity Commission said it is conducting an investigation into large-scale layoffs by the New York-based firm in August 2005.

At the time, Morgan Stanley laid off around 1,000 brokers who failed to meet new production hurdles. As brokers gained seniority, they had to generate higher commissions and fees to remain employed.

The practice is common at brokerage firms. A number of them, including Morgan Stanley and Citigroup Inc. unit Smith Barney, ratchet up demands on experienced brokers. For a given production level, newer brokers retain a higher percentage than more experienced brokers of the commissions and fees they generate, particularly those in the low or middle ranges of production.

In Morgan Stanley's case, the firm went so far as to lay off experienced brokers who didn't generate a high enough production.

The EEOC probe isn't the only potential challenge to Morgan Stanley over age discrimination. A federal lawsuit filed by Edward Sullivan, former regional director at the firm's wealth management unit, is pending before the U.S. District Court of the Southern District of New York. Sullivan, a 25-year Morgan veteran in his mid-50s at the time, alleged that he was fired in May 2006 because of his age.

Some lawyers at brokerage firms and consultants say an adverse finding by the EEOC on the Morgan Stanley layoffs could force a rethinking of pay structures linked to years of service.

Lawyers at brokerage firms say it makes sense to require more production from more experienced advisers. "It has nothing to do with age, it has to do with the number of years of production," said a lawyer at a Morgan Stanley competitor. Still, with an adverse EEOC finding, depending on specifics, "you'd have to change the pay structure," the lawyer said.

To ward off potential lawsuits, said Robert Salwen, a compensation consultant, firms could implement a pay structure based purely on production. Pegging part of compensation on length of service may discourage veteran brokers from resting on their laurels, but "if that's the case, then there may be an age discrimination component."

Growing demands on aging brokers will become an issue because, say consultants, the age of the average broker is rising. "It's an aging industry and it's becoming a bigger problem," said Philip Palaveev, a senior consultant on financial advisory at Moss Adams.

If the EEOC probe concludes the brokers' complaint has merit, the commission can pursue the case before a federal court on the plaintiffs' behalf, or simply advise the plaintiffs to pursue a court case on their own. If the investigation proves favorable to Morgan Stanley, the plaintiffs will have a hard time pursuing a federal lawsuit unless the court overturns EEOC's decision.

The Supreme Court is expected to hear the case of Sprint/United Management Co. v. Mendelsohn on December 3. This is an age discrimination case in which the plaintiff, Ellen Mendelsohn, was laid off. At trial, Mendelsohn wanted to call five former employees as witnesses, to testify that they, too, had been laid off as a result of age discrimination. The trial judge didn’t let them testify, because they weren’t in Mendelsohn’s department and weren’t laid off by her supervisor. Sprint won at trial, and Mendelsohn appealed.

The federal Court of Appeals for the 10th Circuit ruled in Mendelsohn’s favor, finding that the testimony was relevant and should have been presented at trial. The Court of Appeals stated that this testimony might help Mendelsohn prove that there was a company-wide policy of illegally considering age when deciding who should be laid off.

Sprint then appealed to the Supreme Court. The Court agreed to hear the case because the Circuit Courts are split on whether this type of testimony (called “me too” evidence) is admissible in a discrimination case.

This type of evidence is very probative because it helps reveal the motive behind employment decisions, which can be very difficult for plaintiffs to prove at trial unless a company decision-maker was walking around calling people names.

This is a big case because the issue comes up so often. One of the most significant pretrial battles in many employment lawsuits is whether to admit testimony from other employees — and, if the testimony will be admitted, how much they’ll be allowed to say. Both sides are willing to spend time and money fighting over this because it can determine who wins at trial. The Supreme Court’s decision could well shape the outcome of federal discrimination lawsuits for years to come.

Executive recruiters in New York and around the country are using Google to find “digital dirt” on job candidates. Jared Flesher wrote an informative article for the Wall Street Journal’s executive career site (CareerJournal.com) on how to clean up your “digital dirt.” Mr. Flesher’s article cited a survey of executive recruiters finding that 75% of them use search engines to check on job candidates. Chris Russell’s blog, Secrets of the Job Hunt has a new post with good tips on managing your digital information.

If negative information is out there, you need to do something about it. If there is negative information about you that is false, you need to ask the person or company who posted it to take it down. If they refuse and it is keeping you from getting a job, you can take legal action to remove it.

Last week, the House approved a bill granting broad protections against discrimination in the workplace for gay men, lesbians and bisexuals, a measure that supporters praised as the most important civil rights legislation since the Americans with Disabilities Act of 1990 but that opponents said would result in unnecessary lawsuits.

The bill, the Employment Nondiscrimination Act, is the latest version of legislation that Democrats have pursued since 1974.

“On this proud day of the 110th Congress, we will chart a new direction for civil rights,” said Representative Kathy Castor, a Florida Democrat and a gay rights advocate, in a speech before the vote. “On this proud day, the Congress will act to ensure that all Americans are granted equal rights in the work place.”

The House bill would make it illegal for an employer “to fail or refuse to hire or to discharge any individual, or otherwise discriminate against any individual with respect to the compensation, terms, conditions or privileges of employment of the individual, because of such individual’s actual or perceived sexual orientation.”

While 19 states and Washington, D.C., have laws barring discrimination based on sexual orientation, and many cities offer similar protections, federal law offers no such shield, though it does bar discrimination based on race, religion, ethnicity, sex, age, disability and pregnancy.