Arbitration Defenses Could Threaten Brokerage Firms’ Ability to Recover Training Costs
From the Desk of Jim Eccleston at Eccleston Law Offices:
Wells Fargo is seeking more than $50,000 from a former trainee, Erika Williams, after she resigned under duress last June, just a year into her five-year training. Ms. Williams claims that if she has to pay back the cost of training, Wells Fargo will have violated the federal minimum wage law since she was paid an annual salary of $45,000 — about $5,000 less than the training costs. In addition, as an African-American she also alleges that Wells Fargo places an unfair burden on minority advisers, who fail at a higher than normal rate, because they receive less support from the firm.
Wells Fargo's training agreement is a five-year contract that values the training at $55,000. During the last four years, the amount that Wells Fargo can claim the adviser owes decreases at a set rate each month until it is fully amortized at the end of the four years. The goal is to prevent the firms from incurring losses from advisers who receive training and move to other firms.
Trainee dropout is a common concern in an industry that averages around a 20% to 30% success rate, according to a study last year by Cerulli Associates. The success rate measures the number of employees who complete training and go on to become advisers.
If the lawsuit is successful, the ability of brokerage firms to recoup training costs form ex-employees employees who leave the firms early could be in jeopardy.
The attorneys of Eccleston Law Offices represent investors and advisers nationwide in securities and employment matters. Our attorneys draw on a combined experience of nearly 50 years in delivering the highest quality legal services.
Related Attorneys: James J. Eccleston