California Labor Law Violation Fired at Fidelity Stands, Typo Goes

Santa Clara, CAFidelity Investments tried to wangle out of a proposed class action lawsuit alleging California labor law violations by saying the plaintiff’s employment agreement contained a "typo" and she wasn’t in fact an employee. But Fidelity’s excuse appears to have back-fired. “It is astounding how clearly [Fidelity] held itself out as plaintiff’s employer,” wrote California federal judge William Aslup, and he denied their motion to dismiss.

Overtime Compensation Violations

Adrian Morris, a former employee of Fidelity Investments, FMR LLC, and Fidelity Brokerage Services LLC, filed a wage and hour lawsuit against the defendants last October, alleging that they failed to properly calculate her overtime pay. Morris worked as a financial representative from 2015 to 2017. During that time, she participated in the company's quarterly-bonus, student-loan-repayment, and fitness-reimbursement programs, but Fidelity allegedly didn’t pay overtime under these programs and failed to provide wage statements, another violation of the California labor code. Specifically, Fidelity’s complex bonus system didn’t retroactively compensate non-exempt employees for all of the overtime they accrued, according to the lawsuit.

According to court documents, Morris claims her overtime wages did not account for her full regular rate of pay because the defendants failed to include bonuses, student loan repayment, and “fitness reimbursement” in their calculations. Fidelity will pay their employees up to $2,000 per year to pay off student loans if they meet certain requirements and will award them up to $300 per year for fitness expenses, from gym memberships to fitness watches. The lawsuit claims that this extra income and earned bonuses should have been included as part of each employee’s “regular rate” of pay when calculating overtime wages. Further, Morris’s lawsuit claims FMR failed to include the amount of available paid time off (PTO) on employees’ itemized wage statements – another violation of California state law. Morris additionally says that Fidelity claimed she owed them money for “taking too much PTO,” but failed to warn her of how many days she had left before she took them.

Fidelity Class Action Certified

Morris said she was employed jointly by Fidelity Brokerage Services, Fidelity Investments, and FMR LLC and that they constituted an integrated enterprise. FMR, however, tried to disprove her employer-employee relationship by claiming that her offer letter was a “typo” and that it cannot be held jointly liable for alleged violations by its subsidiary Fidelity Brokerage Services LLC because they appear to both be employers of named plaintiff Adrian Morris. But Judge Alsup rejected Fidelity’s assertions.

Judge Alsup also certified a class of current and former Fidelity Brokerage employees in California and conditionally certified a collective action of all U.S.-based employees, which includes current and former Fidelity Brokerage employees who worked for the company between October 2013 and the present; a subclass of workers whose employment ended between October 2014, and the present as well as an FLSA collective action of current and former employees dating back to May 2015.

Judge Alsup found that “Fidelity Investments” was merely a licensed trade name and not a legal entity and that Fidelity was imposing a standard of proof better suited for summary judgment. “On summary judgment or at trial, the fact that FMR held itself out as plaintiff’s ‘employer’ will not carry the day if FMR establishes a different relationship,” he said, and referred to the “economic realities” test set out in the Ninth Circuit’s 1983 Bonnette v. California Health & Welfare Agency decision.

The motion is granted in part and denied in part: claims against Fidelity Investments are dismissed, but FMR remains a defendant in Morris v. Fidelity Investments et al., case number 3:17-cv-06027, in the U.S. District Court for the Northern District of California.

The Typo Excuse

“A simple typographical or grammatical mistake will not change the meaning of the agreement in a significant way,” writes Rebekah Parker, associate, Novack and Macey LLP for Smart Business. But typos aren’t necessarily black and white and there’s such a thing as contract reformation. Perhaps Fidelity came across contract reformation, but didn’t read the small print- the part that says employees too must agree that a typo has been made.

“If all contracting parties agree that a mistake has been made, they may — but do not have to — seek court intervention to reform their agreement. Or, they can voluntarily reform the contract themselves. This can be accomplished by, among other things, correcting the language on the original contract and having each party initial the revision; executing a rider to the agreement that identifies and corrects the mistake; or executing a new version of the contract that clearly states that it is intended to reform the parties’ prior agreement. Courts encourage voluntary reformation and will usually enforce the reformed agreement should a dispute later arise.”