WAGE-AND-HOUR CLAIMS

By Patti Maluchnik, CIC, CBIA

Georgetown Insurance Service, Inc.

Frederick, MD

 

Wage-and-hour claims happen when employees file lawsuits against their employers regarding an alleged failure to pay overtime wages.

Wage and Hour lawsuits have increased substantially over the past 10 years and they will continue to increase as more and more disgruntled ex-employees file lawsuits against their former employers.   According to an analysis of data from the Federal Judicial Center by the law firm Sayfarth and Shaw, claims have increased 432% over the past 20 years.   The analysis also found that just last year, the number of wage-and-hour suits jumped 10 percent.

Generally, the claims fall into three categories:

  1. Hourly employees claiming they weren’t paid for all the hours they worked.
  2. Salaried workers claiming they are owed overtime
  3. Employees working for the tipped minimum wage claiming they didn’t make enough in tips to bring their pay to the minimum wage

Common mistakes by employers are assuming they are immune from these claims due to their company size and/or that their Employment Practices Liability (EPL) policy will cover the claim. Unfortunately, the majority of EPL policies EXCLUDE coverage for Wage-and-Hour claims.

The good news is that recently a few carriers’ have decided to offer defense coverage by adding a sublimit to their EPL policy. Coverage for the actual damages is very hard to get, but securing coverage for defense-costs-only can be a significant value to employers.   In these types of claim, the attorney is able to get his or her hourly fee for the time expended on the case in lieu of a percentage as with most contingency arrangements.   So, on a small claim that might pay out $10,000 to an employee, the attorney might bill out as much as $100,000!   Having a sublimit on your EPL policy would be very worthwhile.

Employers need to re-visit their time-keeping systems, training programs, job descriptions, responsibilities, and actual practices to be sure they are following federal and state laws.   Most importantly – they need to purchase an Employment Practices Liability policy that has a Wage-and Hour Sublimit!

 

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