One of the largest employment-related liability exposures in the United States is Wage & Hour risk. When an employee claims that an employer allegedly failed to pay overtime wages, they can file a Wage & hour claim. Most of these claims are based on state and federal wage-hour laws that have their own specifications for determining when the employees qualify or are exempt from overtime requirements. In most cases such lawsuits are based on the Fair Labor Standards Act (FLSA). If a lawsuit is filed against an employer, this can present a potential exposure of hundreds of thousands, or possibly millions of dollars, depending on the number of employees at issue. It is important to keep in mind that even if only one employee files such a complaint, all employees are automatically included, even if they do not want to claim the unpaid overtime.
The number of wage and hour complaints between 2010 and 2011, increased more than 15%, according to the United States Department of Labor (DOL). According to- Seyfarth Shaw, LLP, a national labor and employment law firm, “In the 12 months ending March 31, 2012, 7,064 FLSA suits were filed in federal court; more than the 7,006 cases filed during the prior 12-month period and the highest for any equivalent 12-month period. It represented a nearly 350% increase from the same period in 2002.”
Fortunately for insureds, some insurance carriers are beginning to provide coverage for Wage & Hour risk under the Employment Practices Liability (EPL) policies. Under a typical EPL policy, most insurance companies will exclude coverage for Wage & Hour claims, or might provide defense coverage only with a sublimit. The biggest mistake a business owner can make is to assume their EPL policy covers Wage & Hour claims. Since no two EPL policies are the same. The extent of wage and hour coverage varies greatly. This is why it is crucial for an employer to review their EPL coverage, and focus their attention on this potential significant liability exposure.
Don’t assume YOUR business is immune to these types of claims. In 2012, the pharmaceutical company, Novartis, paid $99 million to settle a wage and hour class-action lawsuit brought by its outside sales representatives who alleged that they had been misclassified as exempt rather than non-exempt employees.
To read the entire case, click here.
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