You mentioned other wage and hour issues. Can you expand on this?
We’ve talked about failure to pay overtime based upon misclassification, but failure to pay overtime or recognize other ‘paid time’ is asserted for other reasons as well. One recent suit under a collective bargaining agreement stated that the employer owed employees for the time they took to dress for work after arrival at the company facility. They were granted this time and back pay was ordered.
The retail and hospitality industries are particularly hard hit with these claims. Employees will claim that they work through breaks or often miss time off for meals. Sometimes these situations start as employees wanting to do a little more to get recognized but can end up later in a suit for back wages.
As a matter of fact, the Department of Labor reported in fiscal 2008 that 197,000 employees received a total of more than $140 million in minimum wage and overtime back wages as a result of violations pursued by the Wage & Hour Division.
Aren’t these claims covered under an employment practices policy or similar insurance?
Most directors’ and officers,’ and employment practices policies exclude claims that violate laws and regulations, and most specifically mention the Fair Labor Standards Act. They will often include language that the exclusion applies to ‘similar or related federal, state or local law or regulation.’ Policies with less specific language can result in some limited coverage based upon circumstances.
There has been a trend to provide some sublimit for defense only of these allegations, but those limits are generally between $100,000 and $250,000. There remains no coverage for any back wages, overtime pay or similar judgments that the employer might become obligated to pay. This is typically very inadequate for most of the cases and awards that we’ve seen in the last couple of years.
What can an employer do to reduce its exposure to uncovered claims?
The most important action an employer can take is to review all of its employment processes and procedures and be certain that it is not violating laws related to minimum wage, breaks, and overtime. Be sure that you have reviewed the classification of employees and that any employee who is considered ‘exempt’ truly fits within the parameters of that definition within the act. Human resource consultants and employment attorneys may be needed to review company policies.
Finally, have an insurance representative with the expertise and knowledge to review the fine points of your insurance contract before making a decision as to which insurance product is the best product for you.
Gloria D. Forbes is executive vice president with ECBM Insurance Brokers and Consultants. Reach her at (610) 668-7100 or [email protected].
