The wage and hour claim is one of the most dreaded employee claims. The recent wave of class-action wage and hour lawsuits has cost businesses a lot of money in both defense and settlement costs.
According to the U.S. Labor Department’s Wage and Hour Division, it recovered $322 million in wages owed to workers during the 2019 fiscal year.
Consequently, most insurers do not include wage and hour coverage in their employment practices liability insurance (EPLI) policies, which can cause the cost of EPLI to increase significantly if businesses want it included.
Wage and hour claims can be very frustrating for employers, regardless of their form. Here are a few employee complaints that most commonly trigger wage and hour claims so employers can better understand what they can do to limit their exposure.
Wage and Hour Claims Examples
Wage and hour claims are made by non-salaried or non-exempt employees who claim they have been unfairly compensated for their work.
The Fair Labor Standards Act (FLSA) is the federal law that defines minimum wage and overtime rules. Wage and hour claims can only be formally settled through the Department of Labor or by a court.
Employees have a right to unpaid meals and rest breaks during their shifts. Employees should be paid for lunches and rest breaks if their employers mandate them.
Employers sometimes tell employees that they will receive compensatory time off for the overtime they worked rather than giving them the overtime pay they deserve for the extra hours worked.
If employees are required to attend meetings, seminars, or training events on company time, they should be compensated.
Travel related to work cannot be counted as unpaid time by an employer. The employee must be compensated for travel time if they are traveling for work.
Non-exempt employees who work more than 40 hours in a seven-day period are entitled to 1.5 times their normal hourly wage for each overtime hour worked under the FLSA. Employers who fail to pay overtime wages at all or improperly calculate overtime pay to pay employees less than what they earned are liable for back pay.
What Is Wage and Hour Insurance?
One of the most common types of employment law disputes is wage and hour disputes.
An employee may have a complaint about:
Employers can often be protected from wage and hour lawsuits by purchasing wage and hour insurance. Commercial general liability (CGL) insurance often covers wage/hour insurance. As a result of this type of insurance, the insurer provides some financial support to the employer in case of a lawsuit or legal action. “Employment Practices Liability Insurance,” or EPL, is sometimes referred to as CGL.
How Does Wage and Hour Insurance Work?
Most employment practices liability insurance policies cover issues and losses resulting from employment-related claims.
A wage and hour lawsuit may address the following:
- Damages issued to plaintiffs
- Judgments, injunctions, and other court orders
- Settlements or payments related to mediation
- Interest on payments
- Defense costs
A policy’s coverage may vary depending on the terms negotiated between the insurer and the employer. The insurer will not cover terms and expenses not covered by the policy, and the employer will be responsible for them.
How Can Wage and Hour Insurance Disputes Be Resolved?
Insurer-employer disputes may include:
- Damages and costs covered by insurers are usually limited to a specified amount
- Policy expiration dates
- Breach of an insurance contract
- Fraudulent insurance claims
- Federal and state exclusions, such as those related to the Fair Labor Standards Act
To resolve disputes between insurers and employers, separate legal proceedings may be required. A second lawsuit may be filed in addition to the original wage/hour suit.
Getting to Know the Overtime Rules
Wage and hour claims can be filed for a variety of reasons, but overtime pay claims make up the vast majority of the most expensive and complicated. Therefore, employers should be familiar with what the FLSA specifies about overtime.
According to these overtime rules, employees who are eligible for overtime pay and those who are not are determined. The employer does not have to pay an employee for hours worked beyond the regular 40 hours a week if the employee is exempt. The majority of exempt employees work in managerial or white-collar positions.
The Department of Labor increased the salary threshold for white-collar exemptions to $684 a week from $455 a week in September 2019. Despite holding a managerial or senior title, employees earning less than $684 per week should be paid for overtime hours.
Since January 2020, this rule has been in effect. The Department of Labor will update this rule regularly to ensure that employers are paying all non-exempt employees the overtime wages they deserve and that the exemption level remains reasonable.
Additionally, overtime eligibility is not solely determined by the pay-level test. The Department of Labor uses a job-duty test to determine eligibility, along with state-specific rules.
Employers must abide by many rules, making it difficult to avoid wage and hour claims.
Employers must keep meticulous records of employee behavior in order to limit these types of claims. Scheduling software, for example, could help employers keep accurate timesheets and maintain better records of breaks taken, travel time to work, and a variety of other data they need to pay their employees lawfully and properly.
You might want to hire a compensation consultant and a wage and hour attorney to help you sort things out, especially if you employ 50 or more workers.
Business owners can benefit greatly from the services of these types of professionals when it comes to structuring wages and incentive programs. Performing classification audits, which businesses should do regularly, is also dependent on them.
When adhering to the FLSA compensation tests, a classification audit helps your business answer questions such as which tasks and responsibilities should be delegated to employees and which should be handled by contract workers.
To keep up with the constant changes in labor law, classification audits should be performed every two to three years.
Choosing the Right EPLI Policy
Business owners who educate themselves better on the FLSA and hire professionals to keep their businesses compliant with federal and state wage and hour laws will avoid wage and hour lawsuits more easily.
No matter how proactive and committed you are to ensuring that all of your employees are properly paid, it’s hard to avoid wage and hour claims altogether due to the complex, nuanced, and ever-changing laws.
Therefore, businesses of all sizes and industries should consider transferring some of that risk to an insurance company.
EPLI is the go-to policy for protecting your company from employee lawsuits, as most employers know. Employment practices liability insurance covers many types of employee lawsuits, including sexual harassment, age discrimination, religious discrimination, gender discrimination, wrongful termination, and failure to promote.
Is it Necessary to Hire a Lawyer to Help Me With Wage/Hour Insurance?
It is not uncommon for employment liability insurance to involve complex issues. In the case of wage and hour lawsuits, the insurance contract may need to include a special provision or term.
If you need help negotiating or reviewing an insurance policy, you may wish to hire an insurance lawyer for assistance. If you need to appear in court for an employment law dispute, your attorney can provide you with guidance on legal matters.