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Inside the Rise of Wage and Hour Employment Practices Claims

Posted on: July 23, 2014 by Caitlin Morgan

Inside the Rise of Wage and Hour Employment Practices Claims

Inside the Rise of Wage and Hour Employment Practices Claims

Wage-and-hour employment practices lawsuits have been an escalating threat to companies of all sizes over the past decade. In fact, according to data analyzed by law firm Seyfarth Shaw L.L.P., federal wage-and-hour lawsuits filed under the Fair Labor Standards Act (FSLA) reached a record high in 2013-2014.

Between April 1, 2013 and March 31, 2014, there were 8,126 federal wage-and-hour lawsuits filed. This timeframe reflects the reporting year used by the Federal Judicial Center, the education and research agency for the federal courts. The number of filings indicates nearly a 5% increase from the comparable period a year ago, when 7,764 cases were filed, according to Seyfarth Shaw. Indeed, the number of these types of cases has risen 438% since 2000.

“The wage-and-hour litigation epidemic continues, and we expect this trend to expand further in the coming year,” Seyfarth Shaw partner Richard L. Alfred, said in a statement. “While the rise we’ve seen in FLSA cases is astonishing, these numbers are also just one part of the equation. They would be even higher if wage-and-hour lawsuits filed in state courts under state pay practices, data which isn’t readily available, were added.”

According to Alfred, the expected continued spike in wage-and-hour claims are due to the following reasons:

• Tightening of federal standards for class certification, driving attorneys to file many single and multi-plaintiff lawsuits on behalf of plaintiffs when class certification is denied or a class is decertified.

• The minimum wage debate and raising rates, putting greater emphasis on wage-and-hour laws and the availability of overtime pay.

• A directive to the Secretary of Labor by President Obama to revise the regulations on white-collar exemptions, causing employees to focus more attention attention on wage-and-hour policies and practices.

Wage-and-hour lawsuits over the last decade have outranked discrimination lawsuits in terms of the number of filings and size of settlements. These types of employment practices lawsuits have become an unforeseen risk for companies across all industry sectors. Changes made to the Federal FLSA by the US Department of Labor (DOL) in 2004, originally intended to clarify definitions to make it easier for companies to comply, sparked awareness among the plaintiff’s bar. For example, defining on-the-clock versus off-the-clock hours can be a challenge, and distinguishing exempt from nonexempt employees is much more complex than most realize. As a result, the DOL and certain state labor departments have stepped up enforcement efforts in recent years, and the DOL has ramped up its Wage-and-Hour Division under the Obama Administration. These elevated regulatory efforts not only result in more fines, but also result in class action civil lawsuits by employees allowed under the FLSA and equivalent state labor laws.

Complicating the situation is whether the coverage provided under an Employment Practices Liability Insurance (EPLI) policy will respond in the event of a wage-and-hour claim. Some policies do not cover liability arising from these claims, while other plans specifically provide coverage up to a specific sub-limit or provide defense coverage only. It’s critical that an employer understand the provisions under his or her EPLI policy to know whether coverage is available for wage-and-hour suits.

At Caitlin Morgan, we offer EPLI insurance for several of the niche markets in which we specialize and can review the details of coverage and availability. Give us a call at 877.226.1027 to discuss your client’s specific needs.

Sources: Business Insurance, Advisen, Seyfarth Shaw

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Posted in: Employment Practices Liability Insurance