Looking to the future, it's important for insurers to pay close attention to wages and hourly employment claims with Employment Practices Liability Insurance (EPLI) coverage. Claims falling under the Fair Labor Standards Act (FLSA) have continued to rise each year due to the complexity of the legislation. Many companies never even realize they're in violation of the law until it's too late.
What is FLSA?
The Fair Labor Standards Act, or FLSA, is a federal law that encompasses minimum wage, overtime pay standards, records keeping, and child labor regulations. These laws affect both full and part-time workers in private and public sectors.
Exemptions Revisions Create Confusion
Many companies conducted business by utilizing employee positions that would be considered exempt from FLSA. These positions were exemptions and often, highly useful to many corporations. Things have changed. Many positions that used to be exempt are now non-exempt. Furthermore, white-collar exemptions for supervisors and the like have been looked at and will be updated soon. This will lead to further confusion for insurers and companies – while leading to more litigation.
Many lawsuits have resulted from companies being sued for not paying hourly employees properly. Many times companies do not realize they're in violation of FLSA in these cases. For instance, an employee sending work emails on his or her smartphone during a non-paid lunch break can be a violation. Sadly, intent is irrelevant with regards to the FLSA, and hourly wage violations can be an unforgivable mistake.
While discrimination claims can be incredibly difficult to prove, an hour and wage claim can be simple to win in court. With the FLSA, the savvy employee’s attorney can almost always find a violation in how a disgruntled employee was paid. Not only do these cases prove easier for the plaintiff to win, but there's also a hefty lawyer’s fee that comes automatic with such a claim.
Companies continue to take hits with the FLSA. A violation regarding hourly pay often will not only include one employee. Many times the violation will involve hundreds of employees. If this occurs, then a class action lawsuit will be on the table. Companies know nothing cheap comes when the words "class action" are thrown around.
Waiving Class Action Issues
Luckily, companies do have one trick in their toolbox. Class action waivers have recently been held up in the Supreme Court. This means a company can have an employee sign a class action waiver that prevents class-action lawsuits against the company regarding violations concerning hourly work and pay.
How Insurers Can Lower the Risk
To ensure your clients do everything possible to avoid such claims and cases, an insurer can ask companies to proactively audit their policies and payment structures for hourly employees. Auditing the employee handbook and staying up-to-date on FLSA changes will help limit a client's vulnerability. Ultimately, an insurer can only educate a client on what they can do to protect their company. The rest is up to the businesses themselves.
If you have questions about FLSA and/or Employment Practices Liability Issues contact Skyline Risk Management, Inc., (718) 267-6600 to discuss your concerns.