The nation’s leading EPLI forum is back to ensure that you are prepared to manage and defend against the increasing number of claims being filed, positioned to take advantage of new opportunities in the EPLI market, equipped to minimize exposure to risk, armed to tackle the rising costs of litigation, and primed for aggressive new EEOC initiatives.

1. ATLANTA LABOR & EMPLOYMENT
The Evolution of Wage & Hour and EPLI
Offering and Obtaining
Coverage for and
Reducing Exposure to
Wage & Hour Claims
January 29, 2013
GREENBERG TRAURIG, LLP  ATTORNEYS AT LAW  WWW.GTLAW.COM
©2012. All rights reserved.

2. FLSA Cases on the Rise
 20-year upward swing
□
1,457 FLSA cases filed in 12 months ending 9/30/93
□
4,055 FLSA cases filed in 12 months ending 3/31/03
□
7,064 FLSA cases filed in 12 months ending 3/31/12
□
Increase of over 74% in last ten years alone
 Settlements are both common and expensive
□
Offer of judgment is common FLSA strategy
□
One study found a per-plaintiff settlement amount of
approximately $5,000 per plaintiff in 2011
 It takes only 200 employees to reach $1 million
| ATLANTA LABOR & EMPLOYMENT

3. Evaluating Industry Trends Relating to
Wage & Hour Coverage
 Long history of not covering wage & hour claims
 Recent clamor for coverage from insureds
 Impact on the market of Aon’s new Wage &
Hour product in 2012
| ATLANTA LABOR & EMPLOYMENT

4. Determining Whether to Offer Wage &
Hour Coverage
 Is the market hardening?
□
General upward trend of premiums
□
But a wide disparity in premium increases/decreases,
partly depending on size of employer to be covered
□
Other areas of market hardening – retentions, coinsurance, deductibles, hammer clauses
| ATLANTA LABOR & EMPLOYMENT

5. Determining Whether to Offer Wage &
Hour Coverage
 Competitive considerations
□
Relatively few players in EPLI market, and even fewer in
wage & hour area
□
Balances out market hardening, to some extent
□
Willingness to sacrifice market share to increase
premiums?
| ATLANTA LABOR & EMPLOYMENT

6. Determining Whether to Offer Wage &
Hour Coverage
 Public policy
□
Reluctance to cover wage & hour is ostensibly based on
public policy
□
Moral hazard to insure against improper payment of
wages
□
Is wage & hour really any different than other EPLI
claims in this regard?
| ATLANTA LABOR & EMPLOYMENT

7. Underwriting Considerations When Offering
Wage & Hour Coverage
 Scope of Coverage
□
Defense-only sublimits
 More common than indemnity coverage
□
Indemnity coverage
 Starting to come around
 Employer size as a factor?
□
Coverage limits
 Single v. Aggregate
□
Claim types: Misclassification, travel time, off-the-clock,
retaliation
 Industry trends in coverage
| ATLANTA LABOR & EMPLOYMENT

8. Underwriting Considerations When Offering
Wage & Hour Coverage
 Factors to consider
□
Insured’s policies and procedures
 Procedures for proper classification of exempt/non-exempt
 Policies for off-the-clock work
 Time recording methods for exempt and non-exempt
 Internal complaint procedures
| ATLANTA LABOR & EMPLOYMENT

9. Underwriting Considerations When Offering
Wage & Hour Coverage
 Factors to consider
□
Employee composition
 White collar v. blue collar?
 Use of independent contractors?
 Use of PEO or employee leasing company?
 Stable workforce or high turnover?
 Large employer with defined roles v. small employers with
fluid, cross-functional workforce
| ATLANTA LABOR & EMPLOYMENT

10. Underwriting Considerations When Offering
Wage & Hour Coverage
 Industry-specific considerations
□
Industries with significant on-call time
 E.g., health care, tech support
□
Traditional (if questionable) use of independent
contractors
 E.g., auto dealers/sales staff
□
Industries with historic donning/doffing or travel time
issues
 E.g., food processing or airport workers
□
Industries with high-income, front-line exempt
employees
 E.g., mortgage brokers
| ATLANTA LABOR & EMPLOYMENT

11. Assessing the Costs and Benefits of
Available Wage & Hour Coverage
 Consider all the costs, not just premiums
□
Deductibles, co-insurance, hammer clauses, etc.
□
Increased administrative burdens
 Consider all the benefits, not just
defense/indemnity
□
Access to best practices, especially for small- to mid-size
employers
□
Increased workplace satisfaction from proper payment
□
Avoidance of litigation
| ATLANTA LABOR & EMPLOYMENT

12. Understanding ERISA Claims as They Relate
to Wage & Hour Claims
 Wages and benefits are two sides of the total
compensation coin.
 When total compensation is wrong, it may
trigger suits under ERISA and FLSA
 For example:
□
A misclassified independent contractor claims he should
have been paid overtime and allowed to participate in
ERISA benefit plans
 Overlap where ERISA benefits are derivative of
FLSA wages
□
E.g., 401(k) contributions as a percentage of total wages
| ATLANTA LABOR & EMPLOYMENT

13. Impact on EPLI of Overlap Between Wage &
Hour Claims and Other EPL Claims
 Start with the specific language of the policy
and the complaint
 Impact of duty-to-defend provision on “mixed”
cases
 Treatment of FLSA retaliation cases that
overlap with FLSA wage claims
| ATLANTA LABOR & EMPLOYMENT

14. Reducing Exposure to Wage & Hour Claims
 Instituting effective policies and procedures
□
Proper classifications of exempt/non-exempt and
employee/independent contractor
□
Proper time reporting and recording procedures,
potentially for all employees
□
Proper complaint procedures for internal grievances
□
Other best practices?
| ATLANTA LABOR & EMPLOYMENT

15. Reducing Exposure to Wage & Hour Claims
 Obtaining review by outside counsel
□
Can obtain privileged classification analysis
□
Can try to preemptively “fix” FLSA problems
□
FLSA audit may uncover other legal landmines
 Key Issue – how do you fix past FLSA violations
without triggering an avalanche of lawsuits?
| ATLANTA LABOR & EMPLOYMENT

16. EPLI Issues That Can Arise Involving Independent
Contractors or Joint Employment
 Coverage typically limited to “employees”, not
independent contractors
□
Tough choice for employer – calling them “independent
contractors” may win the FLSA case, but result in denial
of coverage
□
So is there incentive to lose the FLSA case to win the
coverage?
□
Does this pose a conflict of interest for the attorney?
| ATLANTA LABOR & EMPLOYMENT

17. EPLI Issues That Can Arise Involving Independent
Contractors or Joint Employment
 Joint employment arises in two situations
□
Corporate affiliates
□
Employee leasing firm or PEO
 Joint employment relationships should be
disclosed and contemplated up front in policy
 Try to make sure that coverage will not be at
odds with substantive defenses
| ATLANTA LABOR & EMPLOYMENT

18. ATLANTA LABOR & EMPLOYMENT
QUESTIONS
January 29, 2013
GREENBERG TRAURIG, LLP  ATTORNEYS AT LAW  WWW.GTLAW.COM
©2012. All rights reserved.