2009 Professional Risk Symposium: EPL, E&O and Fiduciary San Diego, CA ~ April 29 & 30, 2009 Understanding Wage & Hour Claims and What You Can Do About Them

UNDERSTANDING WAGE AND HOUR CLAIMS AND WHAT YOU CAN DO ABOUT THEM MODERATOR: Amy C. Jeter, JD, Senior Vice President, Western Region Claims Advocate, Willis HRH PANELISTS: Karen Carrera, Esq., Partner, Talamantes Villegas Carrera, LLP Andrew Naylor, Esq., Partner, Waller Lansden Dortch & Davis Joseph Werner, JD, Product Line Manager, Zurich NA

Wage & Hour Insurance Issues: Litigation Viewpoint How Wage & Hour exposure is viewed in the legal industry  Business Week: Wage Wars, Oct. 1, 2007 “this litigation has exploded nationwide” “biggest problem … in employment area by far” “claim du juor” “undetonated legal mines”

Insuring Wage & Hour Claims Potential Issues of a W&H claim  Conduct Written policies Job descriptions Actual conduct  Damages Past due wages Overtime Fines Penalties  Defense Costs

Insuring Wage & Hour Claims What is Insurable? Defense Costs Sub-limited coverage Sufficient?

Difficulty in Assessing Risk Problems for Employers = Problems for Underwriters  Old Laws, Modern Workplace Wage & Hour laws arose from New Deal legislation following the Great Depression Shift from manufacturing to servicing industries

Difficulty in Assessing Risk (cont’d)  Volatility Who is Exempt? Who is Non-Exempt?  Traditional exempt: Manager or executive; administrative; professional; outside sales; computer professionals  Now Non-Exempt? Stockbrokers, computer professionals, sales representatives, claims adjusters  Details Focus needs to be on what is actually done, not job titles

Difficulty in Assessing Risk Minimal Inquiry is Extensive: Are regular pay days established? Are employees paid with the frequency required by state law? Is an authorized instrument of wage payment used? Are compliant pay statements provided? (See Littler Mendelson, P.C., Total Wage and Hour Compliance: An Initiative to End the Wage and Hour Class Action War, 2008 – 2009)

Difficulty in Assessing Risk Minimal Inquiry is Extensive (cont’d) Are employees classified properly as exempt or non-exempt? Are non-exempt employees paid proper overtime wages? Is off-the-clock work prohibited/prevented? Are meal and rest periods provided and documented?

Difficulty in Assessing Risk Other Areas of Inquiry  Tracking of work time  Tracking of vacation accrual, use and compensation  Are paycheck deductions appropriate?  Are expenses properly reimbursed  Payment of bonus, commisions v. overtime  Payment of final wages

Difficulty in Assessing Risk State Laws/Multiple Litigation  Starbucks Store Manager Case – settled in California, still litigating in Florida and Texas  Claim Adjuster Litigation Farmers Insurance Group Cases  Oregon  Ninth Circuit (FLSA)  California  Use of out of state banks  Pay statements

Alternative Coverage – What else can be done for the Insured? Stick with “Duty to Defend” Policies Defense Cost Allocation Provisions Loss Prevention Services

Wage & Hour Developments Under the Obama Administration Lorelei Boylan expected to be appointed Administrator of Wage & Hour Division W&H Division to add 250 new investigators Introduction of Family Friendly Workplace Act

Litigation Trends Increase in single plaintiff and small “class” claims Increased retaliation and independent contractor matters Maintaining exempt status and reducing labor costs

Increase in New Wage & Hour Opinion Letters Fluctuating workweek Tip pools Training time Exemptions

Immigration Issues: Does Immigration Status Matter? Hoffman Plastic, 2002 U.S. Supreme Court Decision  California State Legislature reaction  Labor Code section

Immigration Issues: Does Immigration Status Matter? (cont’d) Status is irrelevant  Reyes v. Van Elk, Ltd. 148 Cal. App.4 th (2007): undocumented workers are entitled to minimum wage  Farmer Bros. Coffee v. Workers Comp. Appeals Bd. (Ruiz), 133 Cal.App.4 th 533 (2003): benefits available despite undocumented status

Immigration Status is Irrelevant: People Who Work, Get Paid California Labor Code Section  State law remedies are available to all who have applied for employment, or who are or have been employed in California  No inquiry of immigration status for workers enforcing rights under this section of the Labor Code  Applies only to wages earned Other states’ evaluations

Common Schemes Used with Immigrant Workers Off the Clock (travel, mandatory training) Hour shaving Dual time sheets Dual shift Flat salary “Piece Rate”

Common Schemes Used with Immigrant Workers (cont’d) Wage deductions for uniform, meals “working” meal breaks Unlawful wage deductions  Breakages  Shortages Cash Payments

Attorneys’ Fees for Wage/Hour Cases Lodestar Fee Enhancement Fees on Fees

Attorneys’ Fees for Wage/Hour Cases Recent outcomes 24 plaintiff farm workers prevail at trial, $181,000 award. $465,000 attorneys’ fees awarded Plaintiff farm workers awarded $25,000 at trial, $194,000 attorneys’ fees awarded 8 plaintiff restaurant workers settled unpaid wages for $60,000, $140,000 attorneys’ fees