How to Navigate Wage and Hour Disputes

Employment practices liability insurance (EPLI) claims are nothing that any employer wants to deal with, but they are unfortunately a common occurrence. In the 2017 fiscal year, the United States Department of Labor’s Wages and Hours Division (WHD) found more than $270 million in back wages for 240,000 employees. The WHD also found $86.1 million in low wage industries for 97,000 workers the same year.

Wage and hour claims have been on the rise for years—even being cited in a 2013 Insurance Journal article as a top threat to U.S. employers. Violations of the Fair Labor Standards Act (FSLA) happen, and they happen more often than you think. Each reason is different, which is why it’s important to know what qualifies as a wages and hours claim and how you can prevent them from occurring. In the final installment of our series on the top sources of EPLI claims, here’s what you need to know about wage and hour claims.

When Can Claims be Filed?

There’s many different scenarios that can lead to a claim. Some of the most common, according to the Society for Human Resource Management (SHRM)are:

  • Altering time cards records to avoid paying overtime;
  • Misclassifying exempt and nonexempt employees and independent contractors;
  • Fail to provide due rest and meal periods.

They can also be a major source of risk during the hiring process for employers and for staffing agencies. If the employee feels that he or she had been mislead from the hiring process to his or her employment—for example, if they were told that they would have a certain amount of hours for one amount of pay during the hiring process but then came to the position and had a drastically different amount of hours and salary—then the staffing agency or employer could have a claim filed against them.

What the FSLA Covers

The FSLA covers minimum wage, hours worked, recordkeeping, child labor and overtime pay. While the federal minimum wage is $7.25, state laws may allow for a higher wage, according to WHD. For example, minimum wage our the state of New York is $13.50 for businesses with 10 or fewer employees, and $15 for businesses with 11 or more employees. Employees have to be given this minimum wage for work and nothing less.

If an employee works more than 40 hours a week, they’re also supposed to be getting overtime pay. There isn’t a limit on the number of hours anyone over the age of 16 can work, meaning that it’s important to keep track of when one is supposed to be receiving overtime pay.

The Costs

Defense suits for this type of claim can be substantial, particularly if they become class actions. Because of this, many employment practices liability insurers actually exclude coverage for wage and hour claims, along with other EPLI claims. But just like with retaliation and whistleblower claims, wage and hour claims may still be eligible for the value of their defense under the broad “duty to defend” language. Likewise, the wage and hour claim may implicate coverage where the claim itself is based on a generally unfair business practice that is otherwise covered under the policy, according to SHRM. That’s why it’s important for employees and employers to be aware of their coverage.

Was this article helpful? Take a look at our other blogs on common sources of employment practices liability insurance (EPLI) claims during the hiring process:

Genetic Discrimination in the Hiring Process

Pregnancy in the Workplace: Knowing the Law

The Dos and Don’ts of Candidate Background Checks

About World Wide Specialty Programs

For the last 50 years, World Wide Specialty Programs has dedicated itself to providing the optimal products and solutions for the staffing industry. As the only insurance firm to be an ASA commercial liability partner, we are committed to that partnership and committed to using our knowledge of the industry to provide staffing firms with the best possible coverage. For more information about Staffing Professional Liability Insurance or any other coverage, we have available to protect your staffing business, give us a call at (800) 245-9653 to speak with one of our representatives.

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