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Employment Practices Liability: More Employees Claiming Wage Theft


Employment Practices Liability More Employees Claiming Wage TheftWage-and-Hour Disputes Becoming More Prevalent, Review Practices, EPLI Coverage

Lawsuits accusing employers of violating minimum wage and overtime laws, erasing work hours and wrongfully taking employee tips are being filed across the nation. In fact, according to work advocates who call these practices “wage theft”, these types of actions are becoming “far too prevalent”.

For example, they cite the McDonald’s workers who filed seven class-action lawsuits over wage disputes in in New York, California and Michigan this past March. They also cite a recent case in California where a $21 million settlement with trucking company Schneider was reached over allegations of wage disputes. Moreover, a federal appeals court ruled in August that FedEx was in violation of federal Fair Labor Standards Act (FLSA) and state wage and hour laws by insisting that its drivers were independent contractors rather than employees. FedEx said it planned to appeal.

Some federal and state officials agree with worker advocates, asserting that increasingly more companies are violating wage laws than ever before, pointing to the record number of enforcement actions they have pursued. However, many business groups disagree, saying that government officials have drummed up a flurry of wage enforcement actions, largely to score points with union allies. In fact, employers say they have become more scrupulous in complying with wage laws in response to the much-publicized lawsuits about so-called off-the-clock work that were filed against Walmart and other large companies a decade ago.

No matter what the underlying reasons are, recent figures do show a rise in wage-and-hour disputes. Research conducted by law firm Seyfarth Shaw indicates that between April 1, 2013 and March 31, 2014 there were 8,126 federal wage-and-hour lawsuits filed – which is nearly a 5% increase from the comparable period a year ago, when 7,764 cases were filed. The rise in these types of claims, according to Seyfarth Shaw, is partly due to the fact that the debate over minimum wage and raising rates has put greater focus on the applicable laws and the availability of overtime pay. Moreover, as this debate continues and as states take the initiatives to raise the minimum wage rates, it’s expected that even more claims will be filed.

What can employers and their HR departments do to mitigate wage-and-hour disputes? Here are several steps to take, courtesy of Society for Human Resource Management:

  • Raise awareness. Be sure to train management and non-management employees annually regarding the organization’s wage and hour policies. Also HR should facilitate open communication with workers and provide an opportunity for workers to express concerns regarding wage and hour compliance.
  • Review job descriptions and duties. In most organizations, potential job misclassification errors that can contribute to pay violations tend to focus on a relatively small set of employees. Regularly reviews job descriptions and dig deep to make sure a position is not misclassified.
  • Monitor requests for interns and volunteers. If a particular division or department requests volunteers or interns, take a closer look to ensure that they are not being misclassified.
  • Conduct an audit. An audit of wage and hour practices by an external legal counsel can help an organization measure compliance with existing laws and take steps to address potential problems.

Review your Employment Practices Liability Insurance (EPLI) to determine whether your policy will respond in the event of a wage dispute suit. EPLI responds to employee-related claims alleging workplace discrimination, harassment, and wrongful termination, among other issues. Some policies include a sublimit for wage-and-hour suits, but this is has to be reviewed. At Axis Insurance Services, we specialized in EPLI insurance and can work with you to help you put measures into place that will serve to stem losses. We can also review your EPLI coverage to see how well it addresses your specific operation and industry. Just give us a call at (877) 787-5258.

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Blogged on: September 22, 2014 by Mike Smith
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