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Wage and Hour Preferred Solution

Wage and hour claims can lead to employers paying staggering amounts in defense costs, settlements, or judgments. This rapidly growing area of litigation includes allegations from employees that their employers failed to pay overtime, did not provide meal breaks and rest breaks, or misclassified employees as exempt, rather than nonexempt. And yet, employment practice liability insurance (EPLI) policies typically exclude wage and hour claims.

Geared toward companies with more than 4,000 employees, the “Marsh Wage and Hour Preferred Solution” is intended to provide insurance coverage for claims for actual or alleged violation of the Fair Labor Standards Act (FLSA) or similar state laws, such as the California Labor Code and the New York Labor Law.

Coverage for Typically Excluded Wage and Hour Risks

Offered exclusively through Marsh and its specialist international placement broker Bowring Marsh, the Marsh Wage and Hour Preferred Solution is designed to cover wage and hour risks typically excluded under traditional EPLI policies. Highlights of the solution include:

  • Definition of claim includes claims brought by the Department of Labor, as well as individuals — including independent contractors and employees.
  • Limits up to US$100 million.
  • Broad definition of “wage and hour wrongful acts,” including failure to pay overtime and failure to provide meal breaks and rest period.
  • Definition of “loss” includes defense costs, settlements, and judgments.
  • Addresses collective and class-action wage and hour claims.
  • Non-duty to defend policy — insureds may select their own counsel. (Note: Consent to counsel may be required in certain instances.)
  • A uniquely designed wage and hour risk management toolkit provided by Mercer, a Marsh & McLennan Companies business — at no additional cost — to help companies identify and address areas of potential exposure under the FLSA.

Wage and Hour Lawsuits on the Rise

The number of wage and hour lawsuits filed in federal courts has risen dramatically over the past several years (see below). Wage and hour lawsuits filed in 2011 accounted for 84% of all employment class action lawsuits filed, according to a report from Seyfarth Shaw. The trend was notable in California, Illinois, New Jersey, New York, Massachusetts, Minnesota, Pennsylvania, and Washington. The settlement value of these claims outpaced settlements of employment discrimination claims — a single wage and hour settlement in 2012 cost a pharmaceutical company $99 million.

Wage and Hour Risk Management Strategy

As the amount of wage and hour litigation shows no sign of slowing, employers should attempt to minimize their exposure through a strategy that includes:

  • Staying abreast of changing laws in this area.
  • Engaging third-party providers and outside legal counsel to conduct regular wage and hour audits.
  • Being vigilant as respects proper classification of employees as either exempt or nonexempt, or independent contractor or employees.
  • Evaluating the appropriateness of risk transfer including a solution that is intended to provide coverage for wage and hour claims that are typically excluded under EPLI policies — the Marsh Wage and Hour Preferred Solution.

Who It’s for

Marsh’s Wage and Hour Preferred Solution is intended for:

  • Risk managers, CFOs, and HR directors.
  • In-house employment law counsel
  • Companies in industry sectors typically at greatest risk of wage and hour claims, including: retail, food and beverage, hospitality, technology, financial institutions, services, and manufacturing.
  • Companies with a significant number of exempt employees, hourly employees, and/or independent contractors.
  • Companies with a large employee base in California, New York, New Jersey, Illinois, or Florida.

What You Get

The wage and hour preferred solution includes:

  • Coverage for wage and hour claims traditionally excluded under an EPLI policy.
  • Indemnity coverage for costly collective and class-action wage and hour claims.
  • Ability for insureds to select their own counsel. (Note: Consent to choice of counsel may be required in certain instances.)
  • Innovative wage and hour risk management toolkit to assist in “red-flagging” potential areas of exempt/ nonexempt misclassification exposure.
  • Claims advocates with expertise and knowledge in wage and hour coverage issues.