In a recent article published by Jonathan Segal, partner and managing principal at law firm Duane Morris LLP, he writes about the staggering increase in employee-related lawsuits alleging wage and hour violations. It is estimated that in 2011 there has been a 400% increase in these types of lawsuits since 2000, with more than 7,000 collective actions filed in federal court last year.

 

In filing a wage and hour lawsuit, employees are alleging that their employer did not pay what they were owed either because they were misclassified as exempt from overtime or they were properly classified as non-exempt but they were not paid for some of the time they worked. This could involve, for instance, working off the clock without being paid.

 

The trend has hit corporations with deep pockets hard. Behemoths such as Wal-Mart and Merrill Lynch have made headlines. Both companies were targeted by employees claiming they were required to work off the clock. And, a suit against pharmaceutical giant GlaxoSmithKline is now under review by the U.S. Supreme Court for exempting outside sales reps from overtime pay. But this is not isolated to big companies, smaller firms are also being hit with wage-and-hour disputes.

 

Furthermore, these claims don’t necessarily mean the employers did anything wrong, but they still need to be defended which can be a significant expense.

 

What’s driving this lawsuit spike? According to the article by Mr. Segal, wage and hour laws are often “counter-intuitive”. Segal cites an example: If an employee is exempt and is late to work every day, you may be able to discipline him for being consistently late, but you can’t dock him for his lateness. If a non-exempt employee works overtime without permission, you almost always have to pay her for what you may perceive as “stealing your time,” but you may be able to discipline her for the unauthorized work.

 

Another reason for the spike is that old laws don’t apply to today’s workplace environment. The federal law, the Fair Labor Standards Act, was enacted in 1938 and there have been only relatively minor changes to it since then. The law does not align well with today’s working world. Segal writes that the “law was enacted when the U.S. had a manufacturing-focused economy, not one primarily based on services. In today’s working world, plenty of employees can (and do) work from home, sometimes off the clock without pay.” This creates an opportunity for litigation.

 

The economic landscape is also fueling a plethora of lawsuits. When employees are stuck in a work environment they don’t want to be in but remain because of an unsure economy, they are more likely to sue. “Many employees feel stuck and wage and hour litigation is a way for a group of employees to try to get more money without ‘personally’ attacking their employer,” writes Segal.

 

The Hospitality industry is vulnerable to wage and hour disputes with so many employees working on an hourly basis. And while Employment Practices Liability insurance provides coverage for most claims of discrimination, sexual harassment, wrongful termination, and workplace misconduct, many don’t offer coverage for wage and hour disputes. When looking at your clients’ programs, this is an issue that must be examined carefully when looking at what carriers offer within their policies.

 

IPOAUSA recently announced an exclusive new Hotel Insurance Program with Lloyd’s for limited and full-service hotels, which was launched April 1. Part of the program includes EPLI, which features coverage for wage and hour lawsuits. Additionally, there is a sublimit for defense and investigation as a result of INS action.

 

For more information about our program for the hospitality sector, including our new EPLI coverage through Lloyd’s for limited and full-service hotels, please call Stefan Burkey at 877.653.IPOA (4762).