Understanding Wage & Hour Claims and What You Can Do About Them

1. Understanding Wage & Hour Claims and What You Can Do About Them San Diego, CA ~ April 29 & 30, 2009

2. 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

3. 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”

4. 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

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

6. 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

7. 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

8. 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)

9. 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?

10. 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

11. 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

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

13. 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

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

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

16. Immigration Issues: Does Immigration Status Matter? • Hoffman Plastic, 2002 U.S. Supreme Court Decision • California State Legislature reaction • Labor Code section 1171.5

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

18. Immigration Status is Irrelevant: People Who Work, Get Paid • California Labor Code Section 1171.5 • 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

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

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

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

22. 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