What is a Wage and Hour Claim, and is it covered by insurance? Understanding this type of claim assists in winning the business, by enabling an agent to point out potential gaps to a prospect.

Wage and Hour claims result when a current or former employee asserts the employer violated labor law. The law can be local or state, but is most often the Federal Labor Standards Act of 1938, or FLSA. Some typical claims are:

• misclassification of exempt employees
• misclassification of independent contractors
• failure to pay overtime
• improper overtime calculation
• improper recordkeeping
  
  

The problem of Wage and Hour violations is so pervasive and expensive, that until recent years the claims were excluded, even from Employment Practices Liability policies. Ryan Warden, leader of the Wage and Hour Division of White and Williams LLP says “wage and hour class actions are the single greatest liability employers face today.”*

It is now possible that this type of claim may be defended by EPL insurers, subject to retention. An EPL policy most often excludes the coverage, but usually it is possible to add the coverage by endorsement. Defense may be available, but indemnity or settlement of the claim will not.

The endorsement is not cheap, but could be invaluable to an employer facing such claims. Defending such claims starts at an average of $10,000 for dismissal of a lawsuit, $60,000 to settlement, and $100,000 through trial.