"Supreme Court Ruling will Transform Minimum Wage Liability Landscape," Insurance Day

"Supreme Court Ruling will Transform Minimum Wage Liability Landscape," Insurance Day

July 2, 2018

“D&O insurers are set to benefit from the reduced exposure to claims after” the U.S. Supreme Court decision in Epic Systems Corp. v. Lewis, “but the changes could significantly cut the demand for this form of cover in the US,” Louis Kozloff writes in Insurance Day. “The Epic Systems decision will significantly curtail the instances of employees bringing class action lawsuits to address wage-and-hour violations. This will reduce both the frequency and severity of such claims under wage-and-hour cover that is frequently issued in conjunction with directors’ and officers’ employment practices liability insurance (EPLI) cover or as standalone policies.”

Lou, a partner in the firm’s Global Insurance Services practice, defines a wage-and-hour claim as a claim “brought by an employee against an employer under the federal Fair Labor Standards Act (FLSA) or similar state laws alleging that the employer violated rules regarding payment of hourly wages, minimum wages, or overtime.” The U.S. Department of Labor (DOL), a state regulatory agency, or an employee can pursue such claims, and studies show that the violations are widespread. “One study estimated that in Chicago, New York, and Los Angeles alone, low-wage workers lose nearly $3bn in legally owed wages each year.”

“Based on Epic Systems, employers who do not currently have employment contracts with arbitration and class action waiver provisions are being advised to modify their agreements to include them,” Louis concludes. “Employment contracts with arbitration provisions and class action waivers can be seen as a more effective way to mitigate the risk of significant wage-and-hour claim exposure.”

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