Rocky Mountain RIMS May 2017 Chapter Meeting May 25, 2017 Wage & Hour Case Studies Presented by: Timothy M. Kratz, Attorney at Law (Jackson Lewis P.C.) and Trudy A. Hardin, Esq., SVP (Aon Financial Services Group) 1 1 1
Timothy Kratz - Biography Timothy M. Kratz is a Principal and the Office Litigation Manager in the Denver, Colorado, office of Jackson Lewis P.C. His primary practice involves employment litigation and employer counseling. Mr. Kratz has defended businesses in a wide variety of employment claims including those involving harassment and discrimination, disparate impact class allegations, non-compete agreements, Fair Labor Standards Act, wage and hour, and public policy discharge. He also conducts and coordinates harassment investigations and counsels clients on ways to avoid litigation through protective measures such as employment contracts, supervisor manuals, and employee handbooks. Mr. Kratz is a frequent speaker to Colorado businesses on a variety of employment topics, and he coordinated an employment law breakfast seminar series for Colorado employers from 2012 through 2014. Before starting in private practice, Mr. Kratz served as a law clerk to Chief Judge Donald P. Lay of the United States Court of Appeals for the Eighth Circuit and Justice Gregory K. Scott of the Supreme Court of Colorado. In his spare time, Mr. Kratz enjoys spending time with his wife and three children, competing in golf tournaments, skiing, hiking, and reading. 2 2
Trudy Hardin - Biography In 2015, Ms. Hardin joined FSG Legal and Claims Practice and is Claims Counsel for the Denver office. Prior to that she was the EPL/Wage & Hour Practice Leader. In this capacity she helped develop Aon’s Wage and Hour Policy, the first of its kind in the market place. She also successfully designed and brokered numerous EPL and Wage and Hour programs for corporations all sizes. She works with the Aon brokers to advise Aon clients on issues including policy wording and interpretation, claims and coverage and serves as a claims advocate for clients. This includes assisting clients in interpreting a carriers’ coverage position, attending mediations and negotiating resolutions to coverage disputes. Prior to joining the Legal and Claims, Ms. Hardin joined Aon Financial Services Group in 2003 from Aon Risk Consultants where outsourced to an international real estate investment firm. In addition to day- to-day risk management duties, which included negotiation of insurance and indemnification contract provisions, she was responsible for the negotiation and administration of the EPLI, Professional Liability and REIT D&O renewals. She was also the risk manager to a pension funded construction project that had been taken over by the Department of Labor. Ms. Hardin has held a number of other positions of increasing responsibility throughout her career that began with Allstate Insurance Company. Juris Doctorate - DePaul University College of Law BA- Lake Forest College Local and Regional Studies Member ABA, Admitted to practice in Illinois 3 3
Why Wage & Hour Issues Matter • The U.S. Department of Labor (“DOL”) estimates that over 70% of employers are not in compliance with the FLSA. • DOL collected $247 million in back wages in FY 2015. • Wage claims exceed EEO claims 4 4 5 www.jacksonlewis.com
Wage & Hour Legal Trends Update • Wage & Hour Issues – Wage & Hour claims represent over 90% of the employment class actions filed every year – Federal wage & hour lawsuits filed nationally have increased more than 400% since 2000, with a record high in 2015 of 8,781 – The largest wage & hour claim we’ve seen to date was for $228 million consisting of a class of more than 2,300 delivery drivers misclassified as independent contractors instead of employees • Employee Misclassification – Exempt vs. Non-Exempt Status – Resulting in the failure to pay overtime wages, failure to provide meal and rest breaks, and to account for off-the-clock work – Department of Labor (DOL) White Collar Exemption Rule Currently on Hold • Expansion of joint employer liability – Independent Contractor vs. Employee – Franchisor-Franchisee relationships – DOL focus on “Fissured” industries (i.e. industries with high levels of independent contactors and franchisees) • Pay Practices Issues Continue to Evolve • Arbitration with Class Action Waiver 5 5
The Wage and Hour Lawsuit 6 6
Wage & Hour Case Studies • ABC Company has 25,000 employees located in Colorado, California, Utah, Arizona, Washington and New York. • 7,000 of the 25,000 are independent contractors located in the various states. • 3,000 of the 25,000 are placed ABC’s site by a temporary agency • ABC also contracts with JointCo to provide delivery services. 5,000 JointCo employees are dedicated to ABC Company and actually have uniforms and vehicles labeled ABC, work hours directed by ABC and deliver packages in a manner prescribed by ABC Company. • A wage &hour lawsuit alleging missed meal breaks and failure to pay minimum wage was filed by a group of ABC employees in Colorado on behalf of all ABC Company employees. • A lawsuit was filed on behalf of the 7,000 independent contractors alleging they were misclassified and should be employees. • The drivers at JointCo filed a suit against ABC Company and JointCo alleging they were misclassified and should be employees of ABC Company 7 7
Wage & Hour Case Studies • Shortly after the lawsuits were filed, one of the named plaintiffs employees amended the suit alleging he was retaliated against when he was placed on a PIP. • An independent contractor named plaintiff made a similar amendment to the IC lawsuit after his hours were reduced. • A JointCo driver made a similar amendment to the driver lawsuit when his route was changed to one in a bad area. His truck was robbed several times while working on that route, when he had never been robbed on the route he had before. 8 8
Wage and Hour Case Studies Employees’ Lawsuit Issues Employees Direct Employees Employees of Temporary Agency Wage & Hour Policy Response Definition of Employee Under a wage & hour policy the definition of employees means a natural person who is employed by, or whose service is engaged and directed by, or who is paid through the payroll of, an Insured, including past, present, part time, seasonal and temporary employees, as well as interns and applicants for employment with an Insured. 9 9
Wage and Hour Case Studies Employees’ Lawsuit Issues Meal breaks Federal Law Colorado Law California Law New York Law Other States Law Wage & Hour Policy Response Wage and Hour Law Pay Practices Violation means actual or alleged violation of the Fair Labor Standards Act (except the Equal Pay Act or similar state or local pay equity laws or regulations) or any similar federal, state or local laws governing or related to the payment of wages, including but not limited to compliance with information required to be provided on pay stubs, tip credit issues, meal and break period laws, regular rate claims, failure to timely pay wages upon termination, failure to pay wages for off-the-clock work, and including donning and doffing claims. 10 10
Wage and Hour Case Studies Employees’ Lawsuit Issues Minimum wage Federal Law Colorado Law California Law New York Law Washington Law Other States Law Wage and Hour Policy Response Wage and Hour Law Classification Practices Violation means actual or alleged violation of the Fair Labor Standards Act (except the Equal Pay Act or similar state or local pay equity laws or regulations) or any similar federal, state or local laws governing or related to the classification of employees as exempt or non-exemption from the payment of overtime or minimum wage, the notice requirements for exempt or non-exempt employee, and misclassification of workers as independent contactors for the purposes of determining employees’ eligibility for benefits and other compensation, as well as the company’s various tax withholding obligations under such laws. 11 11
Wage and Hour Case Studies Issues Independent Contractor Misclassification Employees? Court Tests? Damages Wage & Hour Policy Response Employees shall also include those natural persons who are independent contractors, volunteers, temporary or leased personnel of an Insured who claim to be employees or joint employees of an Insured. Loss means damages, judgments (including prejudgment and post judgment interest awarded against an Insured on that part of any judgment paid by us), settlements, statutory attorney fees, statutory liquidated damages, Defense Costs and punitive, exemplary, restitutionary and multiple damages. 12 12
Wage and Hour Case Studies Wage & Hour Policy Response 1. However, Loss does not include any of the following: 2. the cost of any non-monetary relief; 3. medical, insurance or any other benefits to which the claimant allegedly was entitled or would have been entitled had any Insured provided the claimant with a continuation of such benefits; 4. matters which may be deemed uninsurable according to the law under which this Policy is construed; and 5. commissions, bonuses, profit sharing, stocks or benefits allegedly owed to the claimant pursuant to a contract of employment, including but not limited to vacation, holiday, and/or sick pay; or severance payments. 13 13
Wage and Hour Case Studies Wage & Hour Policy Response Fines and penalties? 14 14
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