Resources & Insights

Overtime Changes Present New Risk for Employers

December 13, 2016

Depending on how the courts and incoming Trump administration respond, new U.S. overtime rules could mean big changes for employers and their workers.

employment practices liability
CCIG’s Andrew Mahoney.

First, as many as 4.2 million Americans – including administrative employees who were previously exempt from overtime –  would be entitled to OT. Put another way, anyone who earned less than $47,476 annually would be eligible for OT whenever they work over 40 hours a week.

Second, the number of Fair Labor Standards Act lawsuits will undoubtedly rise. That, in turn, underscores the need for Employment Practices Liability Insurance policies.

Unfortunately, while EPLI policies cover discrimination, wrongful termination and retaliation cases, most typically exclude coverage for claims involving wage and hour laws.

The good news is that coverage is now slowly becoming available to address such claims, though for the moment it’s generally available only to the biggest corporations.

In any case, a federal court judge in Texas last month issued a preliminary injunction halting the Dec. 1 implementation of the rule. The Department of Labor responded by asking an appeals court to expedite its consideration on whether to overturn the injunction. Just how President Trump might view the rule is unknown, although his pick for Labor secretary, Andrew Puzder, is known to oppose any increase in the minimum wage.

All of this is happening against a backdrop in which FLSA lawsuits have been rising. Such suits rose 11% to 8,954 filings in 2015, so it’s fair to say the need for EPLI is greater than ever.

Wage and hour claims are seen in every industry, although manufacturers, retailers and hotel operators are the most frequent targets of litigation, because they employ so many hourly employees. Private companies aren’t alone in this. Nonprofits would be subject to the new law, too.

From a human-resources perspective, better record-keeping will obviously be important. Employers will also want to double-check that they’re not misclassifying independent contractors. This is true regardless of what happens on the new OT rules.

Read: When Lawyers Sue Law Firms over Discrimination

Employers will also want to take advantage of risk management resources offered by insurers, which may include help lines, websites, tools and even some free legal advice.

Also, EPLI coverage will cover what is typically the most significant expense of a wage claim: the legal costs an employer incurs in defending itself against such claims.

These policies are not easy or inexpensive to buy because carriers will want to know what controls and procedures you’ve put into place to protect yourself – and the insurer – against claims.

It’s all about whether your company follows the rules or not. Rules about breaks and meal periods. Rules about record-keeping. And rules, of course, about OT laws.

So, what’s the story if you’re a bigger company? Can you get coverage that protects you against wage and hour claims?

Actually, yes. In fact, these policies will not only cover back wages but fines and penalties, too.

The problem, again, is that this coverage isn’t widely available and the deductibles start at $5 million, so only companies with the deepest pockets can consider buying such policies.

What’s more, these specialty policies typically include provisions that compel companies that want to sue their insurer to do so in New York or some other jurisdiction that tends to be friendly to the insurers.

The bottom line? Regardless of the size of your company, your best risk-management strategy is to make sure you comply with employment laws, OT and otherwise.

Andrew Mahoney is a CCIG Insurance Advisor. Reach him at or 720-330-7925.

Want to learn more about the new OT law? Click here and here.

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