Tuesday, April 22, 2014

Understanding Fair Labor Coverage

The Fair Labor Standards Act, often referred to as FLSA or the Wage and Hours Bill, has been the backbone of ethical employment in the United States for decades. First introduced in 1938, FLSA has traveled a long road of amendments and scrutiny in becoming what it is today.  Generally, employers who produce $500,000 or more in gross sales are subject to FLSA requirements on minimum wage, hours, overtime and working with children. If you fall below this revenue line and are a hospital, school or public agency, you are likely still subject to these regulations. An issue consistently under debate, the FLSA is still changing with proposed amendment in April 2014 that would bring the federal minimum wage for employees to $10.10.

FLSA Coverage at Apogee
Submit Applications Here
Employers have been blurring the lines of FLSA for years. Even those with good intentions can fall into FLSA related issues. While large corporations are highly publicized for FLSA lawsuits, it is smaller companies that are hit harder when claims occur. As not all EPL insurance covers FLSA related claims, many small companies are unprotected and don’t even know it! In fact, the U.S. Department of Labor estimates that as many as 70 percent of employers are not in compliance with the FLSA in some material way.

Most Common FLSA Offenses for Small Businesses

  1. Not paying overtime for time worked over 40 hours in a week
    1. Four Janitors that were not paid for overtime worked won $103,736 for overtime pay and liquidated damages
  2. Misclassifying managers and assistant managers as exempt
    1. Retail Clothing Store Manager was misclassified as exempt as he spent more than half of his time engaged in non-exempt,non-managerial activities. Plaintiff awarded $38,000 in back overtime pay and $62,000 in attorney’s fees
  3. Paying Lump Sum amounts for overtime hours worked vs. paying 1.5 times the normal hourly rate
    1. Small Concrete Company paid a $12,900 settlement and $20,000 in attorney fees for paying non-exempt workers a lump sum amount for overtime rather than time and a half for hours worked over 40
Two additional common FLSA offenses for small businesses include not paying for overtime since it had not been pre-approved and allowing employees to “waive” their rights under the FLSA


More FLSA Claims Examples

Between January 2006 and September 2013 FLSA cases totaled $2.95 billion in settlement dollars.

Misunderstanding of Regulations

A mortgage company was sued by 54 of its loan officers for over $220,000 in unpaid overtime. The owner was under the impression that FLSA did not apply to highly compensated employees. Many of his staff members earned well over 150k per year with the average compensation being $105,000. There is an exception to the FLSA law for highly compensated individuals earning at $100,000 per year or more but the exception also stipulates that a minimum of $455 per week must be paid. These employees were not paid during weeks where they did not close loans.

Exempt Employee Confusion

A laser machining plant was sued for unpaid overtime after firing an employee for what the company described as tardiness and an uncooperative attitude. The administrative assistant was listed as exempt although many of her job responsibilities are considered to be traits of a non-exempt classification. Her lawyer argued that she could not have been an exempt employee since she was docked pay for every hour that she did not work that was less than 38 in a week. The lawsuit settled for $73,000 in liquidated damages for intentional misclassification.

Underage Employees

A grocery store was directed to pay over $52,000 in restitution to thirteen employees all under the age of sixteen for willful violations of the Fair Labor Standards Acts (FLSA) youth employment provisions. The market had minors working six consecutive hour shifts as well as performing such tasks as cleaning a meat slicer, loading a paper baler and operating the power driven baking machine. The FLSA’s youth employment provisions identify hazardous orders that prohibit these specific activities for workers under eighteen and limits the number of hours that minors can work on school days/weeks.

FLSA Coverage at Apogee

At Apogee we can work with you to insure that your small business is insured under federal labor regulations. Access to top markets and years of expertise allow us to provide high quality, competitive quotes when you need them.

Learn more about FLSA and EPL coverage at Apogee here
Submit completed applications here

Application Requirements

  • Application
  • Loss runs, if applicable
  • Copy of current declarations page

Contact Information

Chris Hoxie
Senior Account Manager
(610) 337-3200 Ext. 7027