Wage and Hour
Employment claims alleging violations of wage laws including unpaid overtime, minimum wage violations, and misclassification of employees.
What It Is
Wage and hour claims allege violations of federal and state wage laws, including the Fair Labor Standards Act (FLSA) and state equivalents. Common allegations include failure to pay overtime, minimum wage violations, misclassification of employees as exempt or independent contractors, failure to provide required meal and rest breaks, and off-the-clock work requirements.
Wage and hour claims are particularly challenging for EPLI underwriters because they represent amounts the employer should have paid anyway—the unpaid wages are not a 'loss' in the traditional insurance sense. For this reason, most standard EPLI policies exclude wage and hour claims entirely, or provide only defense cost coverage (no indemnity for the actual wages owed).
Defense-cost-only wage and hour coverage has become increasingly available as an EPLI endorsement. This endorsement pays for legal defense costs when wage and hour claims are filed but does not pay the actual back wages, penalties, or liquidated damages owed to employees. Even defense-only coverage is valuable because wage and hour class actions can generate $500,000-$2,000,000 in defense costs.
Why It Matters for Brokers
Wage and hour claims have become the most common type of employment litigation, surpassing wrongful termination and discrimination. Class action wage and hour lawsuits—particularly for misclassification and overtime violations—can affect hundreds of employees and generate claims in the tens of millions. Brokers must understand that standard EPLI typically excludes wage and hour and proactively offer the defense-cost-only endorsement.
Real-World Example
A staffing company misclassifies 120 temporary employees as independent contractors for 3 years. A class action alleges unpaid overtime, resulting in $2.4M in back wages and $2.4M in liquidated damages (doubling under FLSA) plus $680,000 in plaintiff attorney fees. Total exposure: $5.48M. Standard EPLI excludes the claim entirely. With a wage and hour defense-cost endorsement ($3,200 annual premium), EPLI covers $420,000 in defense costs. The $4.8M in back wages and damages remains uninsured because no EPLI policy covers the actual wages owed.
Common Mistakes
- 1Assuming standard EPLI covers wage and hour claims—most policies exclude them entirely, and the best available is usually defense-cost-only coverage.
- 2Not offering the wage and hour defense-cost endorsement when available, leaving clients without even defense coverage for the most common type of employment litigation.
- 3Failing to advise clients about wage and hour compliance, particularly regarding employee classification and overtime eligibility, as a risk management strategy.
How brokerageaudit.com Handles This
brokerageaudit.com's Policy Checker identifies EPLI policies and checks for wage and hour exclusions. When the exclusion is present, the system recommends the defense-cost-only wage and hour endorsement if available. The Submission Intake flags business types with high wage and hour risk (staffing firms, restaurants, gig economy companies) and recommends proactive compliance review alongside insurance placement.