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|----- Original Message -----
Sent: Thursday, July 12, 2001 7:41 AM
Subject: More Overtime Lawsuits Expected
More Overtime Lawsuits Expected
Labor: Businesses are reviewing their policies in wake of $90-million judgment against Farmers Insurance.
July 12 2001
A day after Farmers Insurance Exchange was slapped with a $90-million judgment in an overtime case, a lawsuit was filed against 21st Century Insurance Group charging that company with cheating its claims adjusters and examiners out of premium pay.
Similar lawsuits are pending against at least nine other insurers in California, where labor laws and court rulings favor white-collar workers' demands for overtime pay.
"This is the lawsuit du jour in California," said Pete Moraga, a spokesman for the Insurance Information Network of California, which represents the state's major insurers. The verdict against Los Angeles-based Farmers is expected to further fuel a boom in class-action overtime lawsuits by low-level managers, supervisors and administrators, a legal trend that began in the retail industry and has taken off in recent years. Since Jan. 1,
2000, white-collar workers have filed at least 175 class-action overtime lawsuits in California, said Richard Simmons, a Los Angeles lawyer who represents employers and the author of several labor law textbooks.
Unlike the federal law and those in other states, California allows exemptions to the overtime rule only for employees who spend more than half of their time on duties that are intellectual, managerial or creative and that require use of discretion and judgment.
The Farmers' case was different from most of the overtime cases filed against retailers because it challenged the administrative, not managerial, exemption.
"It suggests that these cases are difficult for employers regardless of which exemption" they claim, said Ken Sulzer, a lawyer in the Century City office of Seyfarth Shaw, which is defending 13 employers in Los Angeles against overtime class-action lawsuits.
The Farmers' case, which involved 2,400 claims adjusters, was believed to be the first to go to a jury and resulted in a record award that sent tremors through California businesses Wednesday.
"It's just imperative that the California Supreme Court review this," said Bill Dombrowski, president of the California Retailers Assn. and chairman of the state Industrial Welfare Commission. "It has very serious implications for all employers in terms of exemptions. If this decision stands, I don't know how anybody can be exempt in the state of California. It's an amazing, amazing decision."
Farmers said it was disappointed by the verdict and plans to appeal. But the Alameda County jury's award in the damages phase Tuesday came more than a year after the presiding judge ruled the company was liable for overtime, reasoning that its adjusters were the insurance equivalent of production workers. That opinion was upheld by an appellate court in March, and the California Supreme Court declined to review it.
The verdict shows that class-action overtime "cases are employers' greatest litigation risk out there today," said Joseph Beachboard, publisher of the California Employment Law Letter.
The Farmers' opinion contradicts widespread pay practices in the industry, said Barry Carmody, president of the Assn. of California Insurance Cos., adding that insurers now "have to rethink the current duties and responsibilities of claims adjusters."
Some insurers already have made changes, said Ric Hill, a spokesman for Woodland Hills-based 21st Century. That company recently made its adjusters and some underwriters nonexempt employees, converting their salaries to hourly rates and making them eligible for premium pay for overtime worked.
"We did that because we were seeing some uncertainty created by some of the cases flowing through the courts, including Farmers," Hill said. "And, in addition, for competitive reasons--we saw other companies making those changes."
Hill said he could not comment on the lawsuit filed Wednesday against 21st Century because the company had not been notified officially or received a copy.
Matthew Kaufman, the Brentwood lawyer who filed the suit on behalf of two 21st Century employees, said he expects other insurance companies to change their pay practices. "The working conditions in a lot of these companies are very similar," he said.
Dennis Moss, a West Los Angeles lawyer with overtime cases pending against five insurers, said he expects employers to be more interested in settling.
"Farmers went to battle and lost, and in a sense they went to battle for all of them," he said. "There's a lesson there. The employers and their counsel should take the Farmers' verdict as an indication of their exposure and their liability."
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