Wage and Hour Class Actions in the Healthcare Setting Long-Term Care Risk Legal Committee January 27, 2011 Las Vegas, NV Integro Insurance Brokers One Bush Street, Suite 1400 San Francisco, CA 94104 License #: 0E77964 Phone: 415.365.8000 Visit us online at www.integrogroup.com

Agenda Introduction Growth of Wage and Hour claims Healthcare employment statistics Examples of Wage and Hour claims Avalon Health Care Group: Lessons Learned Insurance coverage issues Copyright 2011 Integro Insurance Brokers

Integro Healthcare Practice A True Blending of Expertise Our Practice Facts Experienced brokers, transaction, placement, marketing specialists, including treaty reinsurance brokers +19 Average years’ experience of Integro Healthcare Practice Brokers and Consultants 45 Number of Integro Healthcare professionals +50 Number of HC self insurance / captive programs managed by Integro 98 Percent client retention Risk Financing Healthcare Operations Risk Mitigation Program design consistent with HCO culture, client tailored risk consulting, risk financing compatible with overall TCOR objectives Loss Prevention and Claims Advocacy, policy wording expertise, underwriting and complex claim support. Copyright 2011 Integro Insurance Brokers

Wage and Hour: A Growing Problem Fastest growing workplace tort In 2009, W&H outpaced all other workplace torts the 10 largest private wage and hour settlements totaled nearly $364 million (2009). Up from $253M in 2008. Settlement values more than employment discrimination States with the most significant growth in wage and hour litigation are California, Florida, Illinois, New Jersey, New York, Massachusetts, Minnesota, Pennsylvania and Washington Crosses all industries but Healthcare is a growing target Numerous laws and regulations State and Federal Copyright 2011 Integro Insurance Brokers

Wage and Hour: A Growing Problem Wage and Hour are easy to plead and difficult to defend Plaintiff attorney hotlines Usually brought as a Class Action or Collective Action Healthcare Reform Applies to payments for direct care workers Beginning in 2011, Health and Human Services will be responsible for tackling the challenge of improving wages for these workers Increased Government Involvement Current administration’s emphasis on regulation and enforcement may result in more government initiated lawsuits The Labor Department has hired 250 new wage-and-hour investigators, representing a staff increase of one-third Copyright 2011 Integro Insurance Brokers

Healthcare Statistics In 2008, healthcare provided 14.3 million jobs for wage and salary workers. Ten of the 20 fastest growing occupations are healthcare related. Healthcare will generate 3.2 million new wage and salary jobs between 2008 and 2018, more than any other industry, largely in response to rapid growth in the elderly population. Source: Dept. of Labor, Bureau of Labor Statistics Copyright 2011 Integro Insurance Brokers

Examples Misclassification of employment Failure to pay OT Exempt vs. non-exempt Failure to pay OT Failure to pay for work performed during meal or rest brakes Failure to pay for duties required before or after hours activities required by job E.g. time to change into and out of uniforms Other types of claims Anti-trust; suppression of wages Copyright 2011 Integro Insurance Brokers

Avalon Health Care Group Example RN works for 3 months Files Wage and Hour class action claim seeking twice the salary paid Retains two law firms who specialize in W&H Class Actions Court certifies Class Plaintiff refused to settle for less than $5M Strategy to approach attorneys to determine what fees they are seeking. Proposed minimum settlement fund. Less than 20% of class elected to participate Modest settlement achieved Copyright 2011 Integro Insurance Brokers

Avoiding Claims Make sure worker classifications are reviewed and updated regularly Establish and communicate a workplace due process procedures for workers to bring their grievances to the attention of managers Ensure compliance with meal/rest brake and other labor regulations If you get sued, partner with experienced counsel Copyright 2011 Integro Insurance Brokers

EPL: Coverage Provided The standard Employment Practices Liability (EPL) policy form provides coverage for claims brought by employees (in the form of written demands, civil or criminal proceedings, administrative proceedings, arbitration proceedings, etc.) arising out of: Harassment (sexual or otherwise) Discrimination Wrongful termination Employment related libel or slander Employment related misrepresentation, invasion of privacy, humiliation Wrongful demotion or discipline Failure to provide or enforce adequate or consistent corporate policies and procedures relating to any employment practices violation Retaliation Copyright 2011 Integro Insurance Brokers

EPL: Major Exclusions The standard EPL policy form generally prohibits coverage for the following: Wage & Hour Claims (FLSA) Personal Profit/Deliberately Fraudulent Acts Workers Compensation Disability/Employee/Retirement benefits Bodily Injury/Property Damage Labor grievances pursuant to a collective bargaining agreement Breach of written or express contract Punitive Damages (except where insurable by law), fines and penalties Copyright 2011 Integro Insurance Brokers

EPL: Defense Issues Duty to defend Settlement Issues Insurer or insured Control of defense Rates Panel Counsel Requirements Conflicts Settlement Issues “Hammer” clause Allocation issues Copyright 2011 Integro Insurance Brokers

Coverage for Wage and Hour Industry trying to respond Difficulty in underwriting Volatility of costs Growing and changing exposure Some limited coverage is available Defense only Sublimits Copyright 2011 Integro Insurance Brokers

Questions? Copyright 2011 Integro Insurance Brokers