2008 International Conference Golden Opportunities or Fool’s Gold? November 5-7, 2008 San Francisco Wage & Hour: The New Frontier or The Wild West?

MODERATOR: Paul J. Siegel, Esq., Partner, Jackson Lewis, LLP PANELISTS: Robert Cap, JD, Assistant Vice President, EPL Product Manager, Markel Corporation Kirk Denebeim, Senior Vice President, Principal, Socius Insurance Services Kathy Hughes, Director of Labor & Employment Law, SuperValu Mark Thierman, Esq., Founder, Thierman Law Firm Wage & Hour: The New Frontier or The Wild West?

Overview A Bit About Wage & Hour Claims Points of View –Plaintiff’s Counsel –Carrier –Broker –In-House Counsel Takeaways Q&A

A Bit About Wage & Hour Claims Why are Wage & Hour Claims Almost Always Class or Collective Actions? Why are Wage & Hour Claims So Costly to Defend? What Type Of Wage & Hour Claims are Yet to Come? Can They Be Effectively Underwritten?

Plaintiff’s Counsel Typical Background: Traditional Workplace Law Attorney Class Action Lawyers Differences in Approach Judges and Development of the Law

Industries and Trends – Where You Least Expect It The revolution in Wage & Hour Litigation began with highly paid, articulate, well-educated workers being laid off (end of wrongful discharge was the beginning of WH litigation) –Pac Bell –Farmers Insurance Adjusters –Stock Brokers & Mortgage Brokers –Technology and Computer Workers

Intentional or Negligent? Misclassification, Pay Practices, Other Rules Unclear Statute & Regs Hay System, Org Charts, and Rules of Thumb Company Compensation Needs; Legal Misunderstandings; and, Prejudices Against Non-exempt Status Multi-state Companies – Culture Clash (and Forgetting State By State Differences)

To Sue or Not to Sue: Plaintiff’s Counsel’s Decision to Take a Case Economic Assessment– Regression Rollup of Critical Decision Points, Using a Macro Analysis –$250 to $500K in possible costs –Chance of winning 25% –25% award, 75% of the time –Therefore, case must generate $2 million in fees to “break even” (4 times $500K) –Therefore, case must be worth $10 million to even consider

What is a Case Worth? 10 Hours a Week Overtime Half Time or Time and One Half? Skyline Homes or Fluctuating Work Week 48 Weeks a Year Statutes of Limitation – 2 Versus 3 Yrs. FLSA; 3 or 4 Yrs. CA; 6 Yrs NY Number of FTE (Full Time Equivalents)

What is a Case Worth? Example: 100 Employees, 52K a Year –In Cal- $1000 /wk divided by 40 hrs/wk= $25 an hour, times 1.5 (time and a half) times 10 hrs/ wk, times 48 wks/yr, times 4 years times 100 equals 7.2 Million– OPT IN –60-80% claims rate –FLSA – $1000/50 =$20 an hour, times.5 (half time) times 10 hrs/wk, times 48 wks/yr times 2 years equals $960K—Opt out - 10 to 15% claims rate

Other Issues Discounts for Early Resolution? –Is Class Certification necessary for settlement? –Merits? –Records? –Reversions of unpaid money? Individual Grievances Notice and Other Costs Why Not Pay Hourly?

Carrier’s Point of View What Coverage to Provide? Total Exclusion of Wage Claims Full Limit Versus Sublimit for Defense Cost? Sublimit for Defense Cost and Indemnity If Sublimit, What is the Correct Amount?

Broker’s Point of View: “Caught in the Middle”

Brokers in the Middle Brokers Didn’t Cause This Coverage Problem – But Must Take the Lead to “Fix It” Logistical Challenge: Every Policy Needs to Be Addressed. How Do You Tackle it? How to Communicate Risks and Solutions? A Colossal “CYA” Maneuver…or an Opportunity?

In-House Counsel’s Point of View Avoiding Wage & Hour Liability –Audit Exemption Status –Audit Timekeeping Protocols –Prohibit Off the Clock Work Documentation

Takeaways What Kind of Wage & Hour Claims Will Employers Face? What Coverage Exists for Wage & Hour Claims and What is its Real Value? Preventive Practices and Strategies Involving the Risk Manager, HR Professional Company Counsel in the Insurance Selection Process

Q & A

Many Thanks to Paul J. Siegel, Esq. Robert Cap, JD Kirk Denebeim Kathy Hughes Mark Thierman, Esq.