James F. Mahoney, Attorney

July 2013

Wage & Hour Claims, Workers Comp, Cargo Losses and Other Scary Topics

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I am the CEO of my company. Am I personally liable for wage and hour lawsuit claims?

This month the Second Circuit Court of Appeals found that a CEO was personally liable for a wage and hour class action under the FLEA because he qualified as an employer after applying the "economic reality" test.

Will your EPL insurance cover this? Hmm, are you that kind of "hands on" CEO?

The test includes whether you hire managerial employees (yes); whether you sign paychecks (yes); whether you have the power to close or sell terminals or worksites (yes); whether you routinely review financial reports (duh); whether you work in the corporate offices (well, there's an office there with your name on it); and whether you generally preside over company day to day operations (or are you just butting in).

If this sounds like you, the opinion below should make you read your EPL policy for some not-unusual exclusions and ask your risk person how best to personally cover you, the company and all C-level folks.

The case is Irizarry v. Catsimatidis, No. 11-4035-cv, 2013 WL 3388443 (2d Cir. July 9, 2013).

For whom is my company (or me in some states) responsible for coverage under my workers' compensation policy?

There are three types of individuals for whom you may have Comp liability:

  • direct employees (you know them, they are currently on a break);

  • employees of uninsured subcontractors (you probably don't know them); and

  • de facto employees (just because you call someone an "independent contractor" does not necessarily make it so for a Comp carrier or the IRS or state labor departments or wage and hour lawsuits).

Are you liable for covering your owner-operators who operate in New Jersey? If they live in PA, but bring a Comp claim in NJ, will it stick? What about dray drivers at various ports? These targets are constantly moving with new and exhilarating suits and statutes, but your insurance coverage is probably standing very still.

What is a premium audit, why is it necessary, how are workers classified and what are the consequences to me?

If you can't answer these questions in your head, trust that your Comp insurer may come visiting or just send you a fat bill. Don't worry about being personally liable; it's just company money they're after.

I run a motor carrier and we just "trip leased" a load to another motor carrier. Who is responsible for the cargo loss since their truck just rolled?

The shipper will say you are; the freight broker will say you are; your cargo insurance carrier will say you're not; your insurance broker may not want to answer the phone. You can protect against this, and it's easy.

What are the necessary endorsements to my Business Auto Policy to be sure both I and my employees are covered when driving?

Regardless of the industry or state of operation, the following four endorsements alter the availability of coverage for exposures common to most insureds: 1) employees as insureds (CA 99 33); 2) fellow employee coverage (CA 20 55); 3) auto loan/lease gap coverage (CA 20 71); and 4) rental reimbursement (CA 99 23).