As we look back on 2014 and forward to 2015, insurers should continue to pay attention to the effect of wage and hour employment claims on Employment Practices Liability Insurance (EPLI) coverage. Wage and hour claims brought under the Fair Labor Standards Act (FLSA) and state law equivalents continued to rise in 2014, and 2015 may very well be a record setting year for lawsuits. Employers have recently faced a massive number of FLSA lawsuits for overtime compensation and minimum wage violations. In fact, in some states FLSA cases encompass nearly half of all employment cases filed. The combination of the complexity of the FLSA and the sometimes unsettled law leads many employers to violate the FLSA without even realizing it.

Many EPLI policies do not cover wage and hour claims, and the ones that do usually only cover the cost of defense. However, the continued rise in claims may drive companies to purchase EPLI policies that cover these claims. Given these trends, and new federal regulations on the horizon that will negatively affect companies, insurers may want to think about incentivizing their insured clients to conduct self-audits and have policies that limit risk.

The FLSA is by no means a new law. In fact, it was passed decades ago by the U.S. Congress in 1938. Under the FLSA, employers must pay employees a minimum wage and pay overtime at time-and-a-half the employees' hourly rate when the employee works over 40 hours in a work week. Employers do not need to pay overtime to employees who are exempt from overtime. Given that none of this is new, why are there so many wage and hour lawsuits, and why is the Department of Labor (DOL) suggesting that nearly 80 percent of companies in the U.S. violate the FLSA?