Blog - Month: February 2025
Avoiding Wage & Hour Lawsuits in a Connected, Remote Work World
While wage and hour lawsuits filed against employers around the country declined between 2022 and 2023, there were still nearly 6,000 complaint filings under the federal Fair Labor Standards Act.
These types of complaints are the most common employee actions against employers and they typically cover failure to pay workers for hours worked, overtime infractions or requiring them to work during their lunch period.
With the onset of remote work and mobile devices, the chances of an employee working off the clock have increased substantially.
For example, if a manager texts a non-exempt employee while they are home and during non-working hours and asks them to send a client an e-mail, they are essentially requiring the employee to work unpaid.
If your require or allow your staff to work off the clock, the employee must be compensated for all of that time. This means that even if you did not ask the employee to work, you may still be required to compensate them, as long as:
- You know or have reason to believe that the employee is continuing to work, and
- You are benefiting from the work being done.
This is true regardless of where the work is performed at in the office or at home, for example.
Nine steps to protect your business
To protect your business from being sued for wage and hour infractions:
- Calculate overtime correctly. In some cases, an employee is paid by salary or piecework, and may receive bonuses and commissions. All of these are factors that must be considered in correctly calculating overtime pay.
- Keep detailed records of everything related to wages and hours.
- Do not allow non-exempt employees to remotely access their work e-mail account.
- If you give an employee access to their work e-mail at home, ensure that they are paid for their time in reviewing and responding to e-mails when not at work.
- Educate managers about text messaging or e-mailing non-exempt employees when they are off the clock. Conversely, tell non-exempt staff avoid answering text messages or e-mails about work when they are off the clock.
- Do not allow employees to take lunch at their assigned work area. If a worker answers a phone call or writes an e-mail during a lunch break (even if they weren’t not ordered to do so), they may be entitled to payment for time worked.
- If an employee is asked to stay after their scheduled end time to finish up a project, they need to remain on the clock and paid for that time.
- If a supervisor knows that a worker is staying late to finish a project, that time is compensable, even if the supervisor never asked them to stay late.
- Have in place a written policy that bars unauthorized work or unauthorized overtime. Ensure that your employee handbooks and wage and hour policies and procedures are up-to-date and compliant.
Insurance
If an employee is successful in an FLSA claim, they may recover twice the amount of their unpaid wages, plus a mandatory award of attorney fees, which often far exceed the amount of any unpaid wages.
Many employers purchase employment practices liability insurance to help cover the costs of employee lawsuits, but policies typically exclude coverage for wage and hour claims.
However, there are some insurers that will provide a wage and hour defense-cost-only sublimit on the EPL policy.
There are some specialized insurance policies that are sold by offshore companies that will cover wage and hour infractions, the costs of litigation and awards. However, they are uncommon.
In light of the scarcity of coverage, it’s important that you have in place strong policies to deter employees from working unauthorized overtime.
How the L.A. Fires May Affect Your Commercial Property Insurance
The fires that have ravaged large swaths of homes and businesses in Los Angeles are likely to significantly alter the California commercial property insurance market. Policyholders may need to brace themselves for surging premiums, policy non-renewals and uncertainty.
These wildfires will result in record payouts by insurers. Moody’s RMS estimates insured property losses from the fires will be up to $30 billion, and uninsured property losses will be billions of dollars more.
So many insurers have in recent years already left the state or drastically curtailed the number of policies they write due to the wildfire threat, that the scale of these fires could push more of them to do the same.
Besides the hit to insurers, the L.A. fires are likely to have severe consequences for the state’s market of last resort for home insurance, the California FAIR Plan, which said it may see more than $3 billion worth of claims from the fires.
The FAIR Plan does not have the resources to cover damages above $2.3 billion at this stage. If its ultimate claims exceed that, all property insurers in the state will be surcharged — and likely will pass those fees on to policyholders.
Here’s a look at the current state of the market and how commercial property policies may be affected.
The state of the market
The homeowner’s and commercial property insurance market in California is in a state of crisis.
Dozens of insurers have pulled out of the state and the ones who have opted to stay have dropped policies in high-risk areas or they have gotten more selective about the properties they are willing to insure.
Mainstays like State Farm, Farmers and Allstate have stopped taking on new customers and have been shedding others they deem too risky. State Farm has dropped more than 100,000 policyholders in the last year alone.
Some common factors that can prompt a carrier to refuse coverage are the age of the roof (10 years for composite) or the age of the property (some insurers won’t insure a home older than 25 years).
Commercial property owners who have recently filed claims are often dropped as well by their insurers and find it hard to secure new coverage.
Besides the wildfire risk, the cost of repairs and rebuilding has skyrocketed in the last few years, which has driven rates higher.
The bottom line: The market was already turbulent before the L.A. fires.
Commercial property rates
Commercial property rates have been increasing an average of 20% a year recently, but many property owners have seen their rates double or triple. Even those who are forced to go to the FAIR Plan for coverage face significantly higher premiums, particularly if they live in a wildfire-prone area.
Besides wildfires, a number of other factors have converged to drive insurance rates even for properties in areas not prone to wildfire, like urban, suburban and industrial areas. These include:
- Inflation and rising repair costs — Rebuilding costs have risen more than 30% since 2020.
- Reinsurance costs — Insurance companies purchase their own insurance called reinsurance to manage risk, especially in catastrophe-prone regions. Reinsurers have raised rates and increased the thresholds for when they’ll start paying claims due to the increased risk in California.
While you’ve already experienced rate hikes for your commercial property policy, the size of rate increases over the past few years has been tempered by laws that restrict the factors insurers can use when calculating future rates.
New rules that just took effect in January 2025 will allow insurers to factor in expected future costs of natural catastrophes and the cost of reinsurance when pricing their commercial property policies.
The Department of Insurance has also been expediting rate increase requests, which in the past sometimes have taken years to get approved.
Moody’s has predicted that property rates will rise again as a result of the fires.
Risk to the FAIR Plan
As insurers leave the Golden State or refuse to cover properties in areas like the Pacific Palisades, Big Bear, Truckee and other wildfire-prone areas, more property owners have been forced to get coverage with the FAIR Plan, which has put it in precarious shape. As of Sept. 2024 (prior fiscal year-end), the FAIR Plan’s total exposure was $458 billion, a 61.3% increase from Sept. 2023.
Those sums are astounding, considering that the FAIR Plan’s annual written premium is $1.26 billion. Also, the plan had just $200 million in reserves as of Sept. 30 last year, and $2.5 billion in reinsurance.
Current estimates are that the FAIR Plan will likely face more than $3 billion in claims from the fires, mostly from homeowners, but also the hundreds of businesses that were damaged or destroyed.
Under state law, if the L.A. wildfires exceed its reserves and reinsurance, the plan can charge all private insurers in the state based on their portion of the insurance market for the first $1 billion above what the FAIR Plan can pay — and they can collect half of that from their policyholders.
For any funds needed above $1 billion, the FAIR Plan can seek approval to assess all policyholders in the state.
Any of those surcharges would be on top of premiums policyholders pay. However, there is talk that the California Legislature may come to the rescue with some sort of bailout.
One other issue: Property owners with the FAIR Plan must contend with its policy limits. For commercial properties, the most the plan will insure on any given property is $20 million (for homeowner’s insurance, it’s $3 million).
What you can do
Don’t lose hope if you have business property in California. Consider the following:
California’s property rates are still lower than in many other states. The current changes may reflect a market correction rather than an outlier spike in costs.
There is still insurance capacity with surplus insurers. If you can’t get coverage with a carrier that’s licensed in the state, we can help you find coverage in the non-admitted insurer market. These insurers are reliable even though they’re not licensed in California, but that also gives them flexibility in how they write policies, which they can better tailor for your individual needs.
The market is cyclical and will change. The current challenges are likely to stabilize as insurers adjust to the new risk environment, raise rates, change policy wording and regulatory changes are implemented. Market corrections, along with efforts to mitigate risks, such as improved fire safety measures, may restore balance.
Top Eight Business Risks for 2025
One of the keys to running a successful business is having in place a robust risk management system to ensure your company can guard against a growing number of threats that can derail operations or cause significant losses.
While each industry and company have different risks they face, a recent survey collected responses from risk managers around the world to identify the top risks facing businesses.
The “Allianz Risk Barometer 2025” highlights the key threats for organizations in an increasingly interconnected and volatile environment.
Below are the top eight risks in 2025 and what you can do to protect against them.
1. Cyber incidents
Cyber risks like ransomware attacks, data breaches and IT outages remain the number one threat globally. With AI accelerating the sophistication of attacks, businesses have to double down on protection.
What you can do — Invest in robust cyber-security measures and training employees on how to detect threats and avoid clicking on links that contain malicious code. Regularly update systems, conduct penetration testing and educate staff on cyber hygiene.
2. Business interruption
Supply chain disruptions, often triggered by cyberattacks or natural disasters, have consistently ranked high. If one of your suppliers suddenly can’t provide you with goods your firm needs or a cyberattack affects your ability to function, you will lose money.
What you can do — Diversify suppliers, explore local sourcing and implement business continuity plans that include how to respond to each possible issue that could result in disruption to operations or sales.
3. Natural catastrophes
Events like hurricanes, wildfires, convective storms and flooding can cause significant losses, be that from damage to property and assets, injury to staff, employees being unable to work or business interruption.
What you can do — Put in place a disaster recovery plan that includes how members of your staff will communicate, possible alternative locations for operations, and how to protect your facilities. Evaluate disaster preparedness and explore insurance solutions.
4. Changes in laws, regulations
Regulatory shifts, especially around sustainability and emerging technologies like AI, are creating compliance challenges. Businesses will be faced with plenty of uncertainty under a new Trump presidency, considering his plans to pursue deregulation.
While a boon for business, it could lead to confusion, particularly for those who operate in blue states. As well, the new president’s promises of raising tariffs could lead to higher costs for many businesses that source products, parts and machinery from abroad.
What you can do — It’s important that you stay on top of regulatory and legal changes to avoid penalties or lawsuits. Engage legal advisors or compliance experts to navigate changing laws.
5. Climate change — The physical and operational impacts of climate change, such as extreme weather and resource scarcity, are intensifying and businesses need to harden their operations to cope.
According to the report: “Extreme temperatures can drive up energy demand, which is especially critical for industries reliant on cooling systems, potentially leading to operational cost increases. Water scarcity can threaten businesses reliant on water for operations, while biodiversity loss undermines ecosystem services which many industries depend on, for example, agriculture or maintaining crop yields.”
What you can do — Many of the same preparations businesses can make for dealing with natural catastrophes can also be used for climate change resilience.
6. Fire and explosion
Fires remain a leading cause of business interruption, especially with the rise of lithium-ion battery incidents. “The degree of disruption can be very high, as it can take longer to recover from than many other perils,” the report states.
What you can do — Ensure that you conduct regular fire safety audits and training to staff, particularly if you store flammable materials on-site. Regularly update your fire prevention protocols and provide emergency response training.
7. Macroeconomic developments
Economic uncertainties, including inflation and fluctuating monetary policies, pose challenges for budgeting and forecasting. This will be especially true under the Trump administration as he sets out to reverse Biden’s policies and pursues tariffs that could lead to trade wars.
What you can do — Keep abreast of market trends and adapt to macroeconomic changes with flexible planning. Staying agile and diversifying revenue streams can mitigate risks.
8. Market developments
Many experts believe it is unlikely that there will be a major stock market correction in 2025. Recovering earnings and Trump’s plans for deregulation and strong fundamentals should support continued growth.
What you can do — Strategic planning and market analysis are critical if your organization is reliant on stock market gains.
The takeaway
The above list of risks was gleaned from a survey of companies around the world, but many of the risks also apply to U.S. firms.
It’s important that businesses take a structured approach to managing their risks and creating plans for all eventualities that may affect them. That requires buy-in from management and a focus on protecting the company’s revenue stream, physical and digital assets, employees and supply chains.