A wave of lawsuits seeking overtime pay against insurance and financial services companies appears to be drawing to a close following several settlements and judgments.
Insurance, mortgage and other financial companies have paid multimillion-dollar settlements over allegations that claims adjusters and other office employees were not paid overtime, based on California law. Two other firms face final decisions in their court cases.
“They’re coming full term now,” Stanley Saltzman, a partner at Marlin & Saltzman in Agoura Hills, said of the overtime cases filed against insurance and financial services firms. He represents 800 claims adjusters in an overtime case against Aon Corp. and one of its former subsidiaries, Cambridge Integrated Services Group Inc. “The retail environment is where it really began. Then it went into white-collar and insurance adjusters. Things go in waves.”
The settlements come after Los Angeles-based Farmers Group Inc. agreed late last year to pay $200 million to 2,000 California claims adjusters who alleged they had been misclassified as exempt from overtime. Farmers settled after failing to convince an appellate court to overturn a $90 million judgment brought against the company in 2001. That judgment convinced several plaintiffs’ firms to begin suing other insurers.
“Since Farmers, almost every insurance company in California either changed or was sued,” said James Finberg, a partner at Lieff Cabraser Heimann & Bernstein, who has brought several overtime cases against Farmers. Now, he said, “it has just worked its way through the system.”
The end of the Farmers case launched a string of other settlements in the financial services industry. Earlier this year, State Farm Mutual Automobile Insurance Co. agreed to pay $135 million to settle an overtime case filed in Los Angeles Superior Court by 2,600 claims adjusters in California. Most recently, Calabasas-based Countrywide Financial Corp. paid a $30 million settlement in a similar overtime suit brought by 400 account executives at its Southern California call centers.
Another major insurer, Allstate Corp., faces millions of dollars in damages following a judge’s decision to rule in favor of 25,000 claims adjusters seeking unpaid overtime. Those adjusters were certified as a class in December.
Allstate noted in its most recent quarterly report that the “outcome of these disputes is currently uncertain.”
Management murkiness
Overtime cases have plagued California employers for several years. Store managers of major retail chains, such as Starbucks Corp. and Rite Aid Corp., claimed they were misclassified as exempt from overtime because they rarely managed employees and spent most of their time stocking shelves or helping customers. Under California law, employees with management responsibilities are not entitled to overtime.
In the insurance cases, claims adjusters say they were misclassified because they did not perform administrative functions or exercise independent judgment as required under California law to be exempt from overtime. They said their jobs, which paid $30,000 to $60,000, entailed mostly data entry and formulaic work.
In addition to the recent decision against Farmers, economic factors have played a significant role in convincing firms to settle the claims.
“The economy is somewhat better now than it was a year or two years ago,” said David Borgen, a partner at Goldstein Demchak Baller Borgen & Dardarian, who represented the account executives in the Countrywide Financial case. “Employers have more resources now to resolve these cases.”
Countrywide Financial, while not mentioning any specific lawsuits, reported that legal and consulting fees had increased 40 percent in the first quarter, to $27.4 million, compared with the like period a year earlier.
In a statement issued after agreeing to the $30 million settlement, Countrywide Financial spokeswoman Susan Martin said: “While the company continues to believe that its original classification of account executives was lawful and that it would have been upheld at trial, it decided to settle in order to avoid the expense and uncertainty of litigation.”
That uncertainty remains in the Aon/Cambridge case, which has been set for a re-trial next year. A Los Angeles jury deadlocked 8-4 in determining whether the 800 claims adjusters were entitled to unpaid overtime dating back to 1997. In failing to come to a conclusion, the jury has helped Aon avoid, at least for now, having to pay an estimated $25 million in overtime pay.
But that doesn’t mean the companies won’t consider settling, just to get the case off their backs.
“I suppose that the plaintiffs could approach us with a settlement offer,” said Jon Meer, a partner at DLA Piper Rudnick Gray Cary US LLP representing Aon and Cambridge. “But they haven’t yet.”
