We recently discussed how Democrats in the House of Representatives sought to amend the Federal Labor Standards Act (FLSA) as part of new proposed legislation called the “Wage Theft Prevention and Wage Recovery Act”. The post concluded that the legislation, if enacted, would increase both the frequency and severity of not only FLSA collective actions but also of investigations and enforcement actions by the Department of Labor’s Wage and Hour Division.

Many businesses assessing potential new or growing FLSA and regulatory exposures may be wondering if their liability insurance policies will respond to protect the company and its officers and directors from wage and hour claims. The short answer is, it depends.

While many policies expressly limit or exclude FLSA-related wage claims, or only provide for a small cost of defense, coverage may be available, and companies should carefully review all potentially applicable policies for sources of coverage. We discuss several key issues to consider when assessing wage and hour insurance below.

1. Most EPL Policies Limit or Exclude Coverage for Wage and Hour Claims, but Don’t Assume That Exclusions Apply to All Wage-Related Allegations.

Many companies assume that all workplace-related litigation will be covered by insurance but are surprised to find out that most employment practices liability (EPL) policies exclude claims under the FLSA and similar state and local wage laws. This carve out from EPL policies can be significant—the...

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