Employers continue to face a wave of lawsuits alleging violations of various “wage and hour” statutes (overtime pay, meal and rest breaks, etc.). Employment liability insurers have uniformly denied coverage for these claims and have tightened applicable exclusions. Some insurers now offer wage and hour coverage, but these policies and endorsements usually provide only very restricted defense cost coverage. A new source of coverage now exists, courtesy not of insurers but of revisions to the California Labor Code.
New Labor Code §558.1, effective January 1, 2016, appears to create individual liability for violation of California’s wage and hour statutes. The new law says:
(a) Any employer or other person acting on behalf of an employer, who violates, or causes to be violated, any provision regulating minimum wages or hours and days of work in any order of the Industrial Welfare Commission, or violates, or causes to be violated, Sections 203, 226, 226.7, 1193.6, 1194, or 2802, may be held liable as the employer for such violation.
(b) For purposes of this section, the term “other person acting on behalf of an employer” is limited to a natural person who is an owner, director, officer, or managing agent of the employer, and the term “managing agent” has the same meaning as in subdivision (b) of Section 3294 of the Civil Code.
We have already seen wage and hour complaints name individual officers as defendants.
The individual’s liability may be covered by a directors & officers or management liability policy. Some (but not all) of these policies exclude coverage for employment related claims – but only for the company. These policies may effectively provide coverage for the Labor Code §558.1 liability of an individual officer named in the suit. The defense cost coverage alone could be very valuable, so be sure to check these policies for coverage when an individual is a named defendant in a wage and hour suit.
