Recent Labor and Employment Laws Impacting Insurance Companies

Below are two very important recent developments in the labor and employment law which may have a significant impact on insurance companies.

Fair Labor Standards Act
The United States Department of Labor recently issued comprehensive regulations (effective August 23, 2004) updating and changing which employees must be paid overtime. One area discussed in the regulations is whether overtime needs to be paid to claims adjusters. To qualify as an administrative employee, and thereby exempt from overtime requirements, a claims adjuster must satisfy the following tests:

1. The employee must receive a salary at a rate of at least $455 per week;
2. The employee's primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or its customers; and
3. The employee's primary duty must include the exercise of discretion and independent judgment with respect to matters of significance.

Examples of claims adjusters job duties which would help to establish the exemption include but are not limited to: (a) interviewing insureds, witnesses and physicians; (b) inspecting property damage; (c) reviewing factual information to prepare damage estimates; (d) evaluating and making recommendations regarding coverage of claims; (e) determining liability and total value of a claim; (f) negotiating settlements; and (g) making recommendations regarding litigation.

It must be noted that the job title of claims adjuster alone will not qualify the employee for the exemption. A careful analysis of each claims adjusters duties and responsibilities must be made.

Union Organizing
Insurance companies have recently become a target of increased union organizing drives. For example, on April 20, 2004, approximately 80% of 960 Prudential Insurance Co. sales agents voted, by a four to one margin, to be represented by the Office and Professional Employees International Union. That NLRB vote culminated several years of organizing efforts, which included a narrow union loss in an election held almost two years ago.

With the country-wide decline in manufacturing jobs, unions have devoted substantial resources to organize large groups of employees in service industries. The fastest growing union for the past several years has been the Service Employees International Union, which utilizes new and sophisticated techniques to obtain recognitional status.

Union organizing efforts generally begin very quietly behind the scenes, and are often well entrenched before an employer becomes aware of them. It is critical for employers who want to remain union free to have a vigilant and proactive program addressing this challenge, including supervisory training. Hinshaw can assist companies by providing such a program including: (1) a union vulnerability analysis of policies, procedures and benefits; (2) union awareness and prevention technique; and (3) the proper use of disciplinary procedures to avoid situations that may encourage unionization and discrimination. In the event of a union organizing drive, we can also assist employers with their legal and practical responses and in conducting a successful election campaign to defeat such efforts.

If you would like to discuss these issues further, please contact Thomas Y. Mandler or Tom H. Luetkemeyer.