The Court of Appeal concluded that many of the disputed wage and hour claims in an underlying lawsuit are potentially subject to coverage under an employment practices liability insurance (“EPLI”) policy despite a wage and hour exclusion.
Southern California Pizza Company, LLC (“SCPC”) was named as a defendant in a putative class action lawsuit alleging violations of a variety of Labor Code provisions. The insurance company denied coverage, stating that the alleged violations fell within the wage and hour exclusion. The trial court sustained a demurrer against SCPC concluding all causes of action in the underlying employment lawsuit against SCPC fell within the scope of the policy exclusion.
SCPC appealed the decision and argued that the claims for failure to reimburse business expenses and the failure to provide accurate and itemized wage statements were subject to coverage.
As to the claim for failure to provide accurate wage statements under Labor Code § 226, the Court held that because section 226 is a “wage and hour law,” the cause of action in the underlying lawsuit alleging a violation thereof fell within the scope of the policy’s wage and hour exclusion. Thus the trial court did not err by so concluding.
As to the claim for the failure to provide reimbursable expenses, the Court found that the statutes related to reimbursable expenses do not mention wages or hours, nor do they appear in parts of the Labor Code titled “compensation” or “working hours.” The Court further agreed that claims for failure to reimburse qualify as an employment related workplace tort and are potentially subject to coverage.
The Court also agreed that claims for relief under section 17200 and the Private Attorney General Act are derivative claims based, in part, on defendant’s alleged failure to reimburse business-related expenses and are potentially within the scope of the policy and not excluded.
Traditionally employers have assumed that coverage for all wage and hour class action claims is excluded from their EPLI policy. However, depending on the language of the exclusion, the insurer may be obligated to provide a defense to and pay any resulting liability for certain claims that are typically found in “wage and hour” lawsuits.
Should you have any questions about how this affects your business, please contact the experts at RPNA.