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July 12, 2001
Jury Awards $90M in OT Case
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The award goes to 2,400 claims adjusters for the Farmers Insurance Exchange of Los Angeles.
It's believed to be the biggest award of its type and may exceed $130 million when interest and legal fees are added, according to Steven G. Zieff, a San Francisco lawyer representing the adjusters.
The Times reports that the size of the compensatory award stunned employment experts and lawyers, who had been closely following the lawsuit because of the large number of plaintiffs involved and because it went to a jury trial instead of settling.
"The award is shocking," said Jim Kuns, a senior consultant with the Employers Group, a Los Angeles-based association representing 5,000 California businesses.
The size of the award may encourage more exempt white-collar workers to file lawsuits for overtime pay, the experts told the Times, adding that California employers should review their pay practices.
"That's a pretty substantial judgment," said UCLA professor David Lewin. There will be more lawsuits, he predicted. "Once plaintiffs' lawyers see there is a verdict for plaintiffs, there is less of an incentive for them to settle and more of an incentive to go to a trial," he said.
Farmers issued a statement saying it was disappointed in the award and would appeal.
Zieff, the plaintiffs' lawyer, said a survey the typical Farmers adjuster makes $30,000 a year and works 50 hours a week. The award represents $37,500 per plaintiff. The amount that each plaintiff actually receives will be determined by a judge, who will look at tenure and other factors.
Farmers is one of hundreds of employers embroiled in overtime class-action lawsuits in California, which has strict rules on who gets paid overtime and who is exempt. Exempt employees there must spend more than half their time on duties that are intellectual, managerial, or creative and require the use of discretion and independent judgment.
Even if the Farmers award is overturned, "it should stand as a warning to California employers to carefully analyze the exempt status of their employees," Kuns said. "We're constantly getting calls from employers about [overtime exemptions] based on information they receive from headquarters back East, which don't have the same rules we have here. It's significantly different here."
Until now, according to the Times, most white-collar overtime class-action lawsuits settled short of trial for fractions of what workers claimed they had coming. Since January, Rite Aid Corp., U-Haul Co. and Taco Bell agreed to settle cases for $25 million, $7.5 million and $13 million, respectively. None of the companies admitted any wrongdoing.
What made the Farmers case different? For one thing, it went to trial. For another, the adjusters challenged the administrative exemption to overtime laws, as opposed to the managerial exemption.
Legal and employment experts were watching the case because of its potential to spread class-action overtime lawsuits to millions of administrative workers.
The suit contended that adjusters are the equivalent of insurance production workers. They exercised very little discretion, the suit claimed, and therefore should be paid overtime. An Alameda judge agreed, and in March an appellate court upheld that ruling.
In its statement, Farmers said it was "disappointed and concerned" about the verdict and hopes the state Supreme Court will take up its appeal.
"It is a vital subject, which affects thousands of adjusters employed by Farmers and hundreds of other companies," the statement said. "Field claims adjusters . . . have historically been treated as exempt employees throughout the country. The verdict in this case has the effect of setting California adjusters apart from their peers in other states."
The company went on to argue that as exempt employees, the adjusters may set their own hours and are treated as professionals.
"Some significant disadvantages to being classified as nonexempt include having to keep time cards, working a regular 9-a.m.-to-5-p.m. schedule, accounting for all hours worked to a supervisor, and being treated as an hourly worker rather than a professional," Farmers said.
But Joyce Moses, a former adjuster who now works as a teacher in the San Fernando Valley, told the Times of regularly working nine-to-11-hour days, plus a few hours on Saturdays to keep up with a workload that she viewed as unrealistic. Adjusters complained frequently about conditions but got no relief, she said.
"I had to work on the day I got married," Moses said. "My supervisor made me work a half day. It was not a pleasant experience working for them."
Asked if she felt vindicated by the award, she replied, "I'll feel vindicated when they change their policy and stop screwing their employees."
To view the Los Angeles Times story, click here.