Farmers Insurance Settles Overtime Suit
Farmers Insurance Exchange agreed Friday to shell out up to $210 million for failing to pay overtime to 2,400 claims adjusters, settling what lawyers said could be the nation’s largest white-collar overtime case.
An Alameda County judge approved the agreement three years after a jury awarded Farmers’ adjusters $90 million in back pay. The Los Angeles-based insurance giant agreed to pay interest and fees to the plaintiffs’ lawyers, bringing the total to about $170 million.
In addition, Farmers will pay as much as $40 million in overtime premiums for failing to heed a judge’s post-trial order to change its pay practices immediately, said Steven G. Zieff, a San Francisco lawyer who represented the Farmers’ adjusters.
“It’s a very good message for Labor Day,” he said. “It’s a message that California’s overtime laws must be obeyed. People are entitled to be paid overtime premiums for the overtime work they perform. And if they aren’t, there is going to be a consequence -- in this case a very big consequence.”
Farmers said in a statement that it believed it had complied with applicable standards and settled the case because its appeals were denied.
The case is at the crest of a wave of white-collar overtime suits filed in recent years against California employers. After the 2001 jury verdict in the Farmers suit, many well-known companies, including Starbucks Corp., Bank of America Corp. and Rite Aid Corp., have agreed to settlements in overtime cases totaling hundreds of millions of dollars.
The Farmers’ settlement came eight days after the California Supreme Court cleared the way for a class-action suit filed against Albertsons Inc.’s Sav-on Drug Stores by employees who said their were unfairly classified as managers and improperly denied overtime. The decision in the Sav-on case dashed employers’ hopes that the court might make it more difficult for class-action overtime suits to go forward.
Under California law, employers must pay a premium -- calculated at time and a half -- for work in excess of eight hours a day. The law allows employers to exempt from overtime pay managers, certain professionals and administrators who have a say in how the business is run.
Farmers’ adjusters said in their 1996 suit that they were entitled to overtime because they handled claims and had nothing to say about how the company operated.
In February of this year, the California Court of Appeal for the 1st District affirmed the verdict against Farmers, citing the description in the company’s claims manual of the duties of adjusters as “routine and unimportant.”
Then in May, the California Supreme Court denied further review.
The typical Farmers claims adjuster made $30,000 a year and worked 50 hours a week, according to a survey conducted for the trial. Eligible adjusters will receive average payouts of $50,000 each, depending on their tenure and other factors, Zieff said.
He expects most of the eligible adjusters to apply for their piece of the settlement.
“These are big claims, and I don’t see people walking away from that kind of money, nor should they,” he said.
Labor and employer lawyers believe the size of the Farmers overtime payout will spur more suits -- and give employers something to think about.
“This will continue the trend of employers looking to settle these cases,” said Joe Beachboard, a partner at law firm Ogletree & Deakins in L.A. who represents employers in overtime suits.
“Also, I think this will send a message to employers outside of California about the risks of doing business here.”
