Employment Practices Liability

On August 27th, a California Appellate Court held that an employment practices liability insurance policy’s “wage and hour” exclusion must be construed narrowly to bar coverage only for claims related to “laws concerning duration worked and/or remuneration received in exchange for work.” In doing so, the court made clear that “wage and hour” exclusions do not preclude coverage for claims that go beyond the employee’s actual remuneration received in exchange for work.

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On November 14, 2016, a federal judge in California denied summary judgment to Hanover Insurance Co. (Hanover), finding that class claims alleging a failure to reimburse reasonable business expenses were not excluded by a “wage-and-hour” exclusion contained in EPLI policies issued by Hanover. The lawsuit, brought by a former student of the Bellus Academy beauty school, alleged that Poway Academy (the owner of Bellus) and Beauty Boutique, Inc. (BBI) (operator of two other schools under the “Bellus” name), failed to compensate students for working on paying clients at an onsite salon and also failed to reimburse them for out-of-pocket costs to purchase necessary supplies. The lawsuit alleged a variety of wage-related claims. The lawsuit also alleged that the schools failed to reimburse necessary business expenses in violation of Section 2802 of the California Labor Code.

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