Allstate to Settle Overtime Claims;

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Insurer, which admits no wrongdoing, will pay as much as $120 million to California adjusters.

Los Angeles Times

Allstate Corp. said Thursday that it would pay as much as $120 million to settle claims that some of its white-collar employees in California were routinely required to work long hours without overtime pay.

The case is the latest in a series of class-action lawsuits putting pressure on California employers to revamp their white-collar pay policies. Previous settlements by RadioShack Corp., Bank of America Corp., Starbucks Corp. and Rite Aid Corp. highlighted the practice of classifying workers as managers or administrators to avoid paying overtime.

In the Allstate case, adjusters at the nation’s second-largest home and auto insurer alleged that the company refused to pay overtime but routinely assigned them so many claims that they had to work nights and weekends to keep up.

“It’s very similar to what happened in the ’40s with the sweatshops,” said R. Rex Parris, a Lancaster lawyer who represented the adjusters. “The laptop had become the sewing machine of the 2001 era. Companies were sending these people home with their laptops. They’d work long hours at work, and then they’d go home and continue to work.”

Almost 3,000 California-based adjusters are eligible to receive payments that could range from $1,000 to $100,000, depending on each employee’s tenure with Allstate and amount of overtime worked, said Parris, who estimated that the typical payout would be $50,000 or $60,000. Adjusters make about $50,000 a year, without overtime.

Allstate did not respond to a request for comment.

In a filing with the Securities and Exchange Commission on Thursday, the Northbrook, Ill.-based company said it “continues to deny any liability or wrongdoing with respect to the claims raised in the lawsuit.”

The proposed settlement is subject to approval by a Los Angeles County Superior Court judge.

The Allstate case is part of a wave of class-action litigation by white-collar workers claiming overtime exploitation in industries such as retail, restaurants and banking. National employers have agreed to big payouts in California to avoid being pitted at trial against thousands of managers, assistant managers, claims adjusters or tellers.

The explosion in litigation began about five years ago after California lawyers sought class-action status for alleged overtime law violations, which historically had been handled case by case.

Under California law, employers are required to pay time and a half for more than eight hours of work a day. It also requires employers to pay the overtime premium to many white-collar workers — regardless of title — who spend more than half their time flipping burgers, running cash registers or doing other non-managerial or non-administrative work. Such violations are more difficult to prove under federal law, which governs most states.

Experts said the California suits have had a major effect on the way national employers pay a variety of white-collar workers in the state. Large national employers now are more inclined to classify certain California white-collar workers — such as store managers — as nonexempt, allowing them to collect overtime.

“These are problems that resulted from the employers’ own policies and practices and their inconsistencies with California state law,” said Joe Beachboard, a Los Angeles partner with Ogletree Deakins, a law firm that represents employers. “The big employers now have seen the light, and I get a lot of calls from companies based [outside] California who now want to ensure their pay practices and policies and handbooks are consistent with state law. That didn’t happen much five or 10 years ago.”

In the Allstate case, some plaintiffs alleged that they had to work six days or more a week to keep up with their claims loads.

“It’s just incredible the hours they were expected to put in,” Parris said. “On Saturdays, some of the women were bringing their kids in, and they played on the floor while they worked. It was not a good situation.”

Similar suits are pending against other insurers, and several have settled. In January, State Farm Insurance Cos. agreed to pay $135 million to settle an overtime lawsuit on behalf of 2,600 claims adjusters in California. Los Angeles-based Farmers Insurance Exchange agreed last September to pay as much as $210 million to resolve the overtime claims of 2,400 adjusters who had earlier won $90 million from an Oakland jury.

Most of the insurers who settled have changed the way they manage claims adjusters’ workloads, schedules and pay, Parris said. The new policies have resulted in adjusters’ working fewer hours of overtime and getting paid for the overtime they work, he said. Some of the insurers have limited the new policies to California-based adjusters, but others have made the changes nationwide.

“The suits have changed thousands of lives,” Parris said. “The best example was one guy was telling us he now coaches Little League. He’s now an assistant Scoutmaster. He’s doing things with his kids he never was able to do before.”

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