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State Farm Insurance Settles Overtime Suit

The company agrees to pay $135 million to 2,600 adjusters. The deal is the latest in a wave of such payouts in California.

January 11, 2005|Lisa Girion | Times Staff Writer

State Farm Insurance Cos. agreed to pay $135 million to settle a lawsuit alleging that it failed to pay overtime to 2,600 claims adjusters in California.

The settlement, approved Monday by a Los Angeles County Superior Court judge, is the latest multimillion-dollar payout in a wave of white-collar overtime lawsuits in California, where the laws governing this area are stricter than in other states.

Lawyers for the adjusters said the average award for each plaintiff would be $34,000, although those who worked for the company for eight years would receive an average of $64,000.

The State Farm adjusters, who filed their suit in 2000, said they worked an average of six to seven hours of overtime a week without premium pay, including weekends.

The $135-million settlement "sends a message that [insurers] are not exempt from the labor laws in California," said Louis Marlin, an Anaheim lawyer for the plaintiffs. "They cannot avoid being subject to the same rules and regulations as every other legitimate employer in this state."

A spokeswoman for Bloomington, Ill.-based State Farm confirmed that the company had reached a settlement with its claims adjusters but had no further comment.

State Farm initially denied that it owed the overtime, saying the claims adjusters had administrative posts and thus were ineligible for the extra pay.

In California, most workers are entitled to extra pay -- calculated at time and a half -- after putting in eight hours each day.

That rule applies to anyone who spends more than half of his or her time on menial tasks or has no say over the business, even if he or she is labeled a manager, supervisor or administrator.

Settlement talks in the State Farm case followed a ruling by Los Angeles County Superior Court Judge Anthony Mohr more than a year ago that the claims adjusters were entitled to overtime pay.

Had the case gone to trial, Marlin said, the only issue for the jury to decide would have been the amount of back pay, interest and penalties the company owed.

Marlin noted that he had similar suits pending against several other insurers in California, including Allstate Corp. In that case, Mohr already has ruled that the adjusters are owed overtime pay. A jury trial on damages is set for Feb. 28, Marlin said.

The number of white-collar lawsuits centering on overtime pay has jumped in the state after a 2001 jury verdict against Los Angeles-based Farmers Insurance Exchange, a unit of Farmers Insurance Group.

In September, Farmers agreed to pay as much as $210 million to 2,400 claims adjusters who sought back pay for overtime worked, in what is believed to be the biggest such settlement.

RadioShack Corp., Bank of America Corp., Starbucks Corp. and Rite Aid Corp. are a few of the national companies that have agreed to big payouts in California to avoid squaring off at trial against thousands of managers, assistant managers or tellers.

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