FLSA Issues That All Agencies Should Be Aware Of

It has been over a week since a federal District Court Judge issued an injunction staying the implementation of the new overtime rule (click here for more information on the injunction), and it does not appear that the U.S. Department of Labor is going to try to have the injunction overturned on appeal, at least anytime soon.  So employers will not have to comply with the new overtime rule that was set to go into effect tomorrow, December 1.  However, that only relieves employers from having to pay their employees who they want to treat as exempt from the overtime pay requirements of the Fair Labor Standards Act (“FLSA”) under the administrative, executive, or professional exemptions a minimum salary of $913 a week, or $47,476 a year.  Employers will still have to pay their employees overtime for any hours they work in excess of 40 in any one work week, unless they qualify for one of the exemptions referred to above or another exemption. (Click here for a post that discusses those exemptions and others as they may apply to employees of insurance agencies.)

In determining whether the 40 hour threshold has been exceeded in any one work week, agency owners need to be aware of what is work time that must be included in making that determination.  The FLSA does not require an employer to give an employee any time off during the workday for any reason, even to eat.  It only requires that an employee be paid at least the minimum wage for all the time they are working and overtime pay if they work more than 40 hours in any one work week.  If an employer decides to give its employees a break from work, that break must be at least 30 minutes long and the employee must not be required to do any work during the break period before that time can be excluded from work time for which the employee must be paid.  With respect to breaks given so an employee may eat a meal, what this means is that an employee must not be on call or perform any other work related duties during the break.  If they do, they must be paid for that time, too.

For agency employees who are licensed or have another certification that they must have to perform their duties, any time taken by such an employee for the purpose of attending a class, a webinar, or any other event to obtain or keep their license or other certification is considered work time for which they must be paid.  The same thing is true for any class or other event an employee attends at the request of the agency.  If the agency owner does not want to have to pay overtime to a nonexempt employee in this situation, any such class or other event should be attended during the employee’s normal working hours.

If an employee attends such a class or other event outside of their normal working hours, the agency owner must also be aware of the FLSA’s rules regarding payment for time spent traveling by employees.  These rules are complex, but a good explanation of the basics, as well as other situations that may require payment, can be found here.

While the pressure is off for now on compliance with the new overtime rule, the existing rules still apply and can create problems for an agency that is not aware of what those rules require.

Court Stays Implementation of New Overtime Rule

Yesterday, a judge on the U.S. District Court for the Eastern District of Texas entered a preliminary injunction staying the enforcement of the new overtime rule that was to take effect on December 1, 2016. (Click here for an explanation of the rule.)  The judge found that rule to be unlawful because it imposed a minimum salary requirement for employees who would otherwise qualify as exempt under the administrative, executive, and professional duties exemptions from the overtime pay requirements of the Fair Labor Standards Act (“FLSA”).  Apparently, in the judge’s opinion only Congress can impose such a salary requirement.  However, a minimum salary requirement has been a part of the requirements for employees to qualify for those exemptions for many years, so it’s anybody’s guess what the final outcome will be.  

For now, employers do not have to worry about satisfying the new minimum salary requirement for an employee to be exempt from the overtime pay requirements of the FLSA under the above three exemptions.  However, that could change upon an appeal to the U.S. 5th Circuit Court of Appeals, which could be made before December 1.  So stay tuned for further developments.

In the meantime, remember that an agency’s producers and other employees will have to be paid overtime for any hours they work in excess of 40 in any one workweek, unless they qualify for one of the exemptions referred to above or another exemption. That fact is not affected by this court ruling, (Click here for a post that discusses those exemptions and others as they may apply to employees of insurance agencies.)

BEST WISHES FOR A SAFE AND ENJOYABLE THANKSGIVING HOLIDAY.

Can An Extra Fee Be Charged for Premium Payment by Credit Card?

I was recently asked the above question by a caller to the Free Legal Service program that I run for the members of the Independent Insurance Agents of Georgia.  It is one that I had addressed before in other such calls, so I thought it would be a good topic for a blog post. 

Unlike the issue of charging a fee to an insured for obtaining an insurance policy (click here for a post on that issue), this question deals with recovering the charge imposed on any business that accepts payment by credit card for the services it renders or the products it sells.  As most of my readers probably know, there is a cost paid by such businesses for processing a credit card payment.  Depending on the credit card company involved that cost can be as high as 2 or 2.5 percent of the total amount charged.  Over time that cost can add up to a significant number.

If permitted by the agreement an agency has with its credit card processing company, I think a good argument can be made it is permissible to charge a fee for a premium that is paid using a credit card, if the insured has a choice in how the premium can be paid and there is a payment option available to the insured that would not result in any extra fee being assessed against the insured. If the insured has such a choice, I don’t think the prohibition in O.C.G.A. Section 33-6-5(6)(B) on collecting “as premium or charge for insurance” any sum in excess of the premium or charge for that insurance which was specified in the policy in question would be violated. Where such a choice exists, the agent would be providing a service in excess of the service associated with obtaining the insurance policy by allowing payment of the premium by credit card.

As long as the insured can pay the premium or other charge for insurance in a way that does not result in the payment of an extra fee, providing another more convenient method of payment would be an extra service for which the agency could charge a fee. To be safe, I suggest that the fee charged be no more than the amount the agency would have to pay its credit card processing company. I don’t think an agency would be able to get away with charging more than that amount for very long for competitive reasons, and it would not look good to the Insurance Commissioner’s Office for an agency to be making a profit by charging such a fee. I would also recommend that the insured be informed in writing of the fact that an extra fee would be imposed if a particular method of payment for a premium was used, the amount of that fee, and the other available payment method(s) that would not result in the imposition of such a fee.  This written notice should be given sufficiently in advance of the premium due date to give the insured a realistic opportunity to use a payment method that would not result in the charging of an extra fee.

However, if the insured has no premium payment method available to him or her that would not result in the imposition of a transaction fee on an agency, I don’t think it could validly pass along that fee to its insured, as it would then be in technical violation of O.C.G.A. Section 33-6-5(6)(B).   Of course, just because it’s probably legal to charge a fee for payment by credit card does not mean it’s a good idea to do so, especially if an agency’s competitors were not charging such a fee.

IIAG Fall Conference – What You Missed

IIAG had its annual Fall Conference a couple of weeks ago.  This year it was held at a conference center in Augusta that was adjacent to Riverwalk Augusta, which is a beautiful park that runs next to, and in some places along the top of, the levee that separates downtown Augusta from the Savannah River.  If you have not already done it, I highly recommend a walk through the park and along the river.

While at the conference, I was able to attend three informative presentations on E&O loss control, processes and technologies that can help an agency or agent grow their business, and how to transform an agency into an exceptional customer service provider.  The part of the E&O presentation I attended focused on how to properly document interactions with customers.  The three C’s of all documentation are that it be clear, concise, and consistent.  It is also important that it contain only the facts of what happened and when and who was involved.  It should not contain any opinions, especially on the validity of a customer’s claim or whether the proper coverage was in place.  If there is a possibility that an E&O claim may be made, set up a separate file for all information related to the defense of such a claim.  The speaker favored electronic documentation over paper, but recommended against communicating with the customer using social media or texts due to the difficulty in capturing and storing such communications in the agency’s management system.  Such documentation should include reminders upon the first issuance and every renewal that the customer read their policy to make sure it provides the coverage they want and include disclaimers about possible coverage limitations, e.g., policy does not cover flood damage.  Should use proposals to highlight all such limitations.

The part of the agency growth presentation I attended focused on how to select a target market and common mistakes in doing so.  The first thing an agency or agent should do is review the products available from the companies by which they are appointed.  This will give them a good idea of what their target market should be, as it would be a waste of time to go after a particular type of customer if they could not satisfy all the coverage needs of such a customer.  Once a target market is chosen, be careful not to waste time on potential customers who do not fit the profile in all important respects or the time to cultivate whom will not be worth the amount of commission that can realistically expect to receive.  Be persistent with the target market; one touch with a potential customer is not enough, but need to be creative in how they are touched.  Social media can be monitored for life or other important events involving customers or potential customers, which are then followed up with an appropriate card containing a handwritten note.  Can also use social media to highlight customers by reporting on any newsworthy events involving them or for commercial customers describe and recommend the services they offer.  The mantra for an agency or agent should be “And Then Some.”  Always strive to do what’s expected “And Then Some.”

The most interesting piece of information I learned at the exceptional customer service   presentation was that underwriters grade the agencies and agents with whom they work.  This is usually done on a quarterly basis and will govern the level of service and cooperation with handling unusual risks provided to an agency or agent in the future.  The speaker recommended asking the underwriters about the grade given and how it can be improved.  One sure way to do so is to treat underwriters and other company representatives as if they were customers.

 

Fee Payment Arrangements – A Trap for the Unwary

While attending the IIAG’s Fall Conference a couple of weeks ago (I will cover what you missed in later posts), I had an interesting conversation with some agents about the duties owed their customers by insurance agents.  I pointed out that under Georgia law, an insurance agent is considered a mere “order taker” as far as their duties to the customer are concerned, unless and until the agent does or says something that creates a duty on their part to the customer beyond just providing the customer with the insurance coverage they request.  I have written a few blog posts on how this can happen.

The question was then asked if accepting the payment of a fee from the customer would change the relationship between agent and customer.  My response was that it would change the relationship.  In fact, it would change the relationship significantly, as by doing so, the agent would then owe a duty to the customer to perform the services for which the payment was made in accordance with the current industry standards for the performance of those services.  In addition, if the agent had touted their experience or expertise in performing those services to convince the customer to pay a fee for them, the agent would be held to an even higher standard in his or her performance of them.

If the agent’s only compensation for the performance of the services in question came from the customer, the traditional relationship between the agent and customer would be reversed.  Instead of an “order taker”, the agent would become the customer’s adviser and may in some instances owe a fiduciary duty to the customer to protect their interests above all others.  Such a duty is the highest possible under the law.

Although the above seems obvious when you think about it, it was something that I had never considered before.  That may be true of some agents.  The Georgia Insurance Code requires an agent to have a counselor’s license before they can receive any compensation from their customer and that the agent/counselor get the customer’s advance approval for their performance of services that are specified in writing.  This requirement presents a great opportunity for the agent/counselor to carefully define what they will do and how they will do it, thereby limiting their exposure to claims by the customer to just those services and their performance as described.   Any limitations on what will be done or how it will be done should be set forth in a written agreement with the customer, and that agreement should include a description of what the customer must do to enable the agent/counselor to properly perform their specified services.  At a minimum, this should include the provision of complete and accurate information about the subject of those services.

Every agent/counselor should take advantage of this opportunity to mange the expectations of their customer about the final outcome of the services to be performed.  As noted in earlier posts, there should be no promises of “complete coverage for all risks” or satisfaction guaranteed.