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This report includes a summary of key changes, including the salary level test and salary basis test.

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September 10, 2004
Farmers Insurance to Pay Up to $210M to Settle OT Suit

Farmers Insurance Exchange has agreed to settle a class-action lawsuit in which insurance claims adjusters alleged the company violated California's overtime rules by classifying them as exempt from overtime pay, the Los Angeles Times reports.

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The settlement includes $90 million in back pay a jury awarded in 2001 to about 2,400 claims adjusters, $80 million in interest and attorneys' fees, and as much as $40 million in overtime pay for overtime hours worked since the 2001 jury decision, according to the newspaper. If the settlement does reach $210 million, it could make the settlement of the class-action overtime lawsuit the largest of its kind, according to the plaintiffs' attorneys.

Before the settlement, the company had been appealing the jury award, but the California Court of Appeal for the 1st District sided with the plaintiffs, and the California Supreme Court declined to review the case, the newspaper reports.

In settling the lawsuit, the company denied allegations that it violated overtime rules.

California has stricter overtime-exemption rules than the federal government does. The claims adjusters alleged they fell outside the administrative exemption.

During the trial, Steven G. Zieff, a lawyer representing the adjusters, presented a survey that found that the typical adjuster earned $30,000 per year and works 50 hours per week, the newspaper notes. In California, employers must pay an employee at least twice the state minimum wage ($28,080 per year) to satisfy the salary-level test for exemption.


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