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11th Circuit Update: Workers’ Compensation, Unpaid Overtime

Morales v. Zenith Ins. Co., No. 12-11755 (11th Cir. 2015) (January 22, 2015)

Brief Summary: Recovery of wrongful death judgment against an employer is barred by insurance policy exclusion of injuries covered under workers’ compensation law.

In Morales v. Zenith Ins. Co., Leticia Morales brought a breach of contract claim against Zenith Insurance Company on behalf of herself, her late husband’s estate and their two minor children.

The claim arose when Santana Morales, Ms. Morales’ late husband, was crushed to death by a palm tree while working as a landscaper. The employer had a “workers compensation and employers liability insurance policy” with Zenith, including two types of coverage: workers’ compensation and employer liability insurance (ELI). The ELI insurance required Zenith to “pay all sums [the employer] legally must pay as damages because of bodily injury to its employees,” provided the injury was covered.  The provision contained an exclusion of coverage for obligations imposed by workers’ compensation law.

In 1999, the Estate brought a wrongful death action against the employer, claiming negligence by the employer, and default judgment was granted in favor of the Estate. For damages, a jury awarded $9.925 million.

After Mr. Morales’ passing, Zenith began paying workers’ compensation benefits to the estate, and did so for nearly four years. In 2003, Zenith them made a full settlement of the Estate’s workers’ compensation claims against the employer, and the parties entered into a settlement agreement with language that the settlement constituted an election of remedies as to coverage provided by the employer.

As such, Zenith refused to pay the wrongful death tort judgment, and the employer, in turn, brought a claim against Zenith for breach of insurance policy. The district court granted Zenith’s summary judgment, concluding the policy workers’ compensation exclusion barred the judgment. The appeal ensued, and the 11th Circuit certified three questions to the Florida Supreme Court, including whether the Estate had standing to bring a claim against Zenith under the employer liability policy, whether the exclusion barred the tort judgment., and if not, did the release in the settlement release the claims. The Florida Supreme Court concluded the Estate had standing, but that the exclusion and release prevented recovery of the tort judgment. As such, the 11th Circuit affirmed the district court’s grant of summary judgment in Zenith’s favor.

Bailey v. TitleMax of Georgia, Inc., No. 14-11747 (11th Cir. 2015) (January 15, 2015)

Brief Summary: Employer liable for unpaid overtime when supervisor encourages employees to underreport hours.

In Bailey v. TitleMax of Georgia, Inc., Santonias Bailey, an employee of TitleMax of Georgia, brought a claim under the Fair Labor Standards Act for unpaid overtime. During the year of his employment, Bailey regularly worked hours off the clock when his supervisor told him that the company did not pay overtime and when his supervisor changed Bailey’s time records to reflect less than 40 hours per week. The district court granted the employer’s summary judgment, which argued unclean hands as Bailey was responsible for his overtime for failure to report his supervisor’s actions, and failing to follow the employer’s policy to accurately report hours, which he was aware.

On appeal, the 11th Circuit examined the question as to “if an employer knew its employee underrepresented his hours, can it still assert equitable defenses based on employee’s own conduct in underreporting as a total bar to the employee’s FLSA claims?” The 11th Circuit concluded it could not. Specifically, the 11th Circuit noted that knowledge of an employee’s overtime may be imputed to a supervisor or management when they “encourage artificially low reporting.” The employer’s unclean hands defense was insufficient as the employer had constructive knowledge of the hours Bailey worked, through his supervisor, and because the supervisor encouraged this. A contrary finding would undermine the FLSA.

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* Cathleen Scott is licensed to practice in Florida only.

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