So. Cal Auto Club Employees to Get $19.5 Million in Overtime Class Action Suit

December 6, 2004

A federal court in Santa Ana, California has approved a $19.5 million settlement of class action overtime claims brought by more than 1,300 insurance sales agents employed by the Automobile Club of Southern California.

But the workers’ lawyer, David Borgen, of the Oakland class action law firm, Goldstein, Demchak, Baller, Borgen & Dardarian, said, “It would have been much harder, if not impossible, to win this case under the new Department of Labor (DOL) overtime rules.”

The insurance sales agents initially filed the overtime class action in June 1999, claiming that they worked more than 60 hours a week, were denied overtime pay, and were forced to pay for “gifts” to promote sales. The agents worked for the Automobile Club of Southern California in the Los Angeles area, as well as in Texas and New Mexico.

The “club,” headquartered in Costa Mesa, California, is the largest affiliate of the American Automobile Association (AAA), and provides home, life, and automobile insurance, in addition to its emergency road service programs.

After five years of litigation, including a two day trial in October 2002, the Auto Club agreed to settle all overtime and gift expense claims.

The Auto Club also agreed to reclassify its sales agents as non-exempt employees and began paying them overtime. Payments to the 1,300 eligible workers, averaging about $70 per week for each week worked, are to be made this month.

During the litigation, the Auto Club had reportedly argued that its sales agents were “outside salesmen” under the federal Fair Labor Standards Act of 1938 (FLSA) despite the fact that nearly all of the sales agents worked most of their time inside its District Offices.

The sales agents relied on the “twenty-percent test” in the then current DOL white collar overtime regulations that required an employer to demonstrate that less than 20 percent of the workers’ time was spent on non-exempt or inside sales duties.

The new DOL overtime regulations, effective on Aug. 23, 2004, no longer include the twenty-percent test. “It is clear that, at least in this case and in other cases involving the outside sales exemption, the new regulations are much less protective of workers than before,” Borgen said.

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