Insurance Coverage for Alleged Violations of the Wage Transparency Statute

BY CHARLES K. DAVIS

The opinions and viewpoints expressed in this article are those of the author and do not necessarily represent the opinions or positions of the author’s law firm or its clients.

Effective Jan. 1, 2023, the Washington State Legislature updated Washington’s Equal Pay and Opportunities Act (EPOA) with a new provision that requires employers (with 15 or more employees) to include a salary range in every job posting. Under RCW 49.58.110, the “employer must disclose in each posting for each job opening the wage scale or salary range, and a general description of all of the benefits and other compensation to be offered to the hired applicant.” Violations entitle a job applicant or employee to one of two remedies: (1) investigation by the Director of the Department of Labor and Industries, which may result in damages to the complainant and/or payment of a civil penalty to the Department; or (2) a private right of action against the employer for “actual damages [or] statutory damages equal to the actual damages or five thousand dollars, whichever is greater.”

As of early 2025, hundreds of class actions have been filed alleging failure to comply with RCW 49.58.110—what the Seattle Times recently referred to as a “cottage industry”¹1 Lauren Rosenblatt, “Pay Transparency Lawsuits Spark Accusations of ‘Cottage Industry,’” Seattle Times, Feb. 23, 2025, at A1. of litigation. Typically, the lawsuits request $5,000 in statutory damages for each member of the putative class; i.e., anyone who responded to that employer’s non-conforming job posting. Potential damages can easily climb into the millions, depending on the size of the class.

But companies facing a pay transparency lawsuit may not have to fund the litigation themselves or pay a judgment or settlement out of their own pockets. Businesses that carry Employment Practices Liability Insurance (EPLI) may have coverage. EPLI coverage typically insures things like discrimination, harassment, and inappropriate employment conduct. Because these lawsuits are relatively new, no court has issued a decision yet addressing whether an EPLI policy covers lawsuits for violation of the pay transparency statute. Insurers, however, have been contesting coverage. In the cases I have been involved in, the insurers argued that lawsuits alleging violation of the pay transparency statute are not covered for three main reasons: (1) no discrimination, harassment, or inappropriate conduct is alleged; (2) the remedy sought is a “penalty” and therefore not covered; and (3) RCW 49.58.110 is a “wage and hour” law and therefore not covered.

Do Wage Transparency Lawsuits Fall Within the Insuring Clause of EPLI Policies?

EPLI policy language varies—some policies cover “discrimination,” and may or may not define that term. Others cover “actual or alleged violation of any law concerning discrimination in employment.”

According to RCW 49.58.005(1), the Legislature determined that “despite existing equal pay laws, there continues to be a gap in wages and advancement opportunities among workers in Washington, especially women.” Updates to the EPOA—including the pay transparency requirements—were intended “to address income disparities, employer discrimination, and retaliation practices.” RCW 49.58.005(2). Moreover, academic studies show that pay transparency laws reduce pay discrimination:

Economists now attribute between one-third and one-half of both gender and racial pay gaps to workforce segregation and discrimination, causes that antidiscrimination law should be able to reach and remedy.

. . . Recent data shows that the gender pay gap is smaller when salary information is transparent and known like, for example, in the federal public sector.²2 Stephanie Bornstein, “Disclosing Discrimination,” 101 B.U. L. Rev. 284, 315 (2021) (citations omitted).

Given the language of RCW 49.58.005, there shouldn’t be much debate that a lawsuit alleging violation of the pay transparency statute qualifies as an “actual or alleged violation of any law concerning discrimination in employment,” and should therefore fall within the insuring clause of a policy using that language. Whether such a lawsuit amounts to alleged “discrimination” under policies that simply use that term is a closer question. But considering both the intent of the law and the effect of transparent pay information, an allegation that employers are violating the pay transparency statute is at least arguably an allegation that the employer is engaging in discrimination. In what appears to be an attempt to draft into coverage, some plaintiffs have labelled their pay transparency class action lawsuits as a complaint for “discrimination.”

Is the Remedy for Violation of the Wage Transparency Statute Covered “Damages” or a Non-Covered “Penalty”?

A typical EPLI policy covers “loss” which is defined to include “damages,” but not to include “penalties.” Insurers have attempted to avoid coverage by characterizing the $5,000 per-claimant award as a “penalty.” Although no court decisions have addressed this yet, the plain language of the EPOA arguably belies the “penalty” argument. 

The EPOA clearly provides for an award of “damages.” RCW 49.58.110 entitles an applicant “to the remedies in RCW 49.58.060 and 49.58.070.” RCW 49.58.070 provides for, among other things, “actual damages; [or] statutory damages equal to the actual damages or five thousand dollars, whichever is greater.” Thus, the $5,000 award is “statutory damages.” RCW 49.58.070 does not mention fines or penalties. This is especially significant, because the other statute that provides potential remedies under the wage transparency statute, RCW 49.58.060, does provide for the imposition of a penalty.

Although not requested in any of the class actions that I have seen, RCW 49.58.060 allows an employee to make a complaint to the director of the Department of Labor and Industries. In addition to ordering the employer to pay to the complainant actual damages or statutory damages, “the director may order payment to the department of acivil penalty.” RCW 49.58.060(2)(b). 

The Legislature clearly distinguished between “damages” and “penalties” in the EPOA. The use of both terms in RCW 49.58.060 demonstrates that as used in the Act, damages and penalties are two different things.³3 See State v. Beaver, 148 Wn.2d 338, 343, 60 P.3d 586 (2002) (“When the Legislature uses different words within the same statute, we recognize that a different meaning is intended.”). Moreover, the absence of any mention of penalties in RCW 49.58.070—which provides the remedies at issue in most, if not all, of the class actions—strongly suggests that the class award is not a non-covered “penalty,” but covered “damages.”

Is RCW 49.58.110 a “Wage and Hour” Law?

EPLI policies typically do not provide coverage for actual or alleged violation of “wage and hour” laws. Insurers have argued that there is no coverage for the pay transparency lawsuits because—the insurers say—RCW 49.58.110 is a “wage and hour” law. Although the pay transparency statute mentions “wages,” that does not make it a “wage and hour law.” “Washington’s wage and hour statutes establish the ‘minimum standard for wages and working conditions of all employees’ in the state.”⁴4 United Food & Commercial Workers Union Local 1001 v. Mut. Ben. Life Ins. Co., 84 Wn. App. 47, 51–52, 925 P.2d 212 (1996), abrogated on other grounds by Seattle Prof’l Eng’g Employees Ass’n v. Boeing Co., 139 Wn.2d 824, 991 P.2d 1126 (2000) (quoting RCW 49.46.120). RCW 49.58.110, however, does not establish a minimum standard for wages and working conditions, such as a minimum wage, set a rate for overtime pay, control employer withholding or diversion of wages, or impose a duty to maintain records of each employee’s hours worked, rate of compensation, and amount paid. It simply requires including a pay and benefit range in job postings—it does not dictate how much to pay or concern duration worked.

More importantly, when the exclusion is read in light of its purpose, it becomes clear that the exclusion was not intended to apply to a pay transparency law. The purpose of wage and hour exclusions is to avoid moral hazard—the temptation of an insured to purposely cause the event insured against.⁵5 Twin City Fire Ins. Co. v. Glenn O. Hawbaker, Inc., 4:22-CV-01485, 2023 WL 5652011, at *11 (M.D. Pa. Aug. 31, 2023) (“[T]he purpose of wage and hour exclusions … is to avoid the ‘moral hazard’ created by an incentive to violate wage and hour laws and offload the cost to the insurer.”). This becomes an issue where the insurance goes beyond merely replacing a loss. Insurance against a violation of an overtime law, for example, “would enable the employer to refuse to pay overtime and then invoke coverage so that the cost of the overtime would come to rest on to the insurance company.”⁶6 Admiral Ins. Co. v. Kay Auto. Distributors, Inc., 82 F. Supp. 3d 1175, 1180 (C.D. Cal. 2015) (quoting Farmers Auto. Ins. Ass’n v. St. Paul Mercury Ins. Co., 482 F.3d 976, 978–79 (7th Cir. 2007)). The employer would get the benefit of the overtime work performed without paying for it, “unjustly enriching itself by the difference between the overtime wage for the hours in question and the straight wage.”⁷7 Id. The employer could essentially “trigger coverage any time it wanted a windfall.”⁸8 Id.

Absent very clear language to the contrary, a wage and hour law exclusion “serves only to exclude wrongdoing where the wrongful act has the effect of offloading labor costs to the insurer, and only to the degree that the claim rests on or involves violations of the wage and hour statutory scheme. Other claims as to wrongdoing by the employer or its agents would not be excluded, even if they affected wages.”⁹9 Id. (emphasis added). Otherwise, EPLI coverage would be largely illusory.

The pay transparency class-action lawsuits do not allege that the employer has done anything that could be interpreted as offloading labor costs to the insurer. So for the purposes of EPLI coverage, RCW 49.58.110 should not be considered a wage and hour law.

Class action lawsuits for violation of RCW 49.58.110 have the potential to be economically devastating to a business. Any employer faced with such a lawsuit should tender to its EPLI insurer if it maintains that coverage. If there is any question whether coverage applies under its specific policy, the employer should contact an insurance coverage attorney. 

NOTES

1. Lauren Rosenblatt, “Pay Transparency Lawsuits Spark Accusations of ‘Cottage Industry,’” Seattle Times, Feb. 23, 2025, at A1.

2. Stephanie Bornstein, “Disclosing Discrimination,” 101 B.U. L. Rev. 284, 315 (2021) (citations omitted).

3. See State v. Beaver, 148 Wn.2d 338, 343, 60 P.3d 586 (2002) (“When the Legislature uses different words within the same statute, we recognize that a different meaning is intended.”). 

4. United Food & Commercial Workers Union Local 1001 v. Mut. Ben. Life Ins. Co., 84 Wn. App. 47, 51–52, 925 P.2d 212 (1996), abrogated on other grounds by Seattle Prof’l Eng’g Employees Ass’n v. Boeing Co., 139 Wn.2d 824, 991 P.2d 1126 (2000) (quoting RCW 49.46.120).

5. Twin City Fire Ins. Co. v. Glenn O. Hawbaker, Inc., 4:22-CV-01485, 2023 WL 5652011, at *11 (M.D. Pa. Aug. 31, 2023) (“[T]he purpose of wage and hour exclusions … is to avoid the ‘moral hazard’ created by an incentive to violate wage and hour laws and offload the cost to the insurer.”).

6. Admiral Ins. Co. v. Kay Auto. Distributors, Inc., 82 F. Supp. 3d 1175, 1180 (C.D. Cal. 2015) (quoting Farmers Auto. Ins. Ass’n v. St. Paul Mercury Ins. Co., 482 F.3d 976, 978–79 (7th Cir. 2007)).

7. Id.

8. Id.

9. Id. (emphasis added).