Seventh Circuit Finds Employee's "Work" Not Compensable Due To Lack Of Employer Knowledge

Posted on December 20, 2011 by Noel Tripp

The proliferation of FLSA lawsuits brought by “non-exempt” employees for alleged uncompensated working time has highlighted several important FLSA questions. One prominent and thorny question concerns when and how an employer is deemed to have constructive knowledge of work allegedly performed by an employee, such that the employer will be deemed to have “suffered or permitted” that work, rendering such work compensable time. Often, employers are frustrated by this broad and unclear standard, which may entitle employees to compensation even when no member of management was aware that work was being performed. In a new decision, the Court of Appeals for the Seventh Circuit has identified circumstances under which an employer is not obligated to compensate the employee for such hours. Kellar v. Summit Seating Inc., 2011 U.S. App. LEXIS 24745 (7th Cir. Dec. 14, 2011).

Kellar concerned a sewing manager for Defendant who claimed that she regularly arrived at Summit's factory “between 15 and 45 minutes before the start of her 5:00 a.m. shift.” She characterized her activities upon arrival as follows:

about 5 minutes unlocking doors, turning on lights, turning on the compressor, and punching in on the time clock. Then she prepared coffee for the rest of Summit's employees, which took her about 5 minutes. Depending on her workload, she spent 5 to 10 minutes (or longer) reviewing schedules and gathering and distributing fabric and materials to her subordinates' workstations, "so that they could go straight to work, rather than waiting for [her] to bring [fabric] to them." For another 5 minutes, she drank coffee and smoked a cigarette. The remaining time was spent performing "prototype work" (preparing models for production), cleaning the work area, or checking patterns.

Id. at * 2-3. Plaintiff conceded that “no one told her that she needed to come in before her shift, but she arrived early because it would have been "a hassle" to show up at 5:00 a.m. and still get her subordinates up and running close to the start of their 5:00 a.m. work shifts.” Id. Plaintiff sometimes punched in early (as was common among Defendant’s employees), but when she forgot to do so she would write the “official” shift start time on her timesheet (i.e., 5 a.m.), and she did not complain at any time that her paycheck failed to capture her hours of work. 

The lower court held _that plaintiff was not entitled to compensation for the alleged pre-shift work, and she appealed to the Seventh Circuit. For purposes of the appeal, the parties did not dispute whether or not these activities took place (as typically is disputed). The legal questions before the court were simply: (1) whether these activities were “preliminary” and thus excludable from hours of work under the FLSA on that basis; (2) whether this time was “de minimis” and thus not compensable; and, (3) whether defendant had the aforementioned knowledge necessary to render this work compensable under the FLSA. 

After answering the first two questions in the negative, ruling that these activities would constitute compensable work if Defendant had suffered or permitted them, the court rejected Plaintiff’s claims. The Court observed that Plaintiff, as a manager, was aware of and at times enforced Defendant’s policy of forbidding unauthorized overtime, and participated in weekly meetings discussing the upcoming week’s schedule. The Court further noted that Plaintiff’s early punch-ins did not constitute notice to the employer of pre-shift work because early punching was a common practice at Defendant’s place of business, and “clocking in early would not necessarily have alerted Summit that Kellar was performing pre-shift work. Id. at * 17 citing 29 C.F.R. § 785.48.   Under these circumstances, the Court concluded that “[management] had little reason to know, or even suspect, Kellar was acting in direct contradiction of a company policy and practice that she herself was partially responsible for enforcing. Accordingly, no reasonable trier of fact could conclude that Summit had reason to know that Kellar was working before her shift.” Id. at * 19. 

The “suffer or permit” standard remains a relatively broad one, which can render employee activities compensable even if members of management or others with authority are not expressly aware of the activities at the time they are performed. Kellar provides valuable instruction to employers (particularly those within the Seventh Circuit’s reach, encompassing Illinois, Indiana and Wisconsin) in crafting FLSA-compliant policies for application to non-exempt employees. With that said, all employers should carefully scrutinize timekeeping and wage payment policies to avoid disputes of this ilk. 

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USDOL Issues Second Pro-Employee "Administrator's Interpretation"

Posted on June 17, 2010 by Noel Tripp

As discussed previously, the USDOL Wage and Hour Division has ceased issuing Opinion Letters in response to specific requests for guidance from the public, but rather has decided to issue more general “Administrator’s Interpretations” of its own volition on topics of the DOL’s choosing. As with the first such Interpretation, which set forth the Division’s current view that loan officers generally cannot qualify for the administrative exemption, the Division’s second Interpretation, issued on June 16, also evinces a pro-employee position and contravenes Opinion Letters issued by the Division during the Bush administration. 

Specifically, Deputy Administrator Nancy J. Leppink’s “Interpretation” significantly modifies the Division’s application of § 3(o) of the FLSA, 29 U.S.C. § 203(o), which provides that time spent “changing clothes or washing at the beginning or end of each workday” can be non-compensable pursuant to “the express terms” of a collective bargaining agreement, or “by custom or practice” thereunder. This is a vital provision for unionized employers, as pursuant to case law time spent donning and doffing protective equipment is generally compensable unless addressed by the CBA or “custom or practice”. The DOL’s revised position is that: (1) time spent donning and doffing “protective clothing” (e.g., helmets, smocks, plastic aprons, arm guards, gloves, knife holders, etc.) is a compensable activity not subject to § 3(o); and (2) changing into “ordinary clothes” (i.e. a uniform) can commence the compensable workday even if the changing time itself is not compensable.   This second conclusion has potentially expansive implications.

As to the first issue, the Interpretation specifically rejects Opinion Letters issued by the DOL in 2002 and 2007 stating that the term “clothes” typically includes such protective equipment, and thus time spent in donning and doffing them can be non-compensable. Deputy Administrator Leppink found that excluding such “protective equipment” from the definition of “clothes” is consistent with Congress’ intent to narrowly circumscribe the 3(o) exclusion. However, in reaching this conclusion, the DOL assumes that § 3(o) is an exemption to an FLSA requirement, and thus is to be construed narrowly, despite the fact that many courts (including multiple Circuit Courts) have ruled that § 3(o) is not an “exemption” but instead a definition of “hours worked”, to be construed broadly. Ms. Leppink relied on DOL Opinion Letters issued in 1997, 1998 and early 2001 stating that “protective equipment” was not clothes for purposes of 3(o). (All three of these opinion letters were issued by the Clinton administration.)   Deputy Administrator Leppink acknowledged that recent Circuit Court decisions were consistent with the 2002 and 2007 Opinion Letters and contrary to the DOL’s new position. The Interpretation attempts to distinguish those appellate court decisions, but the new position of DOL cannot be reconciled with them. 

In a second and potentially much more controversial opinion, Ms. Leppink stated that even if “changing clothes” is excluded from “hours worked” under § 3(o) and is non-compensable, it nevertheless can be a principal activity that may starts the continuous compensable workday if it is otherwise a “principal activity.” The FLSA provides that employees are entitled to compensation for all hours worked from the beginning of the first “principal activity,” until the end of the last “principal activity,” including any task which is “integral and indispensible” to those principal activities. The 2007 Opinion Letter and numerous court decisions which held that where § 3(o) excludes from “hours worked” the time cannot start the compensable work day. Ms. Leppink rejected that position and referred to the conclusions in the 2007 Opinion Letter as “conclusory.”   An argument can be made that such an interpretation renders § 3(o) meaningless and is directly contrary to the legislative history of the statute. The DOL’s new position as set forth in the Interpretation, is that any time spent following clothes changing, including time spent walking or commuting to an employee’s actual work station, is now compensable regardless of whether the employer is unionized or § 3(o) is applicable, unless the employer can demonstrate such changing time is not integral and indispensable.    

All employers should carefully review their practices regarding whether any mandatory attire worn by employees constitutes a “uniform”, and whether changing time and/or time immediately following changing time is compensable in light of this Interpretation due to the expansive nature of its language. Unionized employers who have negotiated time donning and doffing protective clothing as non-compensable must carefully consider whether to continue such a practice.   An influx of FLSA claims, especially against unionized employers who have availed themselves of § 3(o), is likely and it will be up to the courts to decide whether to adopt the DOL’s modified positions.
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Federal Court Finds Pre-Shift Time De Minimis And Non-Compensable

Posted on June 11, 2010 by Noel Tripp

The Second Circuit recently affirmed a district court’s decision dismissing security guards’ claims for minimal amounts of allegedly uncompensated work time. In doing so, the Court reiteratedthe general principle applied by federal courts that “"[w]hen the matter in issue concerns only a few seconds or minutes of work beyond the scheduled working hours, such trifles may be disregarded. . . . It is only when an employee is required to give up a substantial measure of his time and effort that compensable working time is involved." Albrecht v. Wackenhut Corp., 2010 U.S. App. LEXIS 10973 at * 3 (2d Cir. N.Y. May 28, 2010) quoting Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 692 (1946).

In Albrecht, the security guards alleged that time spent obtaining and returning their firearms and radios pre and post-shift constituted a “principal activity” under the FLSA, and thus was compensable. The court held that the Plaintiffs failed to controvert evidence in the record that such “arming up” and “arming down” involved only 30-90 seconds, and thus was de minimis. Id. at * 5. 

The Court acknowledged Plaintiffs’ argument that a requirement that non-exempt employees be present and available “15 minutes before the start of a scheduled shift” could give rise to a viable claim under the FLSA, but held that this claim was not properly alleged in the original complaint, which was limited to the time related to arming up and down. Id. at * 5-6.

Despite this favorable result, employers should be conservative in deeming mandatory time spent on premises to be non-compensable as a preliminary and/or de minimis activity.  In fact, the USDOL generally does not recognize the de minimus defense.

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Lojack Revisited: Commuting Time Can Be (Surprise) Compensable Under California Law

Posted on March 30, 2010 by Noel Tripp

The Ninth Circuit recently revised and reissued its earlier opinion in Rutti v. Lojack Corp., No. 07-56599 (9th Cir. Mar. 2, 2010), holding upon further review that the Plaintiff’s commuting time is compensable under California law, while continuing to find that such time  is not compensable under the FLSA. The Court did not change its ruling that time spent on the required post-shift activity at issue in the case – the daily transmission of data – was compensable.

The Plaintiff, an automotive technician, installed and repaired vehicle recovery systems for the employer. Because technicians perform most of their duties at the clients’ locations, the employer required Plaintiff to use a company-owned vehicle to travel to clients’ sites. The employer prohibited technicians from carrying passengers in the company vehicles and from using the vehicles for personal business. The technicians also were required to keep their cell phones on while driving.

The employer paid Plaintiff on an hourly basis for the period beginning when he arrived at his first job and ending when he completed his final job, but not any commuting time. Plaintiff, on behalf of himself and all technicians, sued the employer to recover compensation for commuting time and for alleged preliminary and post-shift activities.

Addressing Plaintiff’s claim that the commuting time should be compensable under California law, the Court concluded that the district court erred in granting summary judgment to the employer. California law requires that employees be compensated for all time “during which an employee is subject to the control of an employer.” Morillion v. Royal Packing Co., 22 Cal. 4th 575, 578 (2000). In Morillion, the California Supreme Court held that the plaintiffs were “subject to the control” of their employer during a mandatory bus commute because “plaintiffs could not drop off their children at school, stop for breakfast before work, or run other errands requiring the use of a car.” The California Supreme Court reasoned the “[p]laintiffs were foreclosed from numerous activities in which they might otherwise engage if they were permitted to travel to the fields by their own transportation.”

Similarly, in Lojack, Plaintiff was required to drive the company vehicle, could not stop off for personal errands, could not take passengers, was required to drive the vehicle directly from home to his job and back, and could not use his cell phone while driving, except to answer calls from the company dispatcher. Accordingly, the Court found that “Plaintiff was under Lojack’s control while driving the Lojack vehicle en route to the first Lojack job of the day and on his way home at the end of the day.” Thus, the Court held that his commute was compensable under California law.

Employers that provide company vehicles and have restrictions regarding their use should expect increased challenges to their policies and claims that employees’ commutes are “compulsory,” rather than ordinary.  A more detailed analysis of the  Lojack decision is available here.

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