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.