Tag Archives: FLSA

December 12, 2014

Supreme Court Says No Pay For Security Screening Time

Supreme Court Says No Pay For Security Screening Time

By Brad Williams

Should employers pay employees for time spent in mandatory, post-shift security screenings designed to deter theft? Not according to a recent Supreme Court decision.

On December 9, 2014, the Supreme Court unanimously held in Integrity Staffing Solutions, Inc. v. Busk, No. 13-433 (2014), that post-shift, anti-theft security screenings are not compensable work time under the Fair Labor Standards Act (FLSA). The decision reversed a Ninth Circuit decision holding that workers in two Amazon.com warehouses were entitled to pay for periods spent waiting for, and being screened at, security checkpoints after their shifts had ended. The workers claimed that they spent roughly twenty-five minutes per day in such screenings, which included removal of their wallets, keys, and belts.

Splitting from other courts to have considered the issue, the Ninth Circuit held that such time was compensable because the workers’ post-shift screening activities were necessary to their principal work activities, and were performed for the benefit of their employer. However, the Ninth Circuit’s understanding of compensable work time under the FLSA echoed that in earlier judicial decisions that had been expressly overruled by Congress.

Specifically, in response to a flood of litigation caused by the earlier decisions, Congress had passed the Portal-To-Portal Act in 1947 to clarify that employers are not obligated to pay employees for activities which are “preliminary” or “postliminary” to the principal activities they are employed to perform. As such, time spent before or after a worker’s “principal activities” is not compensable unless it is spent on activities that are themselves “integral and indispensable” to the worker’s principal activities. Regulations interpreting the Portal-To-Portal Act had long held that activities like checking into and out of work, or waiting in line to receive paychecks, is not compensable work time.

In its December 9th ruling, the Supreme Court reaffirmed that just because an activity may be required by, or may benefit, an employer, does not mean that it is a compensable “principal activity,” or is “integral and indispensable” to a principal activity. The warehouse workers’ employer did not employ the workers to undergo security screenings; it employed them to retrieve products from warehouse shelves and to package the products for shipment to customers. The security screenings were also not “integral and indispensable” to the warehouse workers’ principal activities because their employer could have eliminated the screening requirement altogether without impairing the workers’ ability to perform their jobs.

In reaching its decision, the Supreme Court stated a new definition of “integral and indispensable” activities to guide lower courts. An activity is now “integral and indispensable” to an employee’s principal work activities if it is an “intrinsic element of those activities and one with which the employee cannot dispense if he is to perform his principal activities.” Examples include time spent by battery-plant employees showering and changing clothes because chemicals in the plant are toxic to humans. It also includes time spent by meatpacker employees sharpening knives because dull knives cause inefficiency and other problems on the production line.

The Supreme Court’s decision gives employers much-needed certainty regarding the compensability of certain “preliminary” or “postliminary ” activities. It clarifies that most employers may continue performing uncompensated pre- and post-shift security or anti-theft screenings without fear of successful FLSA collective actions. The decision is particularly relevant to employers in the retail industry, who regularly conduct anti-theft screenings, and to other employers who are increasingly performing security screenings in an era of heightened concerns over terrorism.

Because the FLSA sets minimum standards for wage and overtime payments, states may set higher standards for compensable work time, including with respect to “preliminary” or “postliminary” activities. Unions may also bargain with employers to make such activities compensable. But the Supreme Court’s recent decision helps push back on the tide of FLSA collective actions filed by employees claiming that certain activities are compensable because they are essential to their jobs. The decision also follows a similar Supreme Court decision in January 2014, Sandifer v. U.S. Steel Corp., No. 12-417 (2014), in which the Court held that time spent by union-employees donning and doffing personal protective equipment was not compensable. Taken together, these decisions suggest a concerted judicial effort to address the explosion of FLSA collective actions.

October 7, 2013

Home Health Care Workers to Receive Minimum Wage and Overtime Protections

By Mark Wiletsky

If your organization is in the home health field, be aware that the rules for how to pay home care workers is going to significantly change. Under a recently issued Final Rule, the U.S. Department of Labor (DOL) will extend FLSA pay protections to an estimated 1.9 million home care workers in the U.S. who currently are treated as exempt under the companionship exemption. As a result, workers who provide in-home care to ill, elderly, or disabled individuals through a third party employer will be covered by the minimum wage and overtime provisions of the Fair Labor Standards Act (FLSA) beginning January 1, 2015.

Companionship Services Exemption Narrowed

The so-called “companionship exemption,” implemented in 1975, allowed organizations employing workers who provide home care assistance to elderly, ill, injured or disabled persons to treat these workers as exempt from the federal minimum wage and overtime pay provisions. The new Final Rule narrows the exemption for companionship services in two key ways.

First, the Final Rule prohibits third party employers of health care workers, such as home care staffing agencies, from claiming the exemption for companionship services. The rule makes clear that only an individual, family or household employing a home health worker may claim the companionship exemption. This means that home care workers employed by a company that provides home health services must be paid minimum wage for hours worked and receive overtime pay as provided under the FLSA.

Second, the definition of “companionship services” is limited to only fellowship and protection services, with attendant care limited to only 20 percent of the total hours worked with that person each week. Examples of fellowship and protection services include reading, playing games, accompanying the person on walks, taking the person to appointments or social events and conversing. If the worker provides more than 20 percent of their time on activities of daily living, such as dressing, feeding, bathing, toileting, housework, managing finances and arranging medical care, the worker is not exempt under the companionship exemption.

Medically Related Services Not Included in Companionship Exemption

A direct care worker who provides medically related services is ineligible for the companionship exemption. Under the Final Rule, tasks will be considered medically related when they typically are performed by trained personnel, such as registered nurses, licensed practical nurses or certified nursing assistants, regardless of the training or occupational title of the worker actually performing the services. This means that even if a worker normally meets the companionship exemption by providing only fellowship and protection services, the worker loses the exemption for any workweek in which he or she provides medically related services and therefore, is entitled to minimum wage and overtime pay, if applicable, for that week.

Home Health Employers Should Review Pay Policies

With approximately fifteen months to prepare for the January 1, 2015 effective date of this Final Rule, employers of home health care workers should take time now to review compensation and recordkeeping practices. In particular, determine how you will track worker hours to ensure that you pay minimum wage for all hours worked and an overtime premium for all hours in excess of 40 per workweek. Learn the rules for paying in-home workers for time spent waiting, sleeping and traveling, as summarized on the DOL’s Fact Sheet 79D – “Hours Worked Applicable to Domestic Service Employment Under the FLSA.” Finally, prepare to update and communicate new pay policies to employees through your employee handbook, intranet policy portal and/or in-person training.

Disclaimer: This article is designed to provide general information on pertinent legal topics. The statements made are provided for educational purposes only. They do not constitute legal advice and are not intended to create an attorney-client relationship between you and Holland & Hart LLP. If you have specific questions as to the application of the law to your activities, you should seek the advice of your legal counsel.

August 26, 2013

Ninth Circuit Joins Growing Trend – Declines to Follow D.R. Horton and Upholds Arbitration Agreement Prohibiting Class Claims

By Jeffrey T. Johnson

On August 21, 2013, the Ninth Circuit Court of Appeals, in Richards v. Ernst & Young, LLP, Case No. 11-17530, became the third federal Circuit – together with the Second and Eighth – to reject the National Labor Relations Board’s (NLRB’s) controversial D.R. Horton decision, which held that an arbitration agreement requiring an employee to waive his or her right to bring class claims violated the National Labor Relations Act. The Richards Court also rejected the plaintiff’s argument that Ernst &Young had waived its right to arbitrate her claims by waiting to seek arbitration until after discovery and several rulings by the court. Therefore, the Court held that the arbitration agreement between Richards and Ernst &Young was enforceable, even though it precluded class arbitration.

Federal Courts of Appeal Reject NLRB’s D.R. Horton Decision

Decided in January 2012, the NLRB’s D.R. Horton ruling attempted to thwart efforts by employers to reduce their risk of class action claims through the use of arbitration agreements containing a class/collective action waiver. In re D.R. Horton, Inc., 357 NLRB No. 184 (Jan. 3, 2012). Despite D.R. Horton, employers have continued to argue for the enforceability of such agreements, and like Ernst & Young, have often prevailed in court. In fact, the overwhelming majority of courts that have considered the enforceability of mandatory arbitration agreements with class waivers subsequent to the D.R. Horton decision have rejected the NLRB’s reasoning and refused to follow its holding.

In addition to numerous district courts so ruling, the Ninth Circuit becomes the third federal appellate court to reject D.R. Horton. In January 2013, the Eighth Circuit Court of Appeals held that a class arbitration waiver in the employer’s mandatory arbitration agreement did not preclude arbitration of the employee’s claims under the Fair Labor Standards Act (FLSA). Owen v. Bristol Care, Inc., 702 F.3d 1050 (8th Cir. 2013). The Eighth Circuit found that without a congressional mandate under the FLSA indicating that a right to engage in class actions overrides the mandate of the Federal Arbitration Act in favor of arbitration, the NLRB’s rationale in D.R. Horton must be rejected.

Earlier this month, the Second Circuit Court of Appeals also upheld an arbitration agreement containing a class action waiver in another FLSA case brought against Ernst & Young in New York. Sutherland v. Ernst & Young LLP, No. 12-304-cv, 2013 U.S. App. LEXIS 16513 (2d Cir. Aug. 9, 2013). Despite the employee’s argument that the class action waiver removed the financial incentive for her to pursue a claim under the FLSA, the Court ruled that the arbitration agreement must be enforced. Like the Eighth Circuit, the Second Circuit declined to follow the D.R. Horton decision.

NLRB ALJ’s Bound by D.R. Horton Precedent

Despite employer victories in court, arbitration agreements with class action waivers are still being invalidated by the NLRB and its Administrative Law Judges (ALJs). Just this week, an NLRB ALJ found that the employer violated the NLRA with its mandatory class waiver arbitration agreement of employment claims. Despite the employer’s attempt to distinguish its agreement from the one at issue in D.R. Horton and to point out how courts have rejected the D.R. Horton rationale, the ALJ stated that he was bound by the D.R. Horton decision and required to apply it unless it is overturned by the Supreme Court or reversed by the NLRB itself.

Fifth Circuit to Decide D.R. Horton Appeal

The D.R. Horton decision is currently on appeal in the Fifth Circuit. Union and non-union employers alike will be watching to see whether the Fifth Circuit will follow the other circuits that have rejected the NLRB’s rationale, and overturn the D.R. Horton ruling. If, on the other hand, the Fifth Circuit affirms the D.R. Horton decision, the split between the Circuit Courts could result in the Supreme Court taking up the issue. We will continue to monitor these cases and keep you informed.

February 11, 2013

Wage and Hour Collective Actions Face Higher Class Certification Standard

By Jeffrey T. Johnson

Employers can thank the Seventh Circuit Court of Appeals for raising the standard that employees must meet when seeking final certification of a Fair Labor Standards Act (FLSA) collective action or state wage and hour law class action. In an opinion written by Judge Richard Posner, the Court recently refused to certify a proposed class of 2,341 employees, finding that a trial would not be manageable due, in large part, to the differences in damages among the class members. Espenscheid v. DirectSat USA, LLC, No. 12-1943 (7th Cir. Feb. 4, 2013). The ruling will likely make it more difficult for plaintiffs to get a wage and hour class certified at the critical final certification stage.

Court Finds No Reason for Different Certification Standards

FLSA collective actions are similar in many respects to class actions brought under Rule 23 of the Federal Rules of Civil Procedure—both permit an individual (or small group) to file suit on behalf of all similarly situated individuals. One key difference, however, is that Rule 23 sets forth relatively rigorous standards for certifying a class while FLSA collective actions are reviewed under a more lenient “similarly situated” analysis, typically pursuant to a two-step approach. The Seventh Circuit’s recent decision turns that distinction on its head.

Noting that Rule 23’s procedural provisions are intended to promote efficiency, Judge Posner stated “there isn’t a good reason to have different standards for the certification of the two different types of action.” Moreover, he wrote that “[s]implification is desirable in law,” especially given the fact that plaintiffs often join a collective action and a class action in one lawsuit. This collapse of differing class certification standards gives employers beneficial language to argue against collective action certification on the basis of Rule 23 commonality, numerosity and typicality requirements.

Decertification Proper Where Trial would be Unmanageable

The Court went on to reject certification of the proposed DirectSat “class,” finding that the plaintiffs had not presented a feasible trial plan. The proposed “class” consisted of 2,341 technicians who installed and repaired home satellite dishes. They worked directly in customers’ homes and were paid on a per job basis, not a fixed hourly wage. They alleged that DirectSat forbid them from recording time spent on certain tasks, such as filling out paperwork and picking up tools, and that they often worked more than 40 hours a week without being paid overtime.

Plaintiffs’ arguments to achieve class certification failed. Judge Posner held that lack of uniformity on the amount of damages suffered by each technician doomed certification. Plaintiffs’ proposal to use 42 “representative” members of the class to determine damages on behalf of the entire class was rejected. A further complication was the piece-rate pay basis where those technicians who completed jobs quickly made a higher “hourly” rate than those who worked slower. In the end, plaintiffs’ counsel admitted that it would “be difficult for Plaintiffs to provide an objective framework for identifying each class member within the current class definitions without making individualized findings of liability.” The failure to provide a feasible litigation plan to address these complexities doomed the plaintiffs’ effort to obtain final class certification.

Good Development for Employers

This is a significant decision for employers facing wage and hour collective actions. The standards for final class certification are not very well-developed in most jurisdictions, and Judge Posner’s well-reasoned opinion will carry substantial weight well beyond the Seventh Circuit. Further, if the more stringent Rule 23 standard is to be applied upon final certification, it is only logical that courts will also begin applying it at the earlier conditional certification stage, thereby making class certification more difficult for plaintiffs. Judge Posner and the Seventh Circuit have provided employers with an important tool to defend against these types of class and collective claims.