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By: John McAvoy
On June 11, 2018, the U.S. Supreme Court refused to entertain the appeal of a Pennsylvania employer that could have resolved the emerging split of authority between the federal appellate courts and the U.S. Department of Labor (DOL) as to the compensability of employees’ short rest breaks.
In American Future Systems, Inc. d/b/a Progressive Business Publications v. R. Alexander Acosta, Secretary, U.S. Department of Labor, the Secretary of Labor filed suit against Progressive Business Publications, a company that publishes and distributes business publications and sells them through its sales representatives, as well as the company’s owner, alleging they violated the Fair Labor Standards Act (FLSA) by paying their salespeople an hourly wage and bonuses based on their number of sales per hour while they were logged onto the computer at their workstations, and by not paying them if they were logged off for more than 90 seconds.
The U.S. District Court for the Eastern District of Pennsylvania previously found that the employer’s policy had violated the FLSA, relying on a DOL regulation which states that “[r]est periods of short duration, running from 5 minutes to about 20 minutes, are common in industry. They promote the efficiency of the employee and are customarily paid for as working time. They must be counted as hours worked.” In so holding, the District Court found that the employer was liable for at least $1.75 million in back wages and damages.
On appeal to the Third Circuit Court of Appeals, the employer argued that that it provided “flex time” rather than “breaks,” which allowed workers to clock out whenever they wanted, for any reason. In other words, that the employees were not “working” after they logged off of their computers since they could do anything they wanted, including leaving the office. The appellate court rejected this argument, reasoning that to dock the pay of employees who can’t manage a bathroom sprint is “absolutely contrary to the FLSA,” and affirmed the lower court’s decision.
The Third Circuit’s reliance on DOL regulation was contrary to the holdings of some of the other circuit courts which opted to assess the circumstances of the break in lieu of interpreting the DOL regulation as a bright-line rule that fails to take into consideration the facts of a particular situation.
The employer asked the U.S. Supreme Court to clarify how compensability for breaks should be determined. Citing the circuit split, the employer posited that the question of break pay should be determined by assessing the circumstances of the break, rather than adopting the DOL regulation as a bright-line rule. In its reply brief, the DOL fervently defended its regulations and denied the existence of the alleged circuit split, arguing that “hours worked [are] not limited to the time an employee actually performs his or her job duties.” Unfortunately, this remains an issue for another day as the Supreme Court refused to hear the case and/or resolve the alleged split.
Absent a decision from the Supreme Court to the contrary, employers in Pennsylvania, New Jersey, and Delaware are bound by the Third Circuit’s decision. As such, employers in these states must continue to comply with DOL regulations with respect to the compensability of short breaks.
Fortunately, the applicable DOL regulations are designed to protect employers’ rights. For starters, the regulations recognize that meal periods serve a different purpose than coffee or snack breaks and, as such, are not compensable. Second, an employer need not count an employee’s unauthorized extensions of authorized work breaks as hours worked when the employer has expressly and unambiguously communicated to the employee that the authorized break may only last for a specific length of time, that any extension of the break is contrary to the employer’s rules, and any extension of the break will be punished.
Although an employer will have to compensate an employee who repeatedly takes unauthorized breaks lasting less than 20 minutes in order to comply with the Third Circuit’s ruling and the applicable DOL regulations, the employer is nevertheless free to discipline the employee for such indiscretions by whatever means the employer deems appropriate, including termination.
Prudent employers should prepare themselves to address such issues through smart planning and proper training of employees, including managers, supervisors and HR personnel to ensure the employer’s break, discipline, and termination policies and procedures comply with all applicable DOL regulations.
Want to know whether your company’s break, discipline, and termination policies and procedures comply with DOL regulations? Let me help. Please call or email me (215.789.4919; [email protected]).