Kasten v. Saint-Gobain: Scope of FLSA Protected Activity

In Kasten v. Saint-Gobain Performance Plastics Corp., 563 U.S. 1 (2011), the Supreme Court held that the anti-retaliation provision of the Fair Labor Standards Act protects employees who make oral (as well as written) complaints that their employer violated the FLSA.

Facts

Kasten worked for Saint-Gobain Performance Plastics. He complained orally to his superiors that the company located its timeclocks between the area where Kasten and his co-workers put on (and removed) their work-related protective gear and the area where they carried out their job duties. This location, Kasten complained, prevented workers from receiving credit for the time they spent putting on and taking off their work clothes — contrary to the requirements of the FLSA. Kasten complained only orally and did not make a written complaint. Saint-Gobain fired him. Id. at 5-6.

Kasten then sued his former employer, alleging that Saint-Gobain violated the FLSA’s anti-retaliation provision by terminating him for complaining orally about the legality of the location of the timeclocks. The trial court granted summary judgment for the employer, holding that the FLSA’s anti-retaliation provision covered only written complaints and did not cover oral complaints. The Seventh Circuit affirmed and Kasten appeals.

The Court’s Decision

The FLSA’s anti-retaliation provision makes it unlawful for employers “to discharge or in any other manner discriminate against any employee because such employee has filed any complaint or instituted or caused to be instituted any proceeding under or related to [the FLSA], or has testified or is about to testify in such proceeding, or has served or is about to serve on an industry committee.” 29 U.S.C. § 215(a)(3) (emphasis added).

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This site is intended to provide general information only. The information you obtain at this site is not legal advice and does not create an attorney-client relationship between you and attorney Tim Coffield or Coffield PLC. Parts of this site may be considered attorney advertising. If you have questions about any particular issue or problem, you should contact your attorney. Please view the full disclaimer. If you would like to request a consultation with attorney Tim Coffield, you may call 1-434-218-3133 or send an email to info@coffieldlaw.com.

Babb v. Wilkie: Causation in Federal Sector Age Discrimination

In Babb v. Wilkie, Secretary of Veteran Affairs, No. 18-882, ___ U.S. ___ (Apr. 6, 2020), the Supreme Court held that the federal-sector provision of the Age Discrimination in Employment Act of 1967, 29 U.S.C. § 633a(a), demands that personnel actions be untainted by any consideration of age. This means that a federal sector employee can prevail on an age discrimination claim without proving but-for causation. However, the presence or absence of but-for causation is important in determining the available remedies.

Facts

Babb was a federal employee, a pharmacist, at a U.S. Department of Veterans Affairs Medical Center (the “VA”). Babb sued the VA for, inter alia, age discrimination in various adverse personnel actions. The VA offered various alleged nondiscriminatory reasons for the actions. The District Court granted the VA’s summary judgment motion after finding Babb had established a prima facie case, that the VA had proffered legitimate reasons for the challenged actions, and that no jury could reasonably conclude that those reasons were pretextual.

Babb appealed. She argued the District Court’s requirement that age be a but-for cause of a personnel action was inappropriate under the ADEA’s federal-sector provision. Because that section requires most federal-sector “personnel actions” affecting individuals aged 40 and older be made “free from any discrimination based on age,” Babb argued such a personnel action is unlawful if age is a factor in the challenged decision — even if many other factors having nothing to do with age were also factors. Under Babb’s reading of the ADEA, therefore, even if the VA’s proffered reasons in her case were not pretextual, the VA still violated the ADEA if age discrimination played any part at all in the decision. The Eleventh Circuit rejected that argument, citing binding circuit precedent, and Babb appealed again.

Learn the court’s decision and more about this SCOTUS case at CoffieldLaw.com!

FLSA Executive Employee Exemption: Management and Direction

The Fair Labor Standards Act requires covered employers to pay minimum wages and overtime compensation to certain categories of employees. However, the law contains several exceptions or “exemptions” from these requirements, most of which turn on a combination of the employees’ pay and the nature of their job duties. For example, Section 13(a)(1) of the FLSA, a.k.a. 29 U.S.C. § 213(a)(1), provides an “exemption” from both minimum wage and overtime pay for certain categories of so-called “white collar” employees — namely, employees working as bona fide executive, administrative, professional, or outside sales employees. Section 13(a)(1) and Section 13(a)(17) also exempt certain categories of computer employees.

To qualify for a white collar exemption, employees must be paid on a salary basis at not less than $684 per week (as of January 1, 2020) and have job duties that satisfy certain requirements. Importantly, job titles do not determine whether an employee is exempt from the FLSA. For an employee to be exempt, her actual real-life job duties and salary must meet all the requirements of the FLSA and the Department of Labor’s implementing regulations.

This post will focus on the exemption for executive employees. The Department of Labor is also an excellent resource for information about the executive employee exemption. The DOL’s implementing regulations with respect to the executive employee exemption are generally located at 29 CFR §§ 541.100-106.

Read the full article at TimCoffieldAttorney.net.

Encino Motorcars v. Navarro (SCOTUS, April 2, 2018)

Encino Motorcars v. Navarro (SCt. Case No. 16-1362) (Encino II) held that service advisors at car dealerships are exempt from the provisions of the Fair Labor Standards Act (FLSA) requiring employers to pay overtime to employees who work more than forty hours in a week. Enacted in 1938, the FLSA is the United States labor law that created the employee right to minimum wage, and overtime pay (generally, one and a half times the employee’s regular hourly rate) for employees who work over forty hours a week. The FLSA, however, contains numerous exemptions — categories of employees who are not entitled to receive overtime pay under the FLSA based on their job duties. These employees are referred to as “exempt” from the right to receive overtime pay.

One such provision, codified at 29 U.S.C. §213(b)(10)(A), provides an exemption to the overtime-pay requirement for “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles, trucks, or farm implements.” The plaintiff employee Navarro in Encino Motorcars worked for a car dealership as a service advisor. Navarro sued the dealership on behalf of himself and other service advisors, arguing that the dealership violated the FLSA by failing to pay them overtime wages. The primary question for the Supreme Court was whether the FLSA entitled service advisors to overtime pay, or whether the job of service advisor fell into the exemption for “salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles[.]”

At the trial court level, the district court had dismissed the suit on the grounds that service advisors were exempt and therefore were not entitled to overtime pay. The employees appealed that decision, and the Court of Appeals for the Ninth Circuit reversed the trial court, finding that the exemption for “salesman … primarily engaged in selling or servicing automobiles” did not apply to service advisors at car dealerships. In a 5-4 decision, the Supreme Court reversed the Ninth Circuit and held that the service advisors were exempt and therefore not entitled to overtime pay. Justice Thomas wrote the majority opinion. Justice Ginsberg wrote the dissent.

The Court first determined that a service advisor is a “salesman” for the purposes of the exemption at issue, because the ordinary meaning of “salesman” is someone who sells goods or services, and service advisors “sell [customers] services for their vehicles[.]” Encino II at 6 (cite to earlier decision omitted).

Next, the Court held that service advisors are also “primarily engaged in . . . servicing automobiles.” Thomas’ reasoning here was that “servicing” can mean either “the action of maintaining or repairing a motor vehicle” or “[t]he action of providing a service,” and service advisors satisfy both definitions because they are integral to the servicing process. Encino II at 6-7. Service advisors meet customers and listen to their concerns about their cars; suggest repair and maintenance services; sell new or replacement parts; record service orders; follow up with customers as the services are performed; and explain the repair and maintenance work being performed. Encino II at 6-7 (quotes omitted). Therefore, service advisors are primarily engaged in servicing automobiles.

In reaching this conclusion, Thomas rejected the Ninth Circuit’s approach to interpreting the word “or” in the language of the exemption (“any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles”). The Ninth Circuit had applied the distributive method — matching “salesman” with “selling” and “partsman [and] mechanic” with “servicing”— and therefore determined that the exemption does not apply to “salesm[e]n . . . primarily engaged in . . . servicing automobiles.” The Supreme Court disagreed with that approach, observing that the word “or,” is “almost always disjunctive” — meaning, in this context of this language, that “salesman” could be matched with “servicing.” Encino II at 7-9 (citing United States v. Woods, 571 U. S. 31, 45.) The Court also pointed out that the distributive use of “or” worked best when one-to-one matching was possible and did not make as much sense when trying to pair three terms (“salesman, partsman, or mechanic”) with two terms (“selling” or “servicing”). Therefore, the Court applied the disjunctive meaning of “or.” By using “or” to join “selling” and “servicing”, Thomas determined that the exemption covers a salesman primarily engaged in either selling or servicing. This included service advisors, which the Court had concluded were salesmen primarily engaged in servicing automobiles. Encino II at 7-9.

Thomas also discussed the Ninth Circuit’s application of the long-standing principle in FLSA jurisprudence that exemptions should be narrowly construed. Thomas rejected that approach, reasoning that because the FLSA “gives no textual indication that its exemptions should be construed narrowly, there is no reason to give them anything other than a fair (rather than a ‘narrow’) interpretation.” Encino II at 9 (citing and quoting Scalia, Reading Law, at 363.)

In sum, this case determined that service advisors at auto dealerships are exempt from the overtime-pay requirement, and departed from the Court’s long-standing principle that FLSA exemptions should be construed narrowly.

This article was also published to TimCoffieldAttorney.com and CoffieldLaw.com.

Epic Systems Corp v. Lewis (SCOTUS, May 21, 2018)

Epic Systems Corp v. Lewis (SCt. Case No. 16-285) highlights the tension between a pair of federal laws, The National Labor Relations Act (NLRA) and the Federal Arbitration Act (FAA), concerning whether an employment contract can legally bar employees from engaging in collective action to enforce their rights in court. The Federal Arbitration Act (“FAA”) was enacted in 1925 to allow parties to contractually agree to resolve disputes through arbitration, rather than through the judicial system. The following decade Congress enacted The National Labor Relations Act of 1935 (“NLRA”), which protects the rights of employees to, among other things, engage in collective action to protect their legal rights. Employees protected under the NLRA are able to join together and take collective action to counter unfair employment practices and improve their working conditions and wages.

In Epic Systems, the employer distributed via email a new policy requiring employees to sign an arbitration agreement. The agreement, in short, stated that employees bringing claims for alleged violations of wage-and-hour or other laws could only do so through individual arbitration. This agreement further included a provision designed to waive the employees’ “rights to participate in any class, collective, or representative proceeding.” The agreement was to be recognized and signed by its employees, including Lewis, a tech writer for the company. Lewis did acknowledge and sign the agreement.

The following year, in February of 2015, Lewis filed a suit against Epic Systems. The suit was filed as a purported collective action, involving other tech writers employed at Epic Systems. The collective action alleged Epic Systems failed to follow The Fair Labor Standards Act of 1938, in addition to a Wisconsin law related to employees’ rights to receive overtime pay. The suit was filed in the United States District Court for the Western District of Wisconsin. Epic Systems moved to dismiss the suit, arguing that the arbitration agreement signed by Lewis prevented him from bringing or participating in collective actions, and required him to address any claims through individual arbitration. The District Court denied Epic Systems’ motion, finding Lewis’ action was protected under section 7 of the NLRA, and stating that the 2014 arbitration agreement and collective action waiver violated those terms.

Epic Systems appealed the District Court’s decision to the Court of Appeals for the Seventh Circuit, arguing the District Court erred by finding that the FAA did not control and that the collective action waiver was not valid. The Seventh Circuit agreed with the District Court, however, finding that Epic Systems’ collective action waiver violated the terms of the NLRA. Epic Systems petitioned to the Supreme Court of the United States for a writ of certiorari, following a split of authority among the circuit courts of appeal relating to the tension between respective provisions of the NLRA and FAA. In January 2017, the Supreme Court consolidated Epic Systems with two other similar cases and agreed to hear the oral arguments of all three cases.

On May 21, 2018, the Supreme Court issued a 5-4 decision ruling that individual arbitration agreements and collective action waivers are enforceable under the FAA, and that neither the NLRA or the FAA’s savings clause requires a different conclusion.

This article was originally published to TimCoffieldAttorney.com and CoffieldLaw.com.

This site is intended to provide general information only. The information you obtain at this site is not legal advice and does not create an attorney client relationship between you and attorney Tim Coffield or Coffield PLC. Parts of this site may be considered attorney advertising. If you have questions about any particular issue or problem, you should contact your attorney. Please view the full disclaimer. If you would like to request a consultation with attorney Tim Coffield, you may call 1-434-218-3133 or send an email to info@coffieldlaw.com.

Falk v. Brennan: Law of Employment and Control

In Falk v. Brennan, 414 U.S. 190 (1973), the Supreme Court held that an entity is an “employer” under the Fair Labor Standards Act when it exercises substantial control over the terms and conditions of the work of the employees at issue.

Background

The Fair Labor Standards Act generally requires a covered “employer” to pay its covered nonexempt employees minimum wages for each hour worked and overtime wages for all hours worked in excess of 40 hours per workweek. 29 U.S.C. §§ 206(a) & 207(a). The FLSA defines “employer” as “includ[ing] any person acting directly or indirectly in the interest of an employer in relation to an employee[.]” 29 U.S.C. § 203(d). With some exceptions, the FLSA generally defines “employee” as “any individual employed by an employer.” 29 U.S.C. § 203(e)(1). The FLSA defines “employ” as including “to suffer or permit to work.” 29 U.S.C. § 203(g).

The FLSA also provides that for an employer to be covered under the Act’s dollar-volume “enterprise” coverage provision, the employer must receive “annual gross volume of sales made or business done [] not less than $500,000[.]” 29 U.S.C. § 203(s)(1)(A)(ii).

Facts

D&F operated a property management company in Virginia. It rendered management services for the owners of several apartment complexes. Under its contracts with the apartment owners, D&F agreed to perform, on behalf of each owner and under his “nominal” supervision, “virtually all management functions that are ordinarily required for the proper functioning of an apartment complex.” 414 U.S. at 192. Those functions included advertising the apartments; signing, renewing, and canceling leases; collecting rents; instituting and settling all legal proceedings for eviction, possession of the premises, and unpaid rent; making necessary repairs and alterations; negotiating contracts for essential utilities and other services; purchasing supplies; paying bills; preparing operating budgets for the property owners’ review and approval; submitting periodic reports to the owners; and “hiring and supervising all employees required for the operation and maintenance of the buildings and grounds.” Id. at n4.

As compensation, D&F received a fixed percentage of the gross rents collected from each project. D&F deposited the rents it collected in local bank accounts. From these accounts it paid all expenses incurred in operating and maintaining the buildings. After deducting its compensation, as well as other expenses, D&F periodically transmitted payments to the various apartment owners. If disbursements for any apartment complex exceeded the gross rental receipts, the owner was required to reimburse D&F. 414 U.S. at 192-93. D&F collected about $8 million dollars per year in rents for all the buildings it managed. Id. at n6. However, its gross commissions received on those rentals were less than $500,000 per year. Id. at n10.

The Secretary of Labor filed suit against D&F on behalf of the maintenance workers, alleging that D&F violated the minimum wage, overtime, and recordkeeping requirements of the FLSA with respect to those workers. Id. Significantly, these employees worked under the supervision of D&F and were paid from the rents received at the apartment complexes where they worked. Under the contracts between the apartment owners and D&F, the maintenance workers were considered to be “employees of the project owners.” Id.

A central question for the Court was whether the maintenance workers were also employees of D&F, such that D&F was responsible for complying with the FLSA’s minimum wage, overtime, and recordkeeping requirements with respect to those workers.

A secondary question was which figure should be considered in determining whether D&F met the $500,000 threshold for enterprise coverage: D&F’s gross rentals collected ($8M annually), or D&F’s gross commissions on those rentals (less than $500,000).

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FLSA Administrative Employee Exemption: Discretion and Independent Judgment

The Fair Labor Standards Act requires covered employers to pay minimum wages and overtime compensation to certain categories of employees. However, the law contains several exceptions or “exemptions” from these requirements, most of which turn on a combination of the employees’ pay and the nature of employees’ job duties. For example, Section 13(a)(1) of the FLSA, a.k.a. 29 U.S.C. § 213(a)(1), provides an “exemption” from both minimum wage and overtime pay for certain categories of so-called “white collar” employees — namely, employees working as bona fide executive, administrative, professional, or outside sales employees. Section 13(a)(1) and Section 13(a)(17) also exempt certain categories of computer employees.

This post will focus on the exemption for administrative employees. The Department of Labor is also an excellent resource for information about the administrative employee exemption. The DOL’s implementing regulations with respect to the administrative employee exemption are generally located at 29 CFR § 541.200-204.

Administrative Employee Criteria

To qualify for the administrative employee exemption (and therefore, not be entitled to receive overtime pay under the FLSA), an employee must meet all of the following requirements:

The employee must be compensated on a “salary basis” (as defined in 29 CFR § 541.602) or “fee basis” (as defined in 29 CFR § 541.605) at a rate not less than $684 per week (lower amounts apply for non-federal employees in U.S. territories);
The employee’s “primary duty” must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers;
The employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

29 CFR § 541.200.

Definition of “Primary Duty”

As used in these regulations, “primary duty” means the principal, main, major or most important duty that the employee performs. Determination of an employee’s primary duty must be based on all the facts in a particular case, with the major emphasis on the character of the employee’s job as a whole. Factors to consider when determining an employee’s primary duty include, without limitations, the relative importance of any exempt duties as compared with other types of duties; the amount of time spent performing exempt work; the employee’s relative freedom from direct supervision; and the relationship between the employee’s salary and the wages paid to other employees for the kind of nonexempt work performed by the employee. 29 CFR § 541.700.

Definition of “Directly Related to Management or General Business Operations”

To meet the “directly related to management or general business operations” requirement, an employee must perform work directly related to assisting with the running or servicing of the business. This is different from, for example, working on a manufacturing production line or selling a product in a retail or service establishment. 29 CFR § 541.201(a).

As defined in the DOL regulations, work “directly related to management or general business operations” includes, but is not limited to, work in functional areas such as tax; finance; accounting; budgeting; auditing; insurance; quality control; purchasing; procurement; advertising; marketing; research; safety and health; personnel management; human resources; employee benefits; labor relations; public relations; government relations; computer network, Internet and database administration; legal and regulatory compliance; and similar activities. 29 CFR § 541.201(b)

Work Directly Related to Management or Operations of Customers

It’s worth noting that an employee may qualify for the administrative exemption if her primary duty is performing work directly related to the management or general business operations of the “employer’s customers.” 29 CFR § 541.201(a). This means that an employee who acts as a consultant to her employer’s clients or customers — as tax experts or financial consultants, for example — may qualify for the exemption. 29 CFR § 541.201(c).

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Integrity Staffing v. Busk: Principal Activities Law

In Integrity Staffing Sols., Inc. v. Busk, 574 U.S. 27 (2014), the Supreme Court held that under the Fair Labor Standards Act, time warehouse workers spent waiting for and undergoing security screenings was not compensable time. More broadly, the decision clarified the proper analysis of “principal activities” verses preliminary and postliminary activities. Principal activities are compensable under the FLSA. Purely preliminary or postliminary activities (like a commute) are not, but some activities before or after a shift might still be compensable principal activities. The term “principal activities” includes all activities which are an “integral and indispensable part of the principal activities.” An activity is “integral and indispensable to the principal 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.” 574 U.S at 33.

Facts

Busk worked for Integrity Staffing Solutions as an hourly warehouse worker. Integrity Staffing provided warehouse staffing to Amazon. Integrity Staffing’s warehouse workers retrieved and packaged products for delivery to Amazon.com customers. Integrity Staffing required these employees to undergo a security screening before leaving the warehouse each day, but did not pay them for the time (roughly 25 minutes each day) they spent waiting for and undergoing the screening. Busk and his co-workers filed suit under the Fair Labor Standards Act. They asserted, inter alia, they were entitled to compensation for the time they spent waiting to undergo and undergoing the screenings. They also argued the screenings were compensable because the company could have reduced the time involved to a negligible de minimis amount by adding screeners or staggering shifts, and because the screenings were conducted to prevent employee theft and, thus, for the sole benefit of the employers and their customers.

The District Court dismissed this claim. It held the screenings were not integral and indispensable to the employees’ principal activities but were instead postliminary and noncompensable under the Portal–to–Portal Act. The Ninth Circuit reversed that decision in part, holding that the postshift screening would be compensable as integral and indispensable to the employees’ principal activities if the screenings were necessary to the principal work and performed for the employer’s benefit. Integrity Staffing appealed.

The Court’s Decision

The Supreme Court reversed. It held the time the warehouse workers spent waiting to undergo and undergoing security screenings was not compensable under the FLSA.

First, the Court explained Congress passed the Portal–to–Portal Act in response to the “unexpected liabilities” created by a broad judicial interpretation of the FLSA’s undefined terms “work” and “workweek.” See 29 U.S.C. § 251(a). The Portal–to–Portal Act therefore exempted employers from FLSA liability for claims based on “activities which are preliminary to or postliminary to” the principal activities that an employee is employed to perform. 29 U.S.C. § 254(a)(2).

The Court had long held that the term “principal activities” includes all activities which are an “integral and indispensable part of the principal activities.” Steiner v. Mitchell, 350 U.S. 247, 252–253 (1956). In Integrity Staffing, the Court further explained that an activity is “integral and indispensable to the principal 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.” 574 U.S at 33.

For example, in Steiner, the Court held the time battery-plant employees spent showering and changing clothes was compensable because the chemicals in the plant were “toxic to human beings” and the employer conceded that “the clothes-changing and showering activities of the employees [were] indispensable to the performance of their productive work and integrally related thereto.” Id. at 34 (quoting Steiner at 249, 251). Similarly, in Mitchell v. King Packing Co., 350 U.S. 260, 262 (1956), the Court held compensable the time meatpacker employees spent sharpening their knives because dull knives would “slow down production” on the assembly line, “affect the appearance of the meat as well as the quality of the hides,” “cause waste,” and lead to “accidents.” 574 U.S. at 34 (quoting Mitchell at 262). By contrast, in IBP, Inc. v. Alvarez, 546 U.S. 21 (2005), the Court held noncompensable the time poultry-plant employees spent waiting to don protective gear because such waiting was “two steps removed from the productive activity on the assembly line.” 574 U.S. at 34 (quoting IBP at 42). The Court further noted Department of Labor regulations were consistent with this approach. See 29 CFR § 790.8(b) (“The term ‘principal activities’ includes all activities which are an integral part of a principal activity.”); 29 CFR § 790.8(c) (“Among the activities included as an integral part of a principal activity are those closely related activities which are indispensable to its performance.”); 29 CFR 790.7(g) (examples of preliminary and postliminary activities). 574 U.S. at 30-35.

The Court then held the security screenings at issue in Integrity Staffing were noncompensable postliminary activities. First, the Court determined the screenings were not the principal activities the employees were employed to perform. The workers were not employed to undergo security screenings. They were employed to retrieve goods from the warehouse and package them for shipment. Nor were the security screenings “integral and indispensable” to those activities. In support of this conclusion, the Court cited a 1951 Department of Labor opinion letter, which found noncompensable under the Portal–to–Portal Act both a preshift screening conducted for employee safety and a postshift search conducted to prevent employee theft.

The employees in Integrity Staffing, like the Ninth Circuit, essentially took the position that if an activity was required by an employer it was compensable under the FLSA. The Court disagreed with this approach, noting that it would sweep into “principal activities” the very activities that the Portal–to–Portal Act was designed to exclude from compensation (like the time waiting to don protective gear held noncompensable in IBP). Finally, the Court rejected the employees’ argument that the screenings were compensable because Integrity Staffing could have reduced the time to a de minimis amount. Whether an employer could conceivably reduce the time employees spent on a preliminary or postliminary activity did not change the nature of the activity or its relationship to the principal activities that an employee is employed to perform. Therefore, that concern was properly addressed through bargaining, rather than in a suit under the FLSA. 574 U.S. at 35-37.

Analysis

In sum, Integrity Staffing clarified the analysis of “principal activities” verses preliminary and postliminary activities. Principal activities are compensable. The term “principal activities” includes all activities which are an “integral and indispensable part of the principal activities.” An activity is “integral and indispensable to the principal 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.” 574 U.S at 33. More specifically, Integrity Staffing stands for the proposition that time spent waiting for and undergoing security screenings was not a principal activity and therefore not compensable under the Fair Labor Standards Act.

This article was also published to TimCoffieldAttorney.com.

IBP, Inc. v. Alvarez: Law of Compensation for Waiting

The Fair Labor Standards Act requires employers to pay minimum wages and overtime wages based on time worked by covered employees. Oftentimes, an employee has to spend time waiting to put equipment, walking to a worksite, or doing other preshift tasks necessary to perform her job. Is the employee entitled to compensation under the FLSA for that time? Trial courts routinely address various iterations of this question. In IBP, Inc. v. Alvarez, 546 U.S. 21 (2005), the Supreme Court answered one of them. It held that the FLSA requires employers to pay employees for time spent walking to and from stations that distributed employer-mandated safety equipment.

Facts

Alvarez involved two separate but similar cases. Employees of IBP filed suit under the FLSA seeking compensation for time they spent putting on and taking off (“donning and doffing”) required protective gear and walking between the locker rooms and the production floor of IBP’s meat processing facility. The trial court decided these activities were compensable. The Ninth Circuit affirmed. IBP appealed.

In the companion case, employees of Barber Foods sought compensation under the FLSA for time they spent donning and doffing required protective gear at Barber’s poultry processing plant, as well as time they spent walking and waiting associated with picking up and returning the gear. The trial court found in favor of Barber on the walking and waiting claims, finding those activities were not compensable. The First Circuit affirmed, finding that the walking and waiting times were preliminary and postliminary activities excluded from FLSA coverage by §§4(a)(1) and (2) of the Portal-to-Portal Act of 1947. The employees appealed.

The U.S. Supreme Court consolidated the cases to address the question of whether the FLSA requires employers to pay employees for time spent walking to and from stations that distributed required safety equipment.

Legal Background

In Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 691–692 (1946), the Supreme Court held that a “workweek” under the FLSA included the time employees spent walking from time clocks near a factory entrance to their workstations. In response to that decision, Congress passed the Portal-to-Portal Act. The Portal-to-Portal Act excepted from FLSA coverage walking on the employer’s premises to and from the location of the employee’s “principal activity or activities,” §4(a)(1), and activities that are “preliminary or postliminary” to “said principal activity or activities,” §4(a)(2).

The Department of Labor subsequently issued regulations which interpreted the Portal-to-Portal Act as not affecting the computation of hours within a “workday,” 29 CFR §790.6(a), which includes “the period between the commencement and completion” of the “principal activity or activities,” §790.6(b).

In a subsequent Supreme Court decision, Steiner v. Mitchell, 350 U.S. 247, 256 (1956), the Court explained that the “term ‘principal activity or activities’ … embraces all activities which are ‘an integral and indispensable part of the principal activities,’ ” including the donning and doffing of specialized protective gear “before or after the regular work shift, on or off the production line.”

The Court’s Decision

In the 2005 Alvarez decision, the Court held that an employee putting on employer-required safety equipment qualified as a “principal activity” under the FLSA. The continuous “workday” for purposes of calculating compensable time began when employees started that activity. Therefore, compensable time included the subsequent time employees spent walking to and from the worksite after donning their protective gear, and time spent waiting to doff the gear. The Court further held that the previous time spent waiting to put on the safety equipment, however, was not included in the workday, and not compensable time, because it was a “preliminary” activity under the Portal-to-Portal Act. 546 U.S. at 28-38.

Time spent walking to and from the worksite after donning and before doffing protective gear is compensable time

First, the Alvarez held that the time the IBP employees spent walking after changing into protective gear from the locker room to the production floor was compensable under the FLSA. 546 U.S. at 33-37.

The Court explained that Section 4(a)(1) of the Portal-to-Portal Act text does not exclude this time from the FLSA. IBP had argued that, because donning is not the “principal activity” that starts the workday, walking occurring immediately after donning and immediately before doffing is not compensable. That argument, the Court pointed out, was foreclosed by its decision in Steiner, which clarified that §4 does not remove activities that are “integral and indispensable” to “principal activities” from FLSA coverage because those activities are themselves “principal activities.” 350 U. S. at 253. The Court went on to explain that that these identical terms cannot mean different things within the same law (§4(a)(2) and in §4(a)(1)). According to the normal rules of statutory interpretation, identical words used in different parts of the same statute are generally presumed to have the same meaning. Further, with respect to §4(a)(2)’s reference to “said principal activity or activities,” “said” is an explicit reference to the use of the identical term in §4(a)(1). Alvarez, 546 U.S. at 33-35.

The Court also rejected IBP’s argument that Congress’s repudiation of the Anderson decision (by passing the Portal-to-Portal Act) reflected a legislative purpose to exclude the walking time at issue from the FLSA. The Court found this argument unpersuasive because it observed the time at issue in Alvarez, which occurred after the workday begins (by donning) and before it ends (by doffing), was more comparable to time spent walking between two different positions on an assembly line than to the walking in Anderson, which occurred before the workday began. Id. at 34-35.

The Court also pointed out the DOL regulations supported the compensable nature of the IBP employees’ walking time. For example, 29 CFR §790.6 did not strictly define the workday’s limits as the period from “whistle to whistle.” And 29 CFR §790.7(g), n. 49, which provides that postdonning walking time is not “necessarily” excluded from §4(a)(1) of the Portal-to-Portal Act, does not mean that such time is always excluded. Therefore, the Court determined those regulations could not overcome clear statements elsewhere in the regulations that supported the compensable nature of postdonning walking time. 546 U.S. at 35-37.

Time spent waiting to doff is compensable time

With respect to the Barber Foods employees, the Court similarly held that because donning and doffing gear that is “integral and indispensable” to employees’ work is a “principal activity” under the FLSA, the continuous workday rule required that the time the Barber Foods employees spent walking to and from the production floor after donning and before doffing, as well as the time spent waiting to doff at the end of the day, are not affected by the Portal-to-Portal Act. Therefore, this time was compensable under the FLSA. 546 U.S. at 37-39.

Time spent waiting to don is not compensable time

Finally, however, the Court held that time spent waiting to don protective gear before work is not compensable time. The Court’s reasoned that §4(a)(2) of the Portal-to-Portal Act excluded from the FLSA the time employees spend waiting to don the first piece of gear that marks the beginning of the continuous workday. The Court determined that this qualifies as a “preliminary” activity because it was “two steps removed” from the productive activity on the assembly line. While certain preshift activities were necessary for employees to engage in their principal activities, the Court found that this does not mean that those preshift activities are “integral and indispensable” to a “principal activity” under Steiner. The Court expressed a concern that it could not conclude that Barber employees predonning waiting time was a compensable “principle activity” without also reaching the necessary (but untenable) conclusion that the walking time in Anderson would also be a “principal activity” unaffected by the Portal-to-Portal Act. The Court observed that 29 CFR §790.7(h) (differentiating between being “engaged to wait,” which is compensable, and “wait[ing] to be engaged, which is not compensable) did not support a finding that time spent waiting to don protective gear was compensable. 546 U.S. at 39-42.

Analysis

In short, Alvarez held that an employee putting on employer-required safety equipment qualified as a “principal activity” under the FLSA. The continuous “workday” for purposes of calculating compensable time began when employees started that activity.

This determination, that the workday begins with donning, has two important implications. First, FLSA compensable time included the subsequent time employees spent walking to and from the worksite after donning their protective gear, and time waiting to doff their gear. Second, however, the previous time employees spent waiting to don the protective equipment was not included in the workday, and not compensable time, because it was a “preliminary” activity under the Portal-to-Portal Act.

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McKennon v. Nashville Banner: Law of After-Acquired Evidence

What happens when an employer, having wrongfully terminated an employee (in violation of federal employment law), discovers in litigation that the employee did something that would have legitimately and lawfully lead to termination, had the employer known about it before wrongfully firing the employee? Does the employer still have to pay lost wages for the wrongful termination, or does this “after-acquired evidence” excuse the violation?

The Supreme Court addressed these questions in McKennon v. Nashville Banner Pub. Co., 513 U.S. 352 (1995). The Court rejected the argument that a legitimate reason for termination, discovered after an unlawful discharge, excuses the unlawful action or bars the employee from recovery. However, the Court also indicated that such after-acquired evidence may limit the employee’s ability to obtain reinstatement or recover all lost wages associated with the termination.

Facts

McKennon worked thirty years for Nashville Banner Publishing Company until she was terminated at age sixty-two. McKennon filed suit, alleging that her discharge violated the Age Discrimination in Employment Act of 1967 (ADEA). McKennon’s suit sought a variety of legal and equitable remedies available under the ADEA, including backpay. In her deposition, McKennon admitted that during her final year of employment she had copied and taken home several of the Banner’s confidential financial documents. 513 U.S. 354-56.

For the purposes of summary judgment, the Banner conceded that it had discriminated against McKennon because of her age. Id. The District Court, however, granted summary judgment for the company, holding that McKennon’s misconduct in taking the confidential documents was grounds for termination and that neither back pay nor any other remedy was available to her under the ADEA. The Court of Appeals affirmed on the same reasoning. McKennon appealed. Id. at 355-56.

The Court’s Decision

The Court reversed. It held that an employee who is fired in violation of federal employment law is not barred from all relief when, after her discharge, her employer discovers evidence of wrongdoing that would have led to her termination on lawful and legitimate grounds had the employer known of it. 513 U.S. 356-360.

After-Acquired Evidence Not a Complete Bar

First, the Court held that this kind of “after-acquired evidence” is not a complete bar to recovery. The Court reasoned that even if the employee engaged in misconduct that would have prompted a termination, the employer’s discrimination that actually prompted the discharge cannot be disregarded. The Court assessed the purposes of the ADEA’s remedial provisions, 29 U.S.C. § 626(b) and 29 U.S.C. § 216(b), which (like the remedial provisions of other employment laws) were designed both to compensate employees for injuries caused by unlawful discrimination and to deter employers from discriminating in the first place. The Court concluded that allowing after-acquired evidence to bar all relief would frustrate both of these important objectives. Therefore, the Court held that after-acquired evidence did not bar all relief for unlawful discrimination. Id. at 358-360.

Relevance to Crafting an Appropriate Remedy

Second, however, the Court observed that trial courts should take into account after-acquired evidence of an employee’s wrongdoing in determining the specific remedy for the employer’s discrimination. To hold otherwise, and bar any consideration of employee misbehavior in the relief analysis, would be to ignore the employer’s legitimate concerns about employee misconduct. The ADEA, like other employment laws, just prohibits discrimination. It does not limit employers from having legitimate rules and exercising appropriate lawful discretion in hiring, promoting, and firing employees. Therefore, the Court noted, employee wrongdoing is relevant in taking due account of such lawful prerogatives and the employer’s corresponding equities arising from the wrongdoing. Id. at 360-61.

General Rule: No Reinstatement or Front Pay

Third, the Court discussed how trial courts might balance these competing concerns — on one hand, the prohibition against unlawful discrimination, and on the other, the employer’s right to address legitimate employee misconduct in an appropriate manner. The Court decided that remedial relief in such cases should be addressed on a case-by-case basis. However, the Court stated that as a general rule, if the employer proves the employee engaged in misconduct that would have prompted a lawful termination had the employer known about it, neither reinstatement nor front pay is an appropriate remedy. Id. at 362. This is because “it would be both inequitable and pointless to order the reinstatement of someone the employer would have terminated, and will terminate, in any event and upon lawful grounds.” Id.

Possible Limitations on Back Pay

The Court indicated that the more difficult issue, in after-acquired evidence cases, is the proper measure of back pay. This is because even a guilty employer cannot be required to ignore information it learns about employee wrongdoing that would lead to a legitimate discharge, even if it is acquired during the course of a discrimination lawsuit and might have gone undiscovered in the absence of the discrimination that led to the lawsuit. Id. at 362. The Court stated that the “beginning point in formulating a remedy should therefore be calculation of backpay from the date of the unlawful discharge to the date the new information was discovered.” Id. In determining the appropriate relief, the court can consider extraordinary equitable circumstances that affect the legitimate interests of either party. But an “absolute rule barring any recovery of backpay, however, would undermine the [federal employment law’s] objective of forcing employers to consider and examine their motivations, and of penalizing them for employment decisions that spring from … discrimination.” Id. Thus, as a general rule, after-acquired evidence does not bar back pay, but it might limit the amount of back pay an employee can recover.

No Bar to General Compensatory, Punitive, or Liquidated Damages

It is also worth noting that McKennon did not state or suggest that compensatory damages for past or future emotional harm should be time-limited. The decision only addressed possible limitations on lost wages and reinstatement. Allowing full emotional distress damages even if the defendant prevails on an after-acquired evidence defense makes good sense in light of McKennon’s reasoning. This is because no legitimate business prerogative would be served by allowing a proven discriminator to avoid paying the full cost of the emotional damage caused by the discrimination. The same reasoning supports the conclusion that after-acquired evidence does not bar punitive damages or liquidated damages, in cases where the usual standards for awarding punitive or liquidated damages are met. Here is a link to EEOC’s guidance on this issue.

Employer’s Burden of Proof

Finally, the Court discussed the employer’s burden in attempting to prove an “after-acquired evidence” defense. When an employer seeks to use this defense, it must first establish that the wrongdoing was of “such severity that the employee in fact would have been terminated on those grounds alone had the employer known of it at the time of the discharge.” Id. at 362-63. The Court also expressed concern that, due to the possibility of uncovering after-acquired evidence, employers might routinely undertake extensive discovery into an employee’s background or job performance to resist employment discrimination claims. Id. at 363. However, the Court concluded the trial courts’ authority to award attorney’s fees under §§ 216(b) and 626(b) and to invoke the appropriate provisions of the Federal Rules of Civil Procedure would likely deter most abuses of the discovery rules. Id.

Analysis

The Court in McKennon rejected the notion that a legitimate reason for termination, discovered after an unlawful discharge, excuses the unlawful action or bars the employee from recovery. However, such after-acquired evidence may limit the employee’s ability to obtain reinstatement or recover all lost wages associated with the termination. To use this defense, an employer must prove that the employee engaged in misconduct of such severity that the employee would have been terminated on those grounds alone had the employer learned of it during her employment. As a general rule, if the employer meets this burden, reinstatement is not an appropriate remedy and back pay may be limited.

This article was also published to TimCoffieldAttorney.com and CoffieldLaw.com.