On December 9, 2014, the United States Supreme Court issued a unanimous decision favorable to employers significantly limiting the types of preliminary and postliminary activities that are compensable under the Fair Labor Standards Act (FLSA).
Executive Summary: On December 9, 2014, the United States Supreme Court issued a unanimous decision favorable to employers significantly limiting the types of preliminary and postliminary activities that are compensable under the Fair Labor Standards Act (FLSA). In Integrity Staffing Solutions, Inc. v. Busk, the Court held that the time spent by warehouse workers waiting to undergo and undergoing security screenings before leaving for the day is not compensable.
More importantly, the Court greatly narrowed the test for determining whether preliminary and postliminary activities are compensable by requiring that they constitute an "intrinsic element" of the principal activities and "one with which the employee cannot dispense if he is to perform his principal activities." In doing so, the Court held that whether an employer required a particular activity or whether the activity was for the benefit of the employer is insufficient to call an activity "integral or indispensable."
Background
The FLSA established minimum wage and overtime compensation requirements in the payment of wages. In 1947, Congress passed the Portal-to-Portal Act to clarify that certain acts are not compensable under the FLSA, including commuting time and activities that are preliminary or postliminary to the principal activity or activities an employee is employed to perform.
The Supreme Court has consistently interpreted the term "principal activity or activities" to embrace all activities that are an "integral and indispensable part of the principal activities." However, the Court has not articulated a uniform test to be used in determining what constitutes "integral and indispensable," leading lower courts to examine the relationship between the activity at issue and the principal activities the employee is paid to perform. In doing so, courts have utilized a variety of factors, including whether the activity is required by the employer, whether the activity is necessary for the employee to perform his or her duties, and whether the activity primarily benefits the employer.
The Busk Facts
Jesse Busk and Laurie Castro worked as hourly employees of Integrity Staffing Solutions, Inc., which provides warehouse staffing to Amazon.com throughout the United States. As warehouse employees, they retrieved products from the shelves and packaged those products for delivery to Amazon customers. Integrity required its employees to undergo a security screening before leaving the warehouse at the end of the day. This screening comprised of removing items, including wallets, keys and belts, and passing through metal detectors.
Busk and Castro filed a putative class action alleging they were entitled to compensation for time spent waiting to undergo and actually undergoing the security screenings. They alleged that such time amounted to roughly 25 minutes each day and that it could have been reduced to a de minimis amount if Integrity had added more screeners or staggered termination of shifts. They also claimed the security screenings were required by the employer and were solely for the benefit of the employer since they were conducted to prevent employee theft.
The District Court dismissed the complaint for failure to state a claim, stating that the screenings were not an integral and indispensable part of the principal activities the employees were employed to perform. The U.S. Court of Appeals for the Ninth Circuit reversed in relevant part, holding that since Integrity required these security screenings, this activity was "necessary" to the employees' primary work as warehouse employees and done for Integrity's benefit.
The Supreme Court's Opinion
The Court closely examined the ordinary definitions and its prior usage of the terms "integral" and "indispensable." In doing so, the Court ultimately held that an activity is "integral and indispensable to the principal activities that an employee is employed to perform 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."
In applying this holding to the case at hand, the Court noted that Integrity did not employ its warehouse workers to undergo security screenings, but to retrieve products from warehouse shelves and package them for shipment. In fact, Integrity could have eliminated the security screenings altogether, and this would have no impact or impairment on the employees' ability to perform and complete their work.
Most importantly, the Court stated that the Ninth Circuit erred by focusing on whether an employer required a particular activity and whether the activity was for the benefit of the employer. The Court noted that the test is tied to the productive work that the employee is "employed to perform," and a test satisfied merely by the fact that an employer required an activity would sweep into compensable principal activities the very activities the Portal-to-Portal Act was designed to address. In addition, a test that turns on whether the activity is for the benefit of the employer is similarly overbroad.
Finally, the court rejected the argument that Integrity could have reduced security screening time. The Court held that the fact that an employer could conceivably reduce time spent on preliminary or postliminary activities does not change the nature of the activity or whether it is compensable.
What does this mean for Employers?
This is an early holiday present for employers and a significant win. By narrowly defining the test for activities that are "integral and indispensable," and thus compensable, the Court has made it easier for employers to dispose of certain wage and hour claims concerning preliminary and postliminary activities. Employees can no longer contend that activities are compensable merely because they are required by the employer or because they benefit the employer. Employees must instead allege that they were not compensated for time performing activities that they cannot "dispense" with in performing their principal duties, a much more specific requirement than previously entertained by the courts.
To learn more about this opinion and other compensable time issues, please join us at FordHarrison's Annual New Jersey Labor and Employment Law Workshop this Thursday, December 11, 2014. Information is available at the following link: http://bit.ly/1qxmF3u. You may also contact the FordHarrison attorney with whom you usually work.