On October 13, 2017, the Third Circuit held in Secretary United States Department of Labor v. American Future Systems, Inc., that under the Fair Labor Standards Act (FLSA), an employer was required to compensate employees for all breaks of twenty minutes or less that the employer treated as flex time for the employees.
Facts and Analysis
Defendant American Future Systems, d/b/a Progressive Business Publications (“Progressive”) employed sales representatives to sell its business publications. The sales representatives were paid on an hourly basis, but only when logged onto their computers. In 2009, Progressive eliminated its policy that permitted employees to take two 15 minute paid breaks per day and replaced it with a “flexible time” policy. The flexible time policy allowed sales representatives to “log-off the computer system at any time of the day, for any reason, and for any length of time, at which point, if they so choose, they may leave the office.” Employees were required to log off their computers if they were “not on an active sales call, recording the results of a call, engaged in training or administrative activities, or engaged in other activities that Progressive considers to be work-related.” If sales representatives were logged out of their computers for over 90 seconds, they were not compensated for this flexible time. The Labor Secretary filed suit against Progressive arguing that its flexible break policy violated the FLSA.
In its motion for summary judgment, Progressive argued that flexible time does not constitute hours worked under the FLSA and that the FLSA does not require an employer to provide breaks, thereby obviating any requirement to pay for breaks. Progressive also argued that employees were free to use the flexible time at their discretion. The Court disagreed, relying on a Wage Hour Division (“WHD”) interpretation that provides that an employer is not required to provide breaks, but once it does, the breaks are compensable.
The Court also disagreed with Progressive’s assertion that 29 C.F.R. § 785.16 applied, and found instead that 29 C.F.R. § 785.18 is controlling and enforceable as a bright-line rule. Under section 785.18, “[r]est periods of short duration, running from 5 minutes to about 20 minutes, are common in industry . . . . They must be counted as hours worked.” In contrast, section 785.16 states that breaks “long enough to enable [employees] to use the time effectively for [their] own purposes are not hours worked.” The Court found that the more specific language in 785.18 regarding breaks of 5-20 minutes trumps the general guidance of section 785.16 regarding relief from work where the employee is completely relieved from duty. Moreover, the Court found that applying the predominant benefit test to breaks of 20 minutes or less would be “difficult, if not impossible, to implement in all workplace settings,” and reasoned that short breaks are for the primary benefit of the employer, not the employee, specifically in the present case where “short work intervals better prepare the sales representative to deal with the next call.” The Court concluded that section 785.18 must be enforced as a bright line rule.
In addition to confirming a long-standing WHD interpretation that breaks of 20 minutes or less are compensable, the Third Circuit made clear that a loosely-structured short break characterized by the employer as flex time “for the benefit of the employee” cannot avoid compensability under the FLSA. The Court’s finding in American Future Systems is a reminder that attempts to avoid compensating for off-the-clock work can succumb to significant legal challenge.
If you have any questions regarding this blog, or wage and hour issues generally, please feel free to contact any of the attorneys in the Gibbons Employment & Labor Law Department.