Category Archives: Wage Theft

U.S.S.C.: Time Spent By Employees Waiting For and Undergoing Security Screenings Before Leaving Workplace Was Not Compensable Under FLSA

Integrity Staffing Solutions, Inc. v. Busk

The Supreme Court handed yet another victory to America’s corporations early last month, when it ruled that employers do not have to pay their employees for time spent waiting for and undergoing security screening before leaving the workplace, despite the fact that such screenings are solely for the benefit of the employers. Of note, while the decision reversed a contrary decision from the Ninth Circuit, other Circuits and the DOL itself (which filed an amicus brief in support of employers) have long held that such screenings do not constitute compensable work time.

The Court summarized its decision in its Syllabus, preceding the actual opinion as follows:

Petitioner Integrity Staffing Solutions, Inc., required its hourly warehouse workers, who retrieved products from warehouse shelves and packaged them for delivery to Amazon.com customers, to undergo a security screening before leaving the warehouse each day. Respondents, former employees, sued the company alleging, as relevant here, that they were entitled to compensation under the Fair Labor Standards Act of 1938 (FLSA) for the roughly 25 minutes each day that they spent waiting to undergo and undergoing those screenings. They also alleged that the company could have reduced that time to a de minimis amount by adding screeners or staggering shift terminations and that the screenings were conducted to prevent employee theft and, thus, for the sole benefit of the employers and their customers.

The District Court dismissed the complaint for failure to state a claim, holding that the screenings were not integral and indispensable to the employees’ principal activities but were instead postliminary and noncompensable. The U.S. Court of Appeals for the Ninth Circuit reversed in relevant part, asserting that postshift activities that would ordinarily be classified as noncompensable postliminary activities are compensable as integral and indispensable to an employee’s principal activities if the postshift activities are necessary to the principal work and performed for the employer’s benefit.

Held : The time that respondents spent waiting to undergo and undergoing security screenings is not compensable under the FLSA. Pp. –––– – ––––.

(a) Congress passed the Portal–to–Portal Act to respond to an economic emergency created by the broad judicial interpretation given to the FLSA’s undefined terms “work” and “workweek.” See 29 U.S.C. § 251(a); Tennessee Coal, Iron & R. Co. v. Muscoda Local No. 123, 321 U.S. 590, 598, 64 S.Ct. 698, 88 L.Ed. 949. The Portal–to–Portal Act exempted employers from FLSA liability for claims based on “activities which are preliminary to or postliminary to” the performance of the principal activities that an employee is employed to perform. § 254(a)(2). Under this Court’s precedents, 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, 76 S.Ct. 330, 100 L.Ed. 267. An activity is “integral and indispensable” if it is an intrinsic element of the employee’s principal activities and one with which the employee cannot dispense if he is to perform his principal activities. This Court has identified several activities that satisfy this test—see, e.g., id., at 249, 251, 76 S.Ct. 330; Mitchell v. King Packing Co., 350 U.S. 260, 262, 76 S.Ct. 337, 100 L.Ed. 282—and Department of Labor regulations are consistent with this approach, see 29 CFR §§ 790.8(c), 790.7(g). Pp. –––– – ––––.

(b) The security screenings at issue are noncompensable postliminary activities. To begin with, the screenings were not the principal activities the employees were employed to perform—i.e., the workers were employed not to undergo security screenings but to retrieve products from warehouse shelves and package them for shipment. Nor were they “integral and indispensable” to those activities. This view is consistent with 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 Ninth Circuit’s test, which focused on whether the particular activity was required by the employer rather than whether it was tied to the productive work that the employee was employed to perform, would sweep into “principal activities” the very activities that the Portal–to–Portal Act was designed to exclude from compensation. See, e.g., IBP, supra, at 41, 126 S.Ct. 514. Finally, respondents’ claim that the screenings are compensable because Integrity Staffing could have reduced the time to a de minimis amount is properly presented at the bargaining table, not to a court in an FLSA claim. Pp. –––– – ––––.

While the decision was lauded by corporations throughout the country, it does not present a significant change to the existing law. However, depending on how the dicta in the decision is read in the future the case could have wide unanticipated consequences going forward. For this reason, and because it is from the United States’ highest court, wage and hour practitioners would be wise to read the entire decision.

Click Integrity Staffing Solutions, Inc. v. Busk to read the entire decision.

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11th Cir.: Following Tender of Unpaid Wages and Liquidated Damages, an Employer Only Moots a Case if the Plaintiff Agrees to Dismissal, Absent Payment of Mandatory Fees and Costs

Dionne v. Floormasters Enterprises, Inc.

Following a controversial opinion that created more questions than it answered, the Eleventh Circuit reconsidered it’s prior Opinion in this case and in so doing largely restricted its holding to the unique facts presented in the case.  Previously the Court had held that  an employer, who denies liability for nonpayment for overtime work, need not pay attorney’s fees and costs pursuant to 29 U.S.C. § 216(b) of the Fair Labor Standards Act (“FLSA”) if the employer tenders the full amount of overtime pay claimed by an employee, and moves to dismiss on mootness grounds where the employee concedes that “the claim for overtime should be dismissed as moot.  Although the prior Opinion seemed restricted to these unique facts where the employee conceded that the overtime claim should be dismissed (but attempted to reserve as to fees/costs), courts throughout the Eleventh have since expanded the holding to scenarios where the employee makes no such stipulation.  Here, the Eleventh Circuit affirmed the prior decision, but clarified and limited its applicability.

Significantly, the Eleventh Circuit included the following footnote in its new Opinion:

“Our decision in this matter addresses a very narrow question: whether an employee who conceded that his claim should be dismissed before trial as moot, when the full amount of back pay was tendered, was a prevailing party entitled to statutory attorney’s fees under § 216(b). It should not be construed as authorizing the denial of attorney’s fees, requested by an employee, solely because an employer tendered the full amount of back pay owing to an employee, prior to the time a jury has returned its verdict, or the trial court has entered judgment on the merits of the claim.”

It remains to be seen exactly how the new Dionne Opinion will be applied by trial courts, but it does appear that much of the uncertainty created by the initial Opinion has now been resolved.  To that end, it appears that a Plaintiff who has suffered a theft of his or her wages can now safely accept tender of such wages (and liquidated damages) in response to a lawsuit to collect same, without fear that the employer can avoid payment of mandatory fees and costs, as long as they do not agree that the tender moots the case.

Click Dionne v. Floormasters Enterprises, Inc. to read the entire Opinion on Petition for Rehearing.

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W.D.Mo.: Plaintiffs Sufficiently Pled a “Rounding” Claim, Where Alleged Defendants’ Policy of Rounding Resulted in Improper Denial of Wages

McClean v. Health Systems, Inc.

The Plaintiffs, Certified Nursing Assistants (“CNAs”) for Defendant, claimed that they were required to work off the clock during automatically deducted meal breaks, during mandatory meetings and training sessions, and while performing mandatory data entry known as “dart charting.”  The result of these policies was to allegedly deny the Plaintiffs wages and overtime. After the Plaintiffs amended their Complaint the Defendants filed a motion to dismiss regarding several of Plaintiffs’ allegations.  As discussed here, the court denied Defendants’ motion as it pertained to Plaintiffs’ claims arising from Defendants’ policy of rounding their time to the nearest quarter of an hour, regardless of actual time worked.

Discussing the sufficiency of the rounding claim, the court explained:

“One of the Plaintiffs’ substantive allegations is that the Defendants have a practice of “reduc[ing] [their] employees’ work hours by rounding their hours to the nearest quarter hour of time to their detriment (i.e., the rounding did not average out to equally benefit Defendants and its employees over time) which results in Defendants not paying its employees for all time worked.” Doc. 51 at ¶ 112. Defendants cite federal regulations which expressly allow the practice of rounding to the nearest 15–minute increment. 29 C.F.R. § 785.48(b) (“For enforcement purposes this practice of [rounding to 5, 10 or 15–minute increments] will be accepted, provided that it is used in such a manner that it will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked.”).  The Defendants submit Harding v. Time Warner, Inc. in support of their position that the Plaintiffs have not sufficiently pled a claim of improper rounding. No. 09cv1212–WQH–WMC, 2010 WL 457690 (S .D.Cal. Jan. 26, 2010). In Harding, the court found that, despite describing the allegedly improper rounding procedures in detail, Harding had failed to provide “specific factual allegations” showing that employees had been underpaid. Id. at *5. The Plaintiffs provided the following statements regarding rounding in their Amended Complaint:

112. Defendants further reduce its [sic] employees’ work hours by rounding their hours to the nearest quarter hour of time to their detriment (i.e., the rounding did not average out to equally benefit Defendants and its [sic] employees over time) which results in Defendants not paying its [sic] employees for all time worked. This practice results in Plaintiffs and all other similarly situated employees being denied wages including overtime premiums and Defendants’ illegal rounding practices are not de minimus. [sic]

113. Even though Defendants had a computerized timekeeping system in place and could have easily recognized and paid Plaintiffs’ and other similarly situated employees’ actual hours worked, Defendants deliberately disregarded the system’s records and rounded Plaintiffs’ and other similarly situated employees work time down to the nearest quarter of an hour.”

114. Defendants willfully and illegally rounded Plaintiffs’ and other similarly situated employees’ work time down to the nearest quarter of a [sic] hour.

Doc. 51 at ¶¶ 112–14 (legal conclusions in bold). Iqbal requires “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 129 S.Ct. at 1949. The Plaintiffs allege that the rounding did not average out properly. They further allege that the Defendants maintain a computerized system which keeps time, but still chose to use rounding. Assuming the truth of these allegations, the Court can plausibly infer that the Defendants chose to round time because it would be more favorable than paying for actual time worked on a minute by minute basis, thus violating the averaging rationale inherent to rounding. While the Plaintiffs could have chosen to state more, to require them to plead, for example, specific minutes on specific days for which they were denied wages would be fact pleading inconsistent with Iqbal. Hamilton v. Palm, 621 F.3d 816, 817 (8th Cir.2010) (noting that “Iqbal did not abrogate the notice pleading standard of Rule 8(a)(2)”). The Defendants’ Motion to dismiss the Plaintiffs’ rounding claim is DENIED.”

Click McClean v. Health Systems, Inc. to read the entire Order.

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DOL Debars Seattle-Based Federal Contractor for Violating Minimum Wage, Overtime and Record-Keeping Laws

The U.S. Department of Labor has debarred HWA Inc., President John Wood and Vice President Barbara Wood from future government contracts for three years, due to significant and repeated violations of the McNamara-O’Hara Service Contract Act and the Contract Work Hours and Safety Standards Act. Seattle-based HWA provided security services as a contractor to various federal facilities, government offices and public works projects in the states of Washington, Oregon, Idaho, Missouri and New York.

“The Labor Department will not allow federal contractors to misuse public funds and exploit hardworking laborers by denying their rightful wages,” said Secretary of Labor Hilda L. Solis. “Debarring violators such as HWA from future contracts ensures a level playing field, so that honest companies are not placed at a competitive disadvantage for playing by the rules, and paying their workers full and fair prevailing wages.”

According to a DOL press release:

“Most recently, in 2009, the company defaulted on seven federal contracts and failed to meet its payroll obligations, resulting in nearly $1 million in unpaid wages for 206 employees. The division ordered an emergency withholding of funds on several of the company’s federal contracts and secured the full payment of these wages. All SCA contracts held by the HWA were terminated shortly thereafter.”

The Service Contract Act (SCA) contract clauses, present in all Federal contracts, require contractors and subcontractors performing services under prime contracts in excess of $2,500 to pay service employees in various classes no less than the wage rates and fringe benefits found prevailing in the locality, or the rates contained in a predecessor contractor’s collective bargaining agreement, including prospective increases. The Labor Department issues SCA wage determinations for contracting agencies to incorporate into covered contracts, along with the required contract clauses. The fringe benefit requirements — usually vacation and holidays, known as “health and welfare” benefits — are separate and in addition to the hourly monetary wage requirement under the SCA. In addition, employers with prime contracts in excess of $100,000 under the CWHSSA must pay workers at least one and one-half times their regular rates of pay for all hours worked over 40 in a week.

Although violations of the primary federal wage and hour law, the Fair Labor Standards Act (FLSA), may be pursued by aggrieved employees in private lawsuits, alleged violations of the McNamara-O’Hara Service Contract Act and the Contract Work Hours and Safety Standards Act, may only be pursued by the DOL.  Largely due to the fact that under the prior republican leadership, the employer-friendly DOL pursued very few of these cases, such violations are commonplace on Federal worksites, despite the various laws prohibiting them.  Hopefully, as the current DOL pursues these cases more frequently, workers will once again be assured of the protections of the laws that are on the books.

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Filed under Department of Labor, Wage and Hour News, Wage Theft

Two Boca Raton Business Owners Accused Of Slavery Plead Guilty, Palm Beach Post Reports

The Palm Beach Post reports that:

“Two Boca Raton business owners accused of pressing Filipino workers into slavery pleaded guilty to federal criminal charges, the U.S. Justice Department announced today.

Sophia Manuel, 41, and Alfonso Baldonado Jr., 45, owners of Quality Staffing Services Corporation, pleaded guilty to conspiring to hold 39 Filipino nationals in compelled service at country clubs and hotels in South Florida, a Justice Department news release stated. A sentencing date is pending.

Manuel also pleaded guilty to making false statements to the U.S. Department of Labor in an application to obtain foreign labor certifications and visas, the release stated.

Manuel and Baldonado pressed the Filipino nationals into work for little or no pay, forced them to sleep on kitchen and garage floors, fed them rotten vegetables and chicken innards, and threatened to have them deported, according to court documents.”

To read the entire article, click here.

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Growth of Unpaid Internships May Be Illegal, New York Times Reports

Today’s NY Times reports that there is a growing trend of employers, who illegally deem workers, entitled to be paid at least minimum wage, to be unpaid “interns.”

The article reports that, “[w]ith job openings scarce for young people, the number of unpaid internships has climbed in recent years, leading federal and state regulators to worry that more employers are illegally using such internships for free labor.

Convinced that many unpaid internships violate minimum wage laws, officials in Oregon, California and other states have begun investigations and fined employers. Last year, M. Patricia Smith, then New York’s labor commissioner, ordered investigations into several firms’ internships. Now, as the federal Labor Department’s top law enforcement official, she and the wage and hour division are stepping up enforcement nationwide.

Many regulators say that violations are widespread, but that it is unusually hard to mount a major enforcement effort because interns are often afraid to file complaints. Many fear they will become known as troublemakers in their chosen field, endangering their chances with a potential future employer.”

To read the entire article, click here.

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Miami-Dade County Passes New Wage Theft Ordinance, Miami Herald Reports

The Miami Herald reports that Miami-Dade “[c]ounty overwhelmingly passed a new ordinance to combat wage theft, making it easier for workers to bring legal action against employers who fail to pay them.

Thursday’s vote comes after more than a year of work by a non-governmental task force of labor and immigrant advocates in Miami. San Francisco has a similar ordinance. Los Angeles and New Orleans are considering them.”

In addition to recovering the unpaid wages that have been wrongly denied them, workers can recover 2 times that amount in additional damages.  The ordinance will result in a a low-cost administrative process that seeks to speed along claims for workers who have not been properly paid their wages.

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