When is an employee entitled to be paid for taking a break at work? That was the question that the Third Circuit Court of Appeals had to address in the recent case of Secretary United States Department of Labor v. American Future Systems, Inc., No. 16-2685 (October 13, 2017). In this case, the Third Circuit had to decide whether employees of the defendant company were entitled under the Fair Labor Standards Act (“FLSA”) to be paid for periods of time of 20 minutes or less when they were relieved of all work-related duties. In a significant victory for employees, the Third Circuit said that these employees were indeed entitled to such wage payments.
Defendant employed sales representatives who were paid a base hourly wage and qualified for bonuses and additional compensation based upon work they performed while logged on to their work computers. In 2009, defendant eliminated its existing policy allowing such sales reps to take two 15 minute breaks per day. Under the company’s new policy, employees were allowed to determine the frequency, length and time and duration of the breaks. While employees could take breaks for any reason, defendant only paid such sales rep employees for breaks lasting under 90 seconds.
The United States Secretary of Labor (“DOL”) brought suit against the defendant claiming the lack of payment for any breaks that were less than 20 minutes long violated the FLSA. This was based upon the DOL’s long-standing bright line rule that all breaks taken by employees for under 20 minutes required payment under the FLSA. The defendant attempted to justify its practice of nonpayment by claiming that the time that the sales reps stopped working was not a break in the legal sense but “flex time.” The District Court rejected this distinction, and gave deference to the DOL’s interpretation of what was required by the FLSA in its long-standing rule requiring payment for all breaks under 20 minutes long. The Third Circuit also ultimately rejected defendant’s argument as well, and likewise enforced the DOL’s long-standing rule on the payment requirement for breaks under 20 minutes.
The Third Circuit’s decision is a friendly reminder about the dangers of not knowing all the nuances of wage and hour legal requirements. The DOL has issued a number of regulations that provide guidance to employers on how that agency interprets the wage and hour payment requirements of the FLSA, with one of those being the 20 minute break compensation rule at issue in this case. In this case, not only did this employer have to pay for the actual wages required for all uncompensated employee 20 minute break periods, but the court also awarded liquidated damages. Liquidated damages consist of payment of double the amount of the wages that are owed. Before incurring such costly expenses, it is best to make sure that all novel compensation policies are legally sound and will withstand any possible future scrutiny from the DOL.