Sec'y U.S. Dep't of Labor v. Am. Future Sys., Inc.
| Decision Date | 13 October 2017 |
| Docket Number | No. 16-2685.,16-2685. |
| Citation | 873 F.3d 420 |
| Parties | SECRETARY UNITED STATES DEPARTMENT OF LABOR v. AMERICAN FUTURE SYSTEMS, INC. d/b/a Progressive Business Publications, a Corporation; Edward Satell, Individually and as President of the above referenced Corporation, Appellants |
| Court | U.S. Court of Appeals — Third Circuit |
Alfred W. Putnam, Jr., Esq. [ARGUED], Dorothy A. Hickok, Esq., Drinker Biddle & Reath, 18th & Cherry Streets, One Logan Square, Suite 2000, Philadelphia, PA 19103, Sarah E. Bouchard, Esq., Morgan, Lewis & Bockius, 1701 Market Street, Philadelphia, PA 19103, Lincoln O. Bisbee, Esq., Morgan, Lewis & Bockius, 1111 Pennsylvania Avenue, N.W., Suite 800 North, Washington, DC 20004, Attorneys for Appellants
M. Patricia Smith, Esq., Jennifer S. Brand, Esq., Paul L. Frieden, Esq., Rachel Goldberg, Esq. [ARGUED], Office of the Solicitor, U.S. Department of Labor, 200 Constitute Avenue, N.W., Room N–2716, Washington, DC 20210, Attorneys for Appellee
Jonathan S. Krause, Esq., Klehr Harrison Harvey Branzburg, 1835 Market Street, Suite 1400, Philadelphia, PA 19103, Attorney for Amicus–Appellant
Margaret W. Williamson, Esq., A Better Balance, 80 Maiden Lane, Suite 606, New York, NY 10038, Attorney for Amicus–Appellee
Before: McKEE, RENDELL, FUENTES, Circuit Judges.
We are asked to decide whether the Fair Labor Standards Act requires employers to compensate employees for breaks of 20 minutes or less during which they are logged off of their computers and free of any work related duties. For the reasons set forth below, we conclude that the Fair Labor Standards Act does require employers to compensate employees for all rest breaks of twenty minutes or less. Accordingly, we will affirm the District Court's decision.
American Future Systems, d/b/a Progressive Business Publications, publishes and distributes business publications and sells them through its sales representatives. Edward Satell is the President, CEO, and owner of the company. Sales representatives are paid an hourly wage and receive bonuses based on the number of sales per hour while they are logged onto the computer at their workstation. They also receive extra compensation if they maintain a certain sales-per-hour level over a given two-week period.
Progressive previously had a policy that gave employees two fifteen-minute paid breaks per day. In 2009, Progressive changed its policy by eliminating paid breaks but allowing employees to log off of their computers at any time. However, employees are only paid for time they are logged on. Progressive refers to this as "flexible time" or "flex time" and explains that it "arises out of an employer's policy that maximizes its employees' ability to take breaks from work at any time, for any reason, and for any duration."2
Furthermore, under this policy, every two weeks, sales representatives estimate the total number of hours that they expect to work during the upcoming two-week pay period. They are subject to discipline, including termination, for failing to work the number of hours they commit to.3 Progressive also sends representatives home for the day if their sales are not high enough4 and sets fixed work schedules or daily requirements for representatives when that is deemed necessary.5
Apart from those requirements, representatives can decide when they will work between the hours of 8:30 AM and 5:00 PM from Monday to Friday, so long as they do not work more than forty hours each week.6 As noted above, during the work day, they can log off of their computers at any time, for any reason, and for any length of time and may leave the office when they are logged off. Employees choose their start and end time and can take as many breaks as they please. However, Progressive only pays sales representatives for time they are logged off of their computers if they are logged off for less than ninety seconds. This includes time they are logged off to use the bathroom or get coffee. The policy also applies to any break an employee may decide to take after a particularly difficult sales call to get ready for the next call. On average, representatives are each paid for just over five hours per day at the federal minimum wage of $7.25 per hour.7
The Secretary filed suit against Progressive and Satell alleging that they violated the FLSA by failing to pay the federal minimum wage to employees subject to this policy, and by failing to maintain mandatory time records.8 The Secretary of Labor argued that this policy violated section 6 of the Fair Labor Standards Act9 "by failing to compensate ... sales representative employees for break[s] of twenty minutes or less ...."10 The Secretary sought to recover unpaid compensation owed to Progressive's employees, an equal amount in liquidated damages, and a permanent injunction enjoining Progressive from committing future violations.11
Progressive moved for summary judgment, and the Secretary moved for partial summary judgment on select issues, including its minimum wage claim and claim for liquidated damages. The District Court denied Progressive's motion and granted the Secretary's motion in part.12 In doing so, the court noted that the Department of Labor ("DOL") has consistently applied the Wage and Hour Division's ("WHD")13 interpretation of the FLSA under 29 C.F.R. § 785.18 to this kind of break. That regulation provides that:
Rest periods of short duration, running from 5 minutes to about 20 minutes, are common in industry. They promote the efficiency of the employee and are customarily paid for as working time. They must be counted as hours worked. Compensable time of rest periods may not be offset against other working time such as compensable waiting time or on-call time.14
The District Court afforded the Secretary's interpretation of section 785.18 substantial deference.15 It agreed that section 785.18 created a bright-line rule and concluded that Progressive therefore violated the FLSA by failing to pay its employees for rest breaks of twenty minutes or less. This appeal followed.
The District Court had jurisdiction under 28 U.S.C. § 1331. We exercise jurisdiction pursuant to 28 U.S.C. § 1291. We review a grant of summary judgment de novo.16 Summary judgment is appropriate where the moving party is entitled to judgment as a matter of law, and there is no genuine dispute as to any material fact.17 In reviewing a motion for summary judgment, we view the evidence in the light most favorable to the non-moving party.18 We refrain from making credibility determinations or weighing the evidence.19
We review the District Court's decision to deny or limit liquidated damages for abuse of discretion.20 Although we must apply the clearly erroneous standard of Federal Rule of Civil Procedure 52(a) when reviewing the District Court's findings of fact "which underlie its ‘good faith’ and ‘reasonableness' determinations ... and the finding of subjective good faith itself, we exercise plenary review of the [D]istrict [C]ourt's legal conclusion that [a party] had ‘reasonable grounds for believing’ that its violative conduct was not a violation of the FLSA."21
Progressive advances three arguments on appeal: (1) that time spent logged off under its flexible break policy categorically does not constitute work; (2) that the District Court erred in finding that WHD's interpretive regulation on breaks less than twenty minutes long, 29 C.F.R § 785.18, is entitled to substantial deference; and (3) that the District Court erred in adopting the bright-line rule embodied in 29 C.F.R. § 785.18 rather than using a fact-specific analysis. We do not find any of these arguments persuasive.
Progressive first argues that under its policy, because employees are basically free to do anything they choose and can even leave the job site when logged off of their computers, the time when employees are logged off of their computers does not constitute "work," and therefore, the FLSA does not apply. We disagree.
The FLSA governs compensation for "hours worked."22 But it does not define "work."23 It is well established that some breaks constitute "hours worked" under the FLSA.24 Thus, hours worked is not limited to the time an employee actually performs his or her job duties.25 The FLSA does not require employers to provide their employees with breaks. However, if an employer chooses to provide short breaks of five to twenty minutes, the employer is required to compensate employees for such breaks as hours worked.26
Progressive argues that it does not have a "break policy" per se. Rather, it claims that the "flexible time" policy described above, which allows employees to do whatever they wish and be wherever they want for periods of twenty minutes or less while logged off of their computers, does not constitute "hours worked." According to Progressive, since the FLSA does not require it to provide breaks, it does not need to compensate its employees for these periods.
Although Progressive's position may have some superficial appeal, it cannot withstand scrutiny. According to Progressive, if an employer has a policy allowing employees to log off and leave their work stations at any time, for any reason, it does not have to compensate employees if they take a break. Progressive does not deny that it permits employees to log off; it just refuses to call those time periods "breaks." This misses the point of the FLSA's regulatory scheme. Its protections cannot be negated by employers' characterizations that deprive employees of rights they are entitled to under the FLSA.27 The "log off" times are clearly "breaks" to which the FLSA applies.
The policy that Progressive refers to as "flexible time" forces employees to choose between such basic necessities as going to the bathroom or getting paid unless the employee can...
To continue reading
Request your trial
-
Walsh v. Fusion Japanese Steakhouse, Inc.
...equal amount of liquidated damages for violations of § 7 of the FLSA. 29 U.S.C. § 216(c) ; Secretary United States Department of Labor v. Am. Future Sys. , 873 F.3d 420, 433 (3rd Cir. 2017). Liquidated damages under § 16(c) are compensatory and they "ease the hardship endured by employees w......
-
Walsh v. E. Penn Mfg. Co.
...in favor of employees. Mitchell v. Lublin, McGaughy & Assocs. , 358 U.S. 207, 211, 79 S.Ct. 260, 3 L.Ed.2d 243 (1959) ; American Future Sys. , 873 F.3d at 426 ("The FLSA is a humanitarian and remedial legislation ...."). The actual time standard effectuates this employee-centric policy goal......
-
Johnson v. Nat'l Collegiate Athletic Ass'n
...it power to persuade, if lacking power to control. Id. at 140, 65 S.Ct. 161. Similarly, in Secretary United States Department of Labor v. American Future Systems, Inc., 873 F.3d 420 (3d Cir. 2017), the Third Circuit noted that, while the Wage and Hour Division's "interpretations are not tec......
-
Sanofi-Aventis U.S., LLC v. U.S. Dep't of Health & Human Servs.
...unchanging [general] policy" spanning almost three decades, with which Plaintiffs complied until recently. Dep't of Lab. v. Am. Future Sys., Inc. , 873 F.3d 420, 428-29 (3d Cir. 2017). In fact, as early as 1996 HHS emphasized that § 340B itself imposes an obligation on manufacturers to fill......