Off the Clock Work

American Future Systems, doing business as Progressive Business Publications, was recently ordered to pay $1.75 million dollars to a class of call center workers for unpaid bathroom breaks and other short rest breaks. This amount includes wages owed for time spent on these short breaks plus liquidated (double) damages in an equal amount.

Jim Cain, District Director for the Department of Labor Wage and Hour Division, commented on the ruling and stated: “The judge’s decision reaffirms how clear the Fair Labor Standards Act is about short breaks being compensable, and goes a long way in making these employees whole by awarding liquidated damages.”

Paying for Bathroom Breaks

American Future Systems employs more than 6,000 employees who work in 14 call centers throughout Pennsylvania, New Jersey and Ohio. Many of the company’s employees work as telemarketers who offer free subscriptions to the company’s 20 newsletters. Subscribers are billed after the first few issues unless they cancel their subscriptions.

Cain went on to say that “[f]or far too long, American Future Systems penalized its employees for taking breaks to meet the most basic needs during the work day – stretching their legs, getting a glass of water or just using the restroom.”

What is Compensable?

Federal law does not require lunch or coffee breaks. However, when employers do offer short breaks (usually lasting about 5 to 20 minutes), federal law considers the breaks as compensable work hours that would be included in the sum of hours worked during the work week and considered in determining if overtime was worked. Unauthorized extensions of authorized work breaks need not be counted as hours worked when the employer has expressly and unambiguously communicated to the employee that the authorized break may only last for a specific length of time, that any extension of the break is contrary to the employer’s rules, and that any extension of the break will be punished.

Bona fide meal periods (typically lasting at least 30 minutes), serve a different purpose than coffee or snack breaks and, thus, are not work time and are not compensable.

The American Future Systems decision is yet another example of how an employer can run afoul of state and federal wage and hour laws.  In particular, with call centers, the employer often runs afoul of the law by not counting time spent booting up and shutting down computers at the start and end of each day. This, like meal breaks, is also compensable time for which an employee must be paid. Furthermore, the time spent performing these tasks must be included in their overtime hour calculations.

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Five current and former administrative assistants recently brought wage and hour claims under the Fair Labor Standards Act (FLSA) against the New York City Department of Homeless Services. The plaintiffs brought the case as a collective action under the FLSA and sought to include all similarly situated individuals in the case. The class was conditionally certified, only to later be decertified by the Federal District Judge in the Southern District of New York, who was not satisfied that the class was similarly situated where they worked in different units and reported to different departments. Additionally, the Judge held that the plaintiffs’ own testimony illustrated “critical differences in what supervisors told their employees about overtime.” The plaintiffs alleged that they were forced by the City to work off-the-clock; and when the off-the-clock work was included in their workweek, their hours worked exceeded 40 and they should have been paid overtime.

Decertifcation Process

Following discovery and motion practice, the court granted the City’s motion for decertification of the FLSA collective, determining that the plaintiffs were not similarly situated under the stage two inquiry, after discovery was complete. Generally, Courts in the 2^nd Circuit follow a two-step process to certifying FLSA collective actions. The first step occurs before discovery has been done, and a lenient standard is applied.  However, the stage two inquiry is made on a motion for decertification after discovery has been completed and entails a heightened burden of proof for the plaintiffs to show they are similarly situated.

At this point, the case will proceed on an individual basis. The Court made no ruling on whether the class had valid FLSA claims, only that the plaintiffs were not similarly situated to the class they sought to represent.

The case is Lynch v City of New York and it is pending in the United States District Court for the Southern District of New York.

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The Fair Labor Standards Act (FLSA) has provisions that ostensibly allow employers the ability to select various alternate methods of payment while remaining compliant with current FLSA law. The devil is in the details, and the CFR (Code of Federal Regulations) must be filed to be compliant.

One method included is the “fluctuating workweek method”, which is payment of a base weekly salary to an employee, regardless of hours worked, but with an overtime rate that fluctuates based on the hours worked. The key idea to successful integration of the fluctuating work week method is establishing a clear and mutual understanding of how employees will be paid. In a recent opinion in the 11^th Circuit Court of Appeals, a case regarding Georgia employers and employees, the testimony provided by the employer in a deposition proved that required clarity of understanding prevailed in this case and that the employer was not liable for overtime FLSA violations.

The employee accepted the employment offer from Yachting Promotions, Inc. Yachting Promotions is a company that hosts boat displays, shows, and special events and promotions. Garcia, the plaintiff, lodged allegations that he worked in excess of forty hours per week in each week that Yachting Promotions employed him, but he was never compensated for the extra hours that he worked, resulting in Garcia lodging a FLSA lawsuit against the employer for overtime wages owed. The employer contested in Garcia v. Yachting Promotions, stating that Garcia was not entitled to overtime wages, as he had originally signed a document specifying that the wage payment method would fall under the fluctuating workweek method.

Under the fluctuating workweek method, an employee enters an agreement to receive a fixed salary each week regardless of how many hours work is actually performed. To enable use of this method, an employer must ensure that the employee fully comprehends that his payment method is a fixed salary for all hours worked during the work week each week. In Garcia’s job, the employment agreement was signed by Garcia stating he understood that his pay would be capped at $779 per week on salary arrangement and that his pay aligned and was in accordance with the fluctuating workweek method.

Garcia provided arguments stating he should be permitted to pursue FLSA proceedings, as he failed to comprehend what he had signed. The document was in English, and Garcia’s native language is Spanish. Garcia claimed that all that was conveyed in signing of the document was the message that he was required to sign the document or risk losing the employment position. Although the law clearly states “clear mutual understanding of both parties” that the wages would be provided under the fluctuating workweek method, the trial court awarded a summary judgement in favor of the employer. The 11^th Circuit Court also upheld the court’s ruling.

Garcia testified in his deposition that he understood that he was an employee receiving salary payments at a base rate of $779 per week regardless of the number of hours worked. That testimony alone was enough to satisfy the court’s requirement for mutual understanding in accordance with the law, and as a result, issued a ruling in favour of the employer.

Still, the fluctuating work week is very nuanced, and there are subtle differences in policy that would affirm this type of structure or make it run afoul of wage and hour laws. A seasoned overtime attorney should always examine the pay and policy to determine if there is an overtime violation.