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FLSA Cases Provide Practical Guidance on Pay
Free Download: How to Comply with FLSA Minimum Wage & Overtime Requirements

Number of Employees, Overtime Frequency Defeat De Minimis Rule
Tenth Circuit Applies Three-Factor De Minimis Tes
Apply Three-Factor Test to Determine Paid Time
Changing Payday Does Not Violate FLSA
Employees Allege Minimum Wage, Overtime Violations
Four-Part Standard Used For Changing Paydays
Apply Standard; Check Applicable State Laws

Two decisions interpreting the FLSA provide employers with guidance on what time must be counted as paid, working time and when an employer may change its payday schedule. In both cases, the courts provided tests that employers can use in evaluating their own decisions on these issues.

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An employer who did not pay for preliminary and postliminary duties owes current and former employees $1.5 million in unpaid overtime wages, according to the Tenth Circuit Court of Appeals in Reich v. Monfort Inc., Nos. 96-1544 and 97-1028 (5/22/98). In reaching its conclusion, the court provided employers with a three-factor test to interpret the de minimis exception to the Fair Labor Standards Act ("FLSA").

Number of Employees, Overtime Frequency Defeat De Minimis Rule                            [Download Free Policies]

Workers at the employer’s Colorado meat processing and packing plant were required to put on various items of safety equipment and sanitary clothing before beginning their shift and remove the items and clean equipment when the shift ended. These preliminary and postliminary activities added about 10 minutes daily to each employee’s work day. From 1989 to 1993, the period covered by this lawsuit, between 1500 and 1700 employees worked at the plant.

During trial at the district court level, the employer maintained that these tasks were not compensable under the de minimis exception to the FLSA. Under regulations to the FLSA, preliminary and postliminary activities that are part of the principal activity are considered working time that must be paid. However, the courts have determined that accounting for this time presents administrative difficulties, so they have established the de minimis exception. The de minimis rule recognizes that employers should not have to pay for time considered to be so insubstantial and insignificant that it cannot, as a practical administrative matter, be precisely recorded for payroll purposes. The district court found the de minimis rule did not apply in this case because of the large number of employees involved and the daily frequency of the tasks. The district court ordered the employer to pay back wages to the affected current and former employees, and the employer appealed to the Tenth Circuit.

Tenth Circuit Applies Three-Factor De Minimis Test

The Tenth Circuit Court of Appeals upheld the district court’s decision. In considering if the time is de minimis, the Tenth Circuit applied a three-factor test. The court considered (1) the practical administrative difficulty of recording the additional time; (2) the size of the claim in the aggregate; and (3) whether the claimants performed the work on a regular basis. In its evaluation, the court acknowledged the administrative difficulty in recording the time. However, the court determined that the second and third factors, namely the number of employees involved and the daily occurrence of the preliminary and postliminary activities, made the time in question compensable time.

Apply Three-Factor Test to Determine Paid Time

Employees’ principal activities that should be paid time include those closely-related activities which are indispensable to an employee’s performance. Employers should examine workers’ preliminary and postliminary activities to determine if they meet this definition. If so, employers should use the three-part test to determine if the activities qualify for the de minimis exception. If it is administratively possible to record the time and if a significant number of workers perform the tasks on a regular basis, these preliminary and postliminary activities probably will be considered compensable time.

Changing Payday Does Not Violate FLSA

In another FLSA interpretation, the Second Circuit Court of Appeals determined that an employer who changed the payday schedule permanently for administrative reasons did not violate the FLSA. In its decision in John F. Rogers v. Troy, N.Y., No. 97-7120 (5/22/98), the court relied on the FLSA regulations regarding workweeks and the payment of overtime and developed a four-part standard to be met when an employer changes paydays.

Employees Allege Minimum Wage, Overtime Violations

For administrative reasons, the Troy city officials decided to adopt a uniform payday for both civilian workers and police officers. The city phased in the new payday schedule by delaying the police officers’ pay by one day each week for five weeks. The police officers filed suit, charging the city violated the FLSA by not paying them promptly. The district court dismissed the officers’ claim by determining that the payday change was permanent and not designed to sidestep the FLSA. The officers appealed to the Second Circuit.

Four-Part Standard Used For Changing Paydays

In its decision, the Second Circuit focused on the issue of whether an employer can change the payday. While the FLSA requires prompt payment of wages, it does not specify when wages must be paid. In the absence of statutory direction on this issue, the court looked to the FLSA regulation regarding the beginning and ending of the workweek for purposes of calculating overtime wages. According to the regulation, an employer may change the beginning and ending dates of the work period as long as the change is permanent and is not an attempt to sidestep the FLSA’s overtime requirements. Relying on this analysis, the court developed a four-part standard for changing paydays. Specifically, the payday change does not violate the FLSA if it (1) is made for a legitimate business purpose; (2) does not result in an unreasonable delay in payment; (3) is intended to be permanent; and (4) does not violate the minimum wage or overtime provisions of the FLSA.

Apply Standard; Check Applicable State Laws

This case provides a four-part test employers can use to ensure payday changes comply with the FLSA. However, employers should note that most state laws have payday requirements that specify when wages must be paid. Thus, employers also should check applicable state law for details.


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