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Number of Employees, Overtime Frequency Defeat De Minimis Rule
Tenth Circuit Applies Three-Factor De Minimis Test
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
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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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