IBP, Inc. v. Alvarez

Redefining and Expanding the Compensable
Workday - Implications and Practical Applications
of the Supreme Court’s Recent Decision in
IBP, Inc. v. Alvarez
Tuesday, January 10, 2006
Presenters:
Frank W. Jackson, III, Blue Cross Blue Shield of Michigan
David R. Wylie, Jackson Lewis LLP
Chris Lauderdale, Jackson Lewis, LLP
A presentation of the ACC Employment and Labor Law Committee
According to the U.S. Department of Labor

Federal FLSA lawsuits have grown from
approximately 1,500 per year in the 1990’s to
approximately 3,000 per year in 2003.

FLSA collective actions have more than tripled
since 1997.

Since 2001, collective actions under the FLSA
have outnumbered employment discrimination
class actions.
FAIR LABOR STANDARDS ACT BASICS

The Fair Labor Standards Act (“FLSA”)
Regulates . . .
*Minimum Wage (for all hours up to
forty in a workweek)
Federal = $5.15/hour
State = Vary, but cannot fall below Federal level
*Overtime
Overtime pay = time-and-one-half an employee’s
regular rate of pay for all hours worked in excess
of forty in a workweek.
FAIR LABOR STANDARDS ACT BASICS

Section 13(a)(1) of the FLSA provides an exemption
from both minimum wage and overtime pay for
employees who are employed in a bona fide:
* Executive;
* Administrative;
* Professional; or
* Outside Sales capacity.


Certain computer employees may be exempt
professionals under Section 13(a)(1) or exempt under
Section 13(a)(17) of the FLSA.
These exemptions are defined in regulations issued by
the U.S. Department of Labor (“DOL”) and are very
narrowly construed.
PENALTIES
 Two Years
Standard time period applied
Civil money penalties - $1000 for each violation
Back wages – minimum wage and overtime due
Liquidated damages – amount equal to the back
wages due
PENALTIES
 Three Years
Repeated and/or willful
Same penalties, only for 3 years
Criminal prosecution - $10,000 fine and
imprisonment
 State statutes of limitation may be
longer
COLLECTIVE ACTIONS
 “Similarly Situated”
Employees
 Opt-In Class
 Class Notice
 No Preclusive Effect On Non Participants
– Multiple Collective Actions
OFF THE CLOCK CLAIMS:
CAUSES
1.) Improperly Defining “Compensable Work”
2.) Poor Recordkeeping Practices
3.) Supervisory Misconduct
“Donning & Doffing” CASES

Perdue Farms – 2002:
$20 Million

Mercedes-Benz – 2003:
$668,000

Honda of Alabama - 2003:
$1.2 Million

Honda of South Carolina – 2005:
$2 Million
Defining Conpensable Work Has
Historically Been Complicated by:
1.) Inconsistent Court decisions
2.) Conflicting Regulations
3.) DOL Enforcement Position
Compensable Activity?
 Is it “work”?
 Is it “preliminary or postliminary”
“principal activity”?
 Is it “de minimis”?
to a
QUESTION #1: Is it Work?

“Hours worked” - No FLSA definition

“Employ” – “to suffer or permit to work” 29 U.S.C.A. §
203(g)

“Physical or mental exertion (whether burdensome or
not) controlled or required by the employer and
pursued necessarily and primarily for the benefit of the
employer.” Tennessee Coal v. Muscoda Local No.
123, 321 U.S. 590 (1944)

“Engaged to wait” or “waiting to be engaged.”
“ All the time during which an employee is
necessarily required to be on the
employer’s premises, on duty or at a
prescribed work place.” Anderson v.
Mt. Clemmons Pottery Co., 328 U.S. 680
(1946).
QUESTION #2: Is it “preliminary” or
“postliminary” to a “principal activity”?
Portal to Portal Act of 1947 – compensable activities
do not include:
“walking, riding, or traveling to and from the actual place
of performance or the principal activity” as well as
“activities which are preliminary to or postliminary to …
principal activities,” and “which occur either prior to the
time on any particular workday at which such employee
commences, or subsequent to the time on any particular
workday of which he ceases, such principal activity or
activities.” 29 U.S.C. § 254.
Steiner v. Mitchell, 350 U.S. 247 (1956)
•
Involved Storage Battery Manufacturing
•
Exposure to lead, acids and other toxins
•
Employees were required to shower and change
clothes at end of shift
•
Unique circumstances
When is a “Preliminary” or
“Postliminary” activity a
“Principal Activity?
 When it is “integral and indispensable” to a
principal activity. Steiner v. Mitchell, 350
U.S. 247 (1956)
King v. Mitchell Packing, 350 U.S. 260 (1956)
•
Companion case to Steiner
•
Meatpacking operation
•
Cleaning of knives found to be integral and
indispensable and therefore compensable
From 1956 – 2005
Steiner Viewed as Unique
•
Tum v. Barber Foods, Inc., 360 F.3d 274, 281
(1st Cir. 2004) – observing that in Steiner “the
dangers were extreme and unique to the job.”
•
Reich v. IBP, 850 F.Supp. 1315 (D.Kan. 1993) –
Steiner holding was “very narrow and closely
tied to the extreme facts presented by the case.”
USDOL
REGULATIONS
29 C.F.R. §790.8 “Principal” activities.
(b) The term “principal activities” includes all activities which are an
integral part of a principal activity. Two examples of what is meant by an
integral part of a principal activity are…the following:
(c) Among the activities included as an integral part of a principal activity
are those closely related activities which are indispensable to its
performance. If an employee in a chemical plant, for example, cannot
perform his principal activities without putting on certain clothes, changing
clothes on the employer’s premises at the beginning and end of the
workday would be an integral part of the employee’s principal activity. On
the other hand, if changing clothes is merely a convenience to the
employee and not directly related to his principal activities, it would be
considered as a “preliminary” or “postliminary” activity rather than a
principal part of the activity. However, activities such as checking in and
out and waiting in line to do so would not ordinarily be regarded as integral
parts of the principal activity or activities.
29 C.F.R. § 790.8(b) 7(c) (emphasis added) footnotes omitted).
29 C.F.R. §790.7 offers further clarification of “preliminary”
preliminary” and “postliminary”
postliminary”
activities:
(b) The words “preliminary activity”
activity” mean an activity engaged in by an employee
before the commencement of his “principal”
principal” activity or activities, and the words
“postliminary activity”
activity” mean an activity engaged in by an employee after the
completion of his “principal”
principal” activity or activities. No categorical list of “preliminary”
preliminary”
and “postliminary”
postliminary” activities except those named in the Act can be made, since
activities which under one set of circumstances may be “preliminary”
preliminary” or
“postliminary”
postliminary” activities, may under other conditions be “principal”
principal” activities.
….
(f) Examples of walking, riding, or traveling which may be performed outside the
workday and would normally be considered “preliminary”
preliminary” or “postliminary”
postliminary” activities
are (1) walking or riding by an employee between the plant gate and the employee’
employee’s
lathe, workbench or other actual place of performance of his principal activity or
activities…
activities…
(g) Other types of activities which may be performed outside the workday and, when
performed under the conditions normally present,
present, would be considered “preliminary”
preliminary”
or “postliminary”
postliminary” activities, include checking in and out and waiting in line to do so,
changing clothes,
clothes, washing up or showering,
showering, and waiting in line to receive pay
checks.
checks.
29 C.F.R. § 790.7(b), (f), & (g) (emphasis added) footnotes omitted).
THE INFAMOUS
“Footnote 49”
(29 CFR § 790.7, n. 49)
See Senate Report p. 47. Washing up after work, like the changing of
clothes, may in certain situations be so directly related to the specific
work the employee is employed to perform that it would be regarded as
an integral part of the employee’s “principal activity”. Se colloquy
between Senators Cooper and McGrath, 93 Cong. Rec. 2297-2298.
See also paragraph (h) of this section and Sec. 790.8(c). This does
not necessarily mean, however, that travel between the washroom
or clothes-changing place and the actual place of performance of
the specific work the employee is employed to perform, would be
excluded from the type of travel to which section 4(a) refers.
Examples
“Preliminary / Postliminary” or “Principal”
“Preliminary / Postliminary”
(Before IBP v. Alvarez)

Walking time for Panama Canal locomotive engineers

Automotive employees’ time spent donning protective clothing and
walking to work station

Time spent riding in boat to work site on Chesapeake Bay Bridge

Time spent by Poultry processing employees donning and doffing
protective garments and walking to work station (exception: the Ninth
Circuit)

Time spent by Meat processing employees donning and doffing
lightweight protective clothing

Donning and doffing of sanitary garments by employees of
Manufacturer of surgical equipment.
“Integral & Indispensable”
and Therefore “Principal”
(Before IBP v. Alvarez)

Showering and clothes changing by employees
of storage battery manufacturer

Donning and doffing of cumbersome protective
clothing by Meat processing employees

Donning and doffing of protective clothing and
associated walking and waiting by Poultry
employees (only in the Ninth Circuit)
QUESTION #3: Is it De Minimis?
 10 minutes or less in the aggregate?
 Must associated walking and waiting time
be included?
 Affirmative Defense
Other Issues for Consideration . . .
Are unpaid
meal periods at risk?
 Relieved of duty for 30 minutes?
 Are donning / doffing / walking / waiting
activities compromising meal periods?
§ 203(o) DEFENSE

“Custom or Practice”

Collective Bargaining Agreement
IBP v. Alvarez
 First case argued before Chief Justice
Roberts – October 3, 2005
 Questions presented –
Whether walking
and waiting time associated with
compensable donning and doffing
activities is compensable?
Lower Court Holdings:
Alvarez v. IBP (9th Circuit)
• Found the donning and doffing of unique gear to be
compensable
• Found that “Continuous Workday Rule” caused walking time
to be compensable
Tum v. Barber Foods (1st Circuit)
• Jury properly found that donning and doffing time was de
minimis
• Walking time was properly excluded from compensable time
• Waiting time was properly excluded from compensable time
Significance of Alvarez
Read
Steiner Broadly
“Integral and Indispensable” preliminary and
postliminary activities are “principal activities”.
Significance of Alvarez
 Endorsed
“Continuous Workday” Rule
(a/k/a First Principal Activity)
 Walking time which follows compensable
donning or precedes compensable doffing
is compensable
Significance of Alvarez
 Waiting time associated with donning and
doffing is not compensable (unless
“engaged to wait”)
 Waiting time before/after meal and rest
periods may be compensable.
Significance of Alvarez
 Walking time –
 Waiting time
measurable
– highly subjective
Viability of De Minimis Defense
 DOL’s
position
 Private litigation
 Defending past practices
 Determining future practices
Donning/Doffing Away From Work
 DOL’s
position
 Will it be challenged in private litigation?
What to Expect in Private Litigation
 Viability of De Minimis rule will be
challenged.
 Significance of location of donning and
doffing will be challenged.
What to Expect in Private Litigation
 Any donning or doffing, regardless of
burden or time necessary, will be asserted
as the beginning as ending points of the
workday.
 Applicability of 203(o) to associated
walking time may be challenged
DOL’s Enforcement Position
 “First Principal Activity”/“Continuous
Workday Rule”
 Required = “Integral and indispensable”
 Unless . . . donning and doffing occurs at
home
Other Common Pitfalls
 “Unauthorized”
overtime
 Automated Meal Period deductions
 Automated Systems and
“long punches”
Multi-Million Dollar Verdicts
in Recent Litigation . . .
Wal-Mart Hit With $172 Million Verdict
Over Missed Meal Breaks in California
A California jury Dec. 22 awarded a class of some 116,000 Wal-Mart Inc. workers $172 million
for missed breaks in violation of a state law that mandates a 30-minute, unpaid meal break
(Savaglio v. Wal-Mart Inc.,
Inc., Cal. Super. Ct., No. C-835687, verdict 12/22/05).
The jury in Oakland, Calif., deliberated three days to conclude that the world’
world’s largest retailer
owed class members $52,268,673 for missed meal periods and $115 million in punitive
damages. The jury originally awarded the workers $63,631,858 for missed meal breaks, but
subtracted $6,363,185 because some class members failed to substantially comply with WalMart directions about meal periods.
The class covered 115,919 current and former Wal-Mart employees in California.
“Basically I think the message to Wal-Mart is it’
it’s not acceptable to deprive your employees of
meal breaks,”
”
Jessica
Grant,
a
principal
for
plaintiffs’
breaks,
plaintiffs’ counsel the Furth Firm in San Francisco,
told BNA Dec. 22. “Another thing in play was we presented the jury here with Wal-Mart’
Wal-Mart’s own
documents”
documents” that showed executives knew the company was “breaking the law as far back as
1998.”
1998.” Grant told BNA.
Grant said Wal-Mart has “known about this for years, not only in California but across the
United States. They took steps to conceal the problem while simultaneously pending millions
of dollars on TV”
TV” advertisements promoting how well workers are treated.
U.S. Department of Labor In the 21st Century
February 17, 2005
News Release
Cingular Agrees to Pay $5.1 Million in Back Wages And Implements Policies to Promote Labor Law Compliance
WASHINGTON-The U.S. Department of Labor announced today that it has reached an agreement with Cingular Wireless
to pay 25,351workers employed as customer service representatives $5.1 million in back wages as a result of alleged
violations of the overtime provisions of the Fair Labor Standards Act (FLSA). Cingular, a provider of wireless
telecommunication services, is headquartered in Atlanta, Ga. "Cingular has agreed to pay back wages and to take
positive steps to come into compliance with the Fair Labor Standards Act," said Secretary of Labor Elaine L. Chao. "Their
workers will receive more than $5 million in back wages and overtime pay and can now be assured that they will be paid
for all hours worked.“
worked.“ An investigation by the department's Wage and Hour Division at the Springfield, III. call center
found that customer service representatives would begin work prior to the start of their scheduled shift and, on occasion,
continued to work after their shift ended.
ended. Since the time worked off-the-clock was not recorded, the employees did not
receive compensation for it. After Cingular was made aware of the alleged violations, it worked cooperatively with the
department to come into compliance and compute the back wages at all of its call centers.
Cingular has made no admission of liability in this case. The company also designed and implemented a comprehensive
initiative involving employee training, time reporting and compliance review procedures throughout its call center
operations to ensure continued compliance with the FLSA. "Cingular worked closely with the department, and voluntarily
resolved these difficult back wage issues," said Alfred B. Robinson, Jr., Acting Administrator of the Wage and Hour
Division. "When employers like Cingular work cooperatively with the department, everyone benefits because we are able
to recover wages for employees quickly and efficiently." The FLSA requires employers to pay for all hours of work and to
pay overtime at a rate of one and one-half times the employees' regular rate of pay for hours worked after 40 in a
workweek. The law also requires employers to maintain accurate payroll records. The employees worked at 25 call center
locations including: Little Rock, Ark.; Ashland, Ky.; Atwater, Calif.; Dallas, Texas; Fayetteville, N.C.; Jacksonville, Fla.;
Miami, Fla.; Cedartown, Ga.; Norcross, Ga.; Johnson City, Tenn.; Baton Rouge, La.; Lafayette, La.; Lubbock, Texas;
Midland, Texas; Ocala, Fla.; Ocean Springs, Miss.; Oklahoma City, Okla.; Pleasanton, Calif.; Rosewood, Calif.;
Philadelphia, Pa.; Rantoul, III.; Schaumburg, III.; Springfield, III.; Tulsa, Okla.; and Wichita Falls, Texas.
~
2/17/05
U.S. Department of Labor In the 21st Century (Page 2 of 2)
Cingular Agrees to Pay $5.1 Million in Back Wages And Implements Policies to Promote Labor Law Compliance
February 17, 2005
A consent judgment agreeing to the payment of the back wages and future compliance with the overtime and record keeping
requirements of the FLSA was filed January 13, 2005 in U.S. District Court, Case Number 05-3009 for the Central District of
Illinois. The court must approve the consent decree. For additional information about the FLSA, call the Department of Labor's
toll-free help line at 1-866-4USWAGE (1-866-487-9243). Information is also available on the Internet at
www.wagehour.dol.gov.
www.wagehour.dol.gov.
~
2/27/05
Possible Targets for Donning
and Doffing Claims
•
Call centers
•
Clean room environments
•
Uniformed police officers, firemen, paramedics, etc. . .
•
Large operations with significant walking distances
•
Any operation in which employees are required to put on
clothing or carry equipment at the plant or work site
•
Employees who begin their workday at home
Avoiding Donning and Doffing
Claims






Take inventory of “required” protective garments and
gear
Provide compensated time to don and doff required
protective clothing that cannot be donned or doffed at
home
Support compensated time with time and motion studies
Do not allow donning prior to or doffing after
compensated time periods
Verify that meal periods are adequate when “donning /
doffing / walking” are considered
Establish 203(o) defense for union represented
workforce.
Minimizing Risk of Exposure to
Off-the-Clock Claims
1.) Well publicized policy
2.) Train managers and employees
3.) Include policy and practices in New Employee and Manager
Orientation
4.) Require Employees to review and certify their time entries
5.) Require managers to review and certify clock rules
6.) Review all automated system assumptions and the accuracy of
time entries
7.) Adopt a reporting and complaint procedure
8.) Periodic audits
9.) Document all time report changes
10.) Provide periodic reminders
QUESTIONS
?