Monday, October 18, 2010

FLSA Compliance: Determining Hours Worked — Part II

To pay the employee the correct amount, the employer must be able to determine the number of hours worked. In most cases, it is fairly obvious. But...

Recently, the Labor Department's Wage and Hour Division (WHD) announced that the Wage and Hour Administrator will issue Administrator's Interpretations (AIs) whenever it is determined that further clarity is appropriate regarding proper interpretation of a statutory or regulatory issue.

The intent is to provide a general interpretation of the law and regulations that will have “across-the-board” applicability with regard to the issue in order to provide meaningful and comprehensive guidance and compliance assistance to the broadest number of employers and employees. This is in contrast to opinion letters that provide definitive responses to fact-specific requests submitted by individuals and organizations. Opinion letters have the limitation that a slight change in the assumed facts may lead to a different opinion from DOL.

The WHD announcement indicated that, while opinion letters will continue to be issued, they will take on a more general tone, citing authoritative sources relevant to the issue, but without analysis of the specific facts in the request. However, WHD will retain requests for opinions in order to identify issues that may need interpretive guidance.

Definition of ‘clothes'
Significantly, the subject of AI No. 2010-2, issued June 16, is Section 3(o) of the Fair Labor Standards Act (FLSA), 29 U.S.C. Section 203(o), and the definition of “clothes.” This indicates that difficulties remain in determining whether certain time periods must be included in “hours worked” in determining an employee's compensation.

Section 6 of FLSA provides that employees shall be paid a specified minimum wage. Section 7 of FLSA provides that employees may be employed no more than a specified number of hours without being paid at least one and one half times their regular rate of pay for the overtime hours.

To pay the employee the correct amount, the employer must be able to determine the number of hours “worked.” In most cases, it is fairly obvious. But, in some cases, it may be difficult to determine that particular activities constitute working time.

In the Code of Federal Regulations, specifically 29 CFR 785, the Labor Department (DOL) presents its position as to what constitutes working time. The regulation acknowledges that the ultimate interpretation of FLSA must come from the courts.

Rather than being a complete set of rules, the regulation quotes the U.S. Supreme Court in stating that the department's interpretations are intended to be a “practical guide for employers and employees as to how the office representing the public interest in its enforcement will seek to apply it.” (Skidmore v. Swift, 323 U.S. 134, 138 (1944).)

Employment defined
FLSA's definition of employment is “to suffer or permit to work.”

The U. S. Supreme Court has weighed in with its own definitions. It initially stated that employees subject to the act must be paid for all time “spent in 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 of his business” (Tennessee Coal, Iron & Railroad Co. v. Muscoda Local No. 123, 321 U. S. 590 (1944)).

Later, however, the court ruled that no exertion was necessary and that if the employee is required to give hours to the employer, those hours are hours worked: “… an employer, if he chooses, may hire a man to do nothing, or to do nothing but wait for something to happen. Refraining from other activity often is a factor of instant readiness to serve, and idleness plays a part in all employments in a standby capacity. Readiness to serve may be hired, quite as much as service itself, and time spent lying in wait for threats to the safety of the employer's property may be treated by the parties as a benefit to the employer” (Armour & Co. v. Wantock, 323 U.S. 126 (1944); Skidmore v. Swift, 323 U.S. 134 (1944)).

In another ruling, the court added that the workweek includes “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. Clemens Pottery Co., 328 U.S. 680 (1946)).

Preliminary and postliminary activities
The law does exempt certain activities from inclusion in working time. For example:

• FLSA exempts certain clothes changing time and washing time at the beginning and ending of the workday to parties subject to a collective bargaining agreement.

• The Portal-to-Portal Act exempts certain travel or walking time and similar preliminary and postliminary activities performed before or after the workday when such activities are not made compensable by contract, custom, or practice.

Preliminary and postliminary activities cannot include principal activities. The workday starts when the employee begins the principal activities and ends when the employee ceases those activities for the day. The Portal-to-Portal Act does not affect the computation of hours within the workday. So, activities, such as travel, performed within the workday are included in time worked.

If normally exempt preliminary and postliminary activities are included as time worked under contract, custom, or practice, the time also must be included for FLSA purposes.

Where this applies, the activity must be performed at the time of day when it is compensable and only the time allotted or agreed upon must be included. For example, if the employee is allowed (by custom) 15 minutes to change clothes and that activity takes 25 minutes, only 15 minutes must be included as time worked.

In general, the workday begins when the employee begins principal activities and ends when the employee ceases these activities for the day.

Some activities, which may be performed on the employer's premises before or after principal activities (i.e. outside the workday) may be excluded from hours worked. For example, certain clothes changing and washing up time, travel or walking time, and similar preliminary and postliminary activities. However, preliminary and postliminary activities cannot include principal activities. The term “principal activities” includes all activities that are an integral part of a principal activity. Two examples are provided in 29 CFR 785.24:

• Before starting the operation of a machine at the beginning of the workday, the employee oils, greases, or cleans the machine, or installs a new cutting tool.

• A garment worker in a textile mill reports 30 minutes before the other employees report to begin the work day to distribute clothing or parts of clothing to the other employee's workbenches or prepares the machinery for operation by the other employees at the start of the workday.

Certain other activities, which are closely related to the principal activity and are indispensable to the performance of the principal activity, may not be excluded from time worked.

For example, for safety reasons, the employees of a chemical plant are not allowed to perform the principal activities without wearing certain clothes. Changing clothes on the employer's premises at the start and end of the workday is an integral part of the principal activity and must be counted as time worked.

In contrast, if changing clothes is simply a convenience to the employee and not directly related to the principal activities, it is considered a preliminary or postliminary activity and may be excluded from work time. Similarly, time spent clocking in or out, or waiting in line to do so generally is not regarded as an integral part of the principal activity.

The U. S. Supreme Court weighed in with decisions providing additional guidance as to the types of activities considered an integral part of the employee's job. In Steiner v. Mitchell [350 U.S. 247 (1956)], the employees changed clothes and took showers in a battery plant where the manufacturing process involved extensive use of caustic and toxic materials. In Mitchell v. King Manufacturing Co. [350 U.S. 260 (956)], knife-men in a meatpacking plant sharpened their knives before and after their scheduled workday. In both cases, the court determined that the activities were an integral and indispensable part of the employees' principal activities.

Under FLSA, clothes changing and washing up time may be excluded from hours worked under the express terms of a bona fide collective bargaining agreement (or by custom or practice under that agreement) applicable to the particular employee for the week(s) specified in the agreement. For weeks not so excluded, the clothes changing and washing up time must be counted as hours worked if it is integral and indispensable to the principal activity, or required by law or the employer's rules.

Administrator's Interpretation (AI) No. 2010-2 reaffirmed or clarified some of the rules related to clothes changing time. The letter first discussed the meaning of clothes changing under 29 U.S.C. Section 203(o), which reads as follows:
“203(o) Hours Worked.—In determining for the purposes of sections 206 and 207 of this title the hours for which an employee is employed, there shall be excluded any time spent in changing clothes or washing at the beginning or end of each workday which was excluded from measured working time during the week involved by the express terms of or by custom or practice under a bona fide collective-bargaining agreement applicable to the particular employee.”

AI 2010-2 reaffirmed that the term “clothing” as used in Section 203(o) refers to apparel and not to safety and protective equipment, and the exemption does not extend to protective equipment worn by employees that is required by law, by the employer, or due to the nature of the job. AI 2010-2 also points out that documentation of legislative intent indicates that the term “washing” referred to the employee “cleaning his person at the beginning or end of each workday”( 95 Cong. Rec. 8, 14929 (Oct. 17, 1949)).

AI 2010-2 also quoted comments by Rep. Christian A. Herter indicating his reason for introducing the amendment that added Section 203(o) by which he intended to resolve conflict in collective bargaining agreements (CBAs) within the baking industry as to what constituted a work day.

“Let me be specific. In the baking industry, for instance…there are [CBAs]…. In some of those [CBAs], the time taken to change clothes and to take off clothes at the end of the day is considered part of the work day. In other [CBAs] it is not so considered. But, in either case the matter has been carefully threshed out between the employer and the employee and apparently both are completely satisfied with respect to their bargaining agreements” (95 Cong. Rec. H11210 (Aug. 10, 1949) (statement of Rep. Herter)).

AI 2010-2 also considered whether clothes changing can be a principal activity. In IBP v. Alverez, 546 U.S. 21, 30 (2005) (at 37), the U.S. Supreme Court explicitly held that activities that are integral and indispensable are principal activities, and activities occurring after the first principal activity and before the last principal activity are compensable.

The conclusion in Alvarez was that the time spent walking between the locker rooms where meat processing employees performed the principal activities of donning and doffing protective equipment was compensable because it occurred after the first principal activity and before the last principal activity.

At issue is whether the exclusion from hours worked of clothes changing time under Section 203(o), where the clothes changing time would otherwise be considered a principal activity, changes the clothes changing time from a principal activity into a preliminary or postliminary activity. According to AI 2010-2, the majority of court decisions support the notion that exclusion under Section 203(o) would not make the activity any less integral and indispensible to the employee's duties. That is, the character of the activity is not dependent upon whether the activity is excluded under a collective bargaining agreement.

In Figas v. Horsehead Corp., 2008 WL 4170043 (W.D. Pa.), the U.S. District Court for the Western District of Pennsylvania noted that Section 203(o) excludes “any time spent in clothes changing or washing at the beginning or the end of each workday” and concluded that under this statutory language, the excluded time is considered to be part of the workday.

The AI comes to an interpretation consistent with the weight of the judicial authority—that clothes changing time may be a principal activity that starts or ends the work day, even though it is excluded from compensable time under Section 203(o), pursuant to a collective bargaining agreement. Consequently, where the clothes changing time is a principal activity that starts or ends the workday, even though not included in the measured hours of the workday, any intervening activities, including walking and waiting, become part of the measured workday and are compensable.

AI 2010-2 was issued to assist employees and employers in better understanding the scope of the Section 203(o) exemption. It presented a more detailed discussion of prior WHD opinion letters, Congressional background, and judicial decisions and comments than this article could address.

In keeping with the stated purpose of providing “across-the-board” guidance, the AI discussed the underlying authority and gave a general interpretation that there is a distinction between clothes changing that is a preliminary or postliminary activity and clothes changing that is a principal activity. But it did not give more than a general idea as to where that distinction lies.

The AI also determined where clothes changing is a principal activity, it may still delimit the workday, despite exclusion from the measured workday under Section 203(o). This can result in the inclusion of activities, such as walking and waiting, in the measured workday that might otherwise be considered preliminary or postliminary under the Portal-to-Portal Act.

This article was originally published in IOMA's monthly newsletter, 'Payroll Practitioner's Monthly', and is republished here with the express written permission of IOMA, Copyright(c) 2010.

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