This month, the U.S. Court of Appeals for the Third Circuit held that the Fair Labor Standards Act (“FLSA”) requires employers to compensate employees for all rest breaks of twenty minutes or less.
American Future Systems arose from a suit filed by the U.S. Department of Labor (“DOL”) on behalf of former employees of publishing company American Future Systems, Inc. dba Progressive Business Publications (“Progressive”) under the FLSA. Progressive employed sales representatives who were paid by the hour and received bonuses based on the number of sales made while they were logged onto their work computers. These employees were previously subject to a policy which gave them two fifteen-minute paid breaks per day, however, Progressive eliminated the policy in favor of a so-called “flexible time” policy under which they could log-off their work computers at any time, for any reason. Although employees were free to take as many breaks as they wanted, they were not paid for these breaks if they were logged off for more than a minute and a half, including short breaks spent in the bathroom or getting coffee.
The DOL sued Progressive in the Eastern District of Pennsylvania, alleging that Progressive failed to pay federal minimum wage under the FLSA. Specifically, the DOL claimed the Wage and Hour Division’s interpretation of the FLSA in Section 785.18 of the Code of Federal Regulations is a bright-line rule providing that short breaks ranging from five minutes to twenty minutes constitute compensable hours worked. The district court agreed, and Progressive appealed.
Third Circuit Analysis
The Third Circuit affirmed the district court’s decision as consistent with the FLSA. In doing so, the Court rejected Progressive’s argument on appeal that time spent logged off does not constitute “work” as required under the FLSA because the employees were free to do as they pleased during that period, including even leaving the worksite. As the court explained, this misses the point of the FLSA’s regulatory scheme. The FLSA governs compensation for “hours worked,” but hours worked includes some breaks and is not limited to the time an employee actually performs his or her job duties. While the FLSA does not require employers to provide rest breaks, if employers choose to provide short rest breaks of five to twenty minutes, the rest breaks must be paid. In Progressive’s case, the Court found that time spent logged off under the flexible time policy was “clearly” a rest break to which the FLSA applied and Progressive could not simply characterize the rest breaks as something else to avoid its obligations under the FLSA.
The Court additionally rejected Progressive’s argument that the district court erred in giving substantial deference to Section 785.18, finding the longstanding rule well within the Wage and Hour Division’s expertise. The Court also rejected Progressive’s argument that the district court improperly applied Section 785.18 as a bright-line rule.
Consideration for Employers
This decision serves as an important reminder for employers to compensate employees for short rest breaks as hours worked, even if their state law does not require paid rest breaks.