Third Circuit Confirms Paid Meal Breaks Cannot Offset FLSA Overtime Liability

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In a recent decision, the Third Circuit emphasized the need for employers to capture and compensate all hours worked by non-exempt employees, even if the employer pays the employees for break time that it could treat as non-compensable under the Fair Labor Standards Act.

In Smiley v. E.I. DuPont De Nemours & Company, the plaintiffs filed an FLSA collective action and Pennsylvania state law class action seeking compensation for unpaid time spent donning and doffing their uniforms and safety gear and performing other activities before and after their shifts.  This unpaid time averaged approximately 30 to 60 minutes per day.  The plaintiffs worked 12-hour shifts and, per DuPont’s written policy, were paid for a 30-minute meal break and two other 30-minute breaks per shift.  DuPont counted the paid break time as hours worked for overtime purposes, even though the FLSA did not require it to do so.  The paid break time always exceeded the unpaid pre-shift and post-shift donning and doffing time.

DuPont argued that the plaintiffs’ claims for unpaid overtime fail, because it voluntarily treated the break time as hours worked, effectively serving as an offset against the 30 to 60 minutes of daily unpaid pre-shift and post-shift time.  The District Court agreed with DuPont’s offset argument and dismissed the lawsuit entirely.

On appeal, the Third Circuit rejected the offset argument and overturned the dismissal.  After mentioning the FLSA’s “broad remedial purpose,” the Court observed that employers have some flexibility when considering whether to treat bona fide meal breaks as hours worked.  The Court also noted that the FLSA explicitly permits offsets against overtime pay only in three specific situations, none of which addressed paid meal breaks.

The Court concluded that nothing in the FLSA authorized the offsetting of discretionary compensation that the employer included in calculating the employee’s regular rate of pay.  Even though the FLSA did not require DuPont to pay for the meal and other breaks or to treat that time as hours worked, once it did so, it could not use that time as an offset against other time spent working that it did not count for overtime purposes.

In other words, using the strict FLSA definition, the employees had a total of 11 to 11 1/2 hours worked per day (including the pre-shift and post-shift activities and excluded the 90 minutes of break time) and were paid for 12 hours worked per day.  Nevertheless, the Court held that DuPont’s practice violated the FLSA.

The Smiley decision is an important reminder for employers to review their pay practices and ensure that all hours worked by non-exempt employees are captured and compensated.  Even if an employer goes beyond what the FLSA requires and pays an employees for meal breaks, that generosity cannot be used to offset other potential overtime violations.

The Third Circuit again reminded us that the FLSA exists to protect employees, not employers, and the need for technical compliance with its requirements.  Unless a pay practice is expressly authorized by the FLSA or its regulations, the pay practice may run the risk of creating potential class-based liability for even generous employers.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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