What New Jersey Employers Should Know About Wage and Hour Liability for Employee Breaks

Wage and Hour Liability for Employee Breaks

New Jersey employers must pay their workers for breaks of 20 minutes or less under the Fair Labor Standards Act (FLSA) even if it is classified as “flex time,” according to a recent decision by the Third Circuit Court of Appeals. The precedential decision in Secretary United States Department of Labor v. American Future Systems Inc. highlights the importance of properly accounting for employee breaks.

Employer’s Employee Break Policy

American Future Systems, d/b/a Progressive Business Publications (Progressive), publishes and distributes business publications and sells them through its sales representatives. The company’s sales representatives are paid an hourly wage and receive bonuses based on the number of sales per hour while they are logged onto the computer at their workstation.

In 2009, Progressive changed its employee break policy by eliminating paid breaks but allowing employees to log off of their computers at any time. Under the “flexible time” policy, employees choose their start and end time and can take as many breaks as they please. However, Progressive only pays sales representatives for the time they are logged off of their computers if they are logged off for less than ninety seconds. This includes the time they are logged off to use the bathroom or get coffee. The policy also applies to any break an employee may decide to take after a particularly difficult sales call to get ready for the next call.

The Department of Labor filed (DOL) suit against Progressive, alleging that the company violated the FLSA by failing to pay the federal minimum wage to employees subject to this policy, and by failing to maintain mandatory time records. Its suit argued that this policy violated section 6 of the Fair Labor Standards Act “by failing to compensate . . . sales representative employees for break[s] of twenty minutes or less…” The DOL sought to recover unpaid compensation owed to Progressive’s employees, an equal amount in liquidated damages, and a permanent injunction enjoining Progressive from committing future violations.

The District Court ruled that the DOL had consistently applied the Wage and Hour Division’s (WHD) interpretation of the FLSA under 29 C.F.R. § 785.18. It provides that:

Rest periods of short duration, running from 5 minutes to about 20 minutes, are common in the industry. They promote the efficiency of the employee and are customarily paid for as working time. They must be counted as hours worked. Compensable time of rest periods may not be offset against other working time such as compensable waiting time or on-call time. 

Accordingly, the court concluded that Progressive violated the FLSA. Because the company was uncooperative during the investigation, the court ordered the company to pay both back wages and liquidated damages.

Third Circuit Rules Back Wages Due Under FLSA

The Third Circuit agreed that the FLSA requires employers to compensate employees for breaks of 20 minutes or less during which they are logged off of their computers and free of any work-related duties. According to the court, despite the terminology used, the “log off” times are clearly “breaks” under the FLSA.

“The policy that Progressive refers to as ‘flexible time’ forces employees to choose between such basic necessities as going to the bathroom or getting paid unless the employee can sprint from computer to bathroom, relieve him or herself while there, and then sprint back to his or her computer in less than 90 seconds,” Third Circuit Judge Theodore McKee wrote.

He added, “If the employee can somehow manage to do that, he or she will be paid for the intervening period. If the employee requires more than 90 seconds to get to the bathroom and back, the employee will not be paid for the period logged off of, and away from, the employee’s computer. That result is absolutely contrary to the FLSA.”

The Third Circuit rejected Progressive’s argument that if a bright-line rule is enforced, employees will be allowed to take any number of breaks during their workday, and as long as they are less than twenty minutes, employers will have to compensate them. While the federal appeals court recognized “this is a theoretical possibility,” it concluded that it was not a realistic one. Judge McKee further highlighted that the employer could address the abuse of the break policy through discipline or ultimately termination.

Message for New Jersey Employers

The Third circuit’s decision in Secretary United States Department of Labor v. American Future Systems Inc. provides a valuable reminder for New Jersey employers. While the FLSA does not mandate that employers have a break policy, it also does not allow employers to avoid compensating workers by disguising a break policy as “flexible time.”

If you have questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact me, Jorge R. de Armas or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.