October 15, 2014

Potentially Far-Reaching FLSA Case Before Supreme Court

On October 8, 2014, the Supreme Court heard oral arguments in Integrity Staffing Solutions, Inc. v. Busk to determine whether time employees spend in a security clearance solely for their employer's benefit is compensable under the Fair Labor Standards Act (FLSA). Although the case is limited to security checks, the Supreme Court's decision could have wide-ranging implications for the compensability of other pre- and post-shift activities and may provide guidance to employers struggling to account for those activities.

Integrity provides warehouse space and staffing services. In 2010, two former hourly employees, who had worked at warehouses filling orders for Amazon.com customers, sued Integrity, alleging that Integrity violated the FLSA by requiring them to pass through security clearance at shift's end without compensation. The former employees alleged that they had to wait up to 25 minutes to go through the clearance, which required them to remove wallets, keys and belts and pass through a metal detector. The alleged purpose of the security clearance was to reduce loss of product from theft. 

The FLSA requires employers to pay employees a minimum wage for work and pay an overtime premium for hours of work in excess of 40 in a workweek. Although the FLSA does not define "work," the Supreme Court has interpreted the term broadly to mean activities required by the employer and pursued for the employer's business and benefit. The Portal-to-Portal Act of 1947 amended the FLSA to generally exclude "preliminary" and "postliminary" activities from compensable time unless they are "integral and indispensable." The Supreme Court has held that activities are "integral and indispensable" if they are so closely related to the employees' other duties that they are an integral part of those duties and, therefore, included among their principal activities.

The district court for the District of Nevada dismissed the complaint for failure to state a claim, holding that time spent clearing security was not compensable. On appeal, the Ninth Circuit reversed. It said that the cases on which the district court had relied — cases involving security clearances at a nuclear power plant and on an airport construction site — were distinguishable because everyone who entered the workplace — not just employees — had to pass through the security clearances in those cases. In contrast, the Ninth Circuit found that Integrity's security clearance stemmed from the nature of the employees' work, specifically their access to merchandise, because it had been implemented to reduce employee theft. 

Integrity appealed to the United States Supreme Court, which heard oral argument on October 8, 2014. At oral argument, the Supreme Court justices extensively probed each side's arguments. Of particular interest was that lawyers for the Labor Department, which is responsible for enforcing the FLSA, argued in support of the employer's position that going through the security clearance was a noncompensable, postliminary activity. The Supreme Court's decision is expected next spring.

Although only the issue of security clearances is before the Court, the Supreme Court's questions to the lawyers hinted that it may try to tackle the larger issue of determining whether other pre- and post-shift activities generally are compensable. In addition to asking about security screenings and searches, the justices also questioned the lawyers about job-specific, security-related tasks commonly performed by other employees, like cashiers, bank tellers and casino employees. It, therefore, is likely that the Supreme Court's decision will have wide-ranging implications for many employers, whether they have security clearances similar to Integrity's or not.  

If you have questions about the FLSA or other wage and hour issues, please contact a Faegre Baker Daniels employment litigation lawyer.

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