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Employer Required To Compensate Employees For Breaks Of Short Duration

November 13th, 2017

In Secretary United States Department of Labor v. American Future Systems, Inc., 873 F.3d 420 (10/13/2017), the Third Circuit held that the employer’s flexible time policy was subject to the Fair Labor Standards Act, (“FLSA”), that the Department of Labor’s interpretation of FLSA as requiring compensation for rest periods of short duration was subject to the highest level of deference, and that the District Court did not abuse its discretion in awarding liquidated damages.  In this case, the Secretary of the Department of Labor, (“DOL”), brought a wage and hour action against American Future Systems, (“AFS”), claiming that its policy of not providing paid breaks, but instead allowing employees to take breaks from work at any time, for any reason, and for any duration violated FLSA.

FSA employed sales representatives who worked from computer stations.  The sales reps were only paid for the time that they were logged onto their computers and were not paid for the time they were logged off.  The sales reps were allowed to set their own schedules between the hours of 8:30 am and 5:00 pm., and were not permitted to work more than 40 hours per week.  The Sales reps were required to estimate every two weeks the total number of hours they would work during the upcoming two weeks, and could be disciplined if they failed to meet their estimates.  FSA would sent sales representatives home for the day if their sales were not high enough, and would set fixed work schedules or daily requirements when it deemed necessary.  On average, sales representatives were paid for an average of just over 5 hours per day at $7.25 per hour.

DOL sued FSA alleging that it violated the FLSA by failing to pay minimum wage, failing to maintain mandated time records, and failing to compensate for breaks of twenty minutes or less.  DOL sought to recover unpaid compensation owed to FSA’s employees, an equal amount in liquidated damages, and a permanent injunction against future violations.  The District Court granted summary judgment to DOL on its claim for compensation for breaks of short duration, running from 5 to 20 minutes.

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