Background
The Department of Labor (DOL) recently brought suit against East Pennsylvania Manufacturing (East Penn) under the Fair Labor Standard Acts (FLSA) for allegedly failing to pay thousands of employees for time they spent changing before and changing and showering after work. Because of their exposure to lead and other workplace hazards, this group of employees was required to change into uniforms before each shift, and shower after each shift.
Critically, East Penn did not record how much time the workers actually spent changing and showering. Instead, the employer paid these employees by giving them a five-minute grace period at the start of each shift to dress and get to their workstations, plus five minutes at the end of each shift to change clothes and shower. As part of the trial, the DOL's expert testified that workers actually averaged 15 minutes dressing pre-shift and 11 minutes undressing and showering post-shift—more time than they were paid for under the employer's grace period policy.
After the trial, the jury sided with the DOL and found that East Penn owed over 10,000 hourly workers more than $22 million in back pay. East Penn filed an appeal with the Third Circuit.
The Decision
On December 18, 2024, the Third Circuit affirmed the trial court's massive award.[1] On appeal, East Penn argued that it complied with wage and hour law by paying its employees for the two grace periods—the time it believed was "reasonable" for employees to change and shower pre- and post-shift. East Penn also argued that requiring employers to pay the "actual" time spent completing these tasks would incentivize employees and reward them for dragging their feet or tending to personal matters.
The Third Circuit rejected East Penn's argument and held that the company was required to pay its employees for the actual time they spent changing and showering before and after performing their other duties. The court explained that because the changing and showering activities were themselves work integral and indispensable to the employees' other duties, the FLSA requires payment for actual, not "reasonable," time. As for East Penn's argument that doing so would incentivize employees to waste time, the court stated that if a worker "lollygags" on the job, the proper course of action is discipline or termination—not to withhold compensation. The Third Circuit did not opine on the practicality of disciplining thousands of individual employees for taking a few minutes too long to change their clothing.
East Penn also sought to avoid liability by relying on the de minimis exception. Generally, under the FLSA, employers must pay non-exempt employees for all of the time that they perform work. However, the de minimis exception excuses employers from paying small, irregular, or difficult-to-record work time. The Third Circuit flatly rejected East Penn's contention, finding that more than $22 million in unpaid time was not, in fact, de minimis.
Employer Takeaways
The Third Circuit has made clear that an employer's failure to pay employees for the "actual" time worked can violate the FLSA and lead to massive liability. The decision is immediately binding on employers in Pennsylvania, New Jersey, and Delaware. Furthermore, the Third Circuit's decision is consistent with other recent cases from other appellate courts across the county. Accordingly, employers, in consultation with counsel, should consider:
- Reviewing their time-tracking systems to ensure all compensable time is recorded and employees' time worked is not being estimated
- Establishing a policy that strictly prohibits off-the-clock work unless specifically requested and requires employees to immediately report any off-the-clock work
- Conducting regular training for human resources professionals and managers regarding federal and state wage and hour laws, including on whether certain work activities qualify as "hours worked"
If you or your company have any questions about the Third Circuit's latest decision, or how to best handle complying with federal and state wage and hour law while reducing the risk of liability, please contact the authors of this article or any attorney in Venable's Labor and Employment Group.
[1] Dep't of Lab. v. E. Penn Mfg. Co., Inc., 123 F.4th 643 (3d Cir. 2024).