Professional Service Agreement

Justices Will Not Review Legality of Flex-time Policy That Would Not Pay for Breaks Exceeding Ninety Seconds

June 15, 2018

The Supreme Court has denied review of a case filed by American Future Systems, which contested the Third Circuit’s interpretation of the employer’s flexible time policy. That policy allowed employees to log off their computers during their 8:30 to 5:00 workday at any time, for any reason, for any length of time—but it would only pay them for their logged-off time if it did not exceed 90 seconds, which the appeals court found violated Fair Labor Standards Act (FLSA) regulations that require employers to compensate employees for breaks of 20 minutes of less.

The appeals court below did not agree with the employer’s argument that because the FLSA does not require employers to provide breaks, time logged off for less than 20 minutes under the employer’s flex-time policy could not be "hours worked," making the FLSA inapplicable. Instead, the court afforded the DOL’s regulation at 29 C.F.R. §785.18 deference and applied the regulation’s bright-line rule that break periods of 20 minutes or less are compensable.

New break policy. The petitioner, a business information publisher and distributor, employs sales representatives working in several call centers and pays them an hourly wage plus bonuses. Prior to 2009, the employer paid employees for two 15-minute breaks daily, but it then implemented a written compensation policy that stated that sales reps could take personal breaks at any time, for any reason, and for any duration, but that the time logged off would not be paid unless they were logged off for less than 90 seconds. This applied to restroom breaks, coffee breaks, or to get ready for the next call. Sales reps were expected to log off any time they were not working on an active call or engaged in other activities the employer deemed work-related; on average, sales reps are each paid for just over five hours per day at the federal minimum wage of $7.25 per hour.

On appeal to the Third Circuit, the employer argued that time spent logged off under its flexible break policy categorically does not constitute work; that the trial court erred in finding the regulation on breaks less than 20 minutes long (Sec. 785.18) was entitled to substantial deference; and that it was error to adopt the bright-line rule embodied in that regulation rather than using a fact-specific analysis. None of these arguments was persuasive to the Third Circuit.