Bobbi-Jo SMILEY; Amber Blow; Kelsey Turner, Appellants v. E.I. DUPONT DE NEMOURS AND COMPANY; Adecco USA, Inc.
No. 14-4583
United States Court of Appeals, Third Circuit.
Argued July 14, 2016 (Opinion Filed: October 7, 2016)
839 F.3d 325
District Judge: Honorable James M. Munley
District Court No.: 3-12-cv-02380
Rachel Goldberg, Esq. [ARGUED], United States Department of Labor, Division of Fair Labor Standards, Room N2716, 200 Constitution Avenue, N.W., Washington, DC 20210, Counsel for Amicus Curiae, Secretary, United States Department of Labor
Before: VANASKIE, KRAUSE, and RENDELL, Circuit Judges
OPINION
RENDELL, Circuit Judge.
Plaintiffs Bobbi-Jo Smiley, Amber Blow, and Kelsey Turner appeal the District Court‘s grant of summary judgment in favor of Appellees E.I. DuPont De Nemours & Company and Adecco USA, Inc. (collectively, “DuPont“) on their claims under the Fair Labor Standards Act (“FLSA“),
Thomas M. Marrone, Esq. [ARGUED], MoreMarrone, 1601 Market Street, #2500, Philadelphia, PA 19103, Patricia V. Pierce, Esq., Greenblatt Pierce Engle Funt & Flores, 123 South Broad Street, Suite 2500, Philadelphia, PA 19109, Counsel for Appellants, Bobbi-Jo Smiley, Amber Blow, and Kelsey Turner
David S. Fryman [ARGUED], Ballard Spahr, 1735 Market Street, 51st Floor, Philadelphia, PA 19103, Amy L. Bashore, Ballard Spahr, 210 Lake Drive East, Suite 200, Cherry Hill, NJ 08002, Counsel for Appellee, E. I. du Pont de Nemours and Company
A. Patricia Diulus-Myers, Jackson Lewis, 1001 Liberty Avenue, Suite 1000, Pittsburgh, PA 15222, Eric R. Magnus, Jackson Lewis, 115 Peachtree Street, N.E., Suite
The District Court agreed with DuPont. We conclude that the FLSA and applicable regulations, as well as our precedent in Wheeler v. Hampton Twp., 399 F.3d 238 (3d Cir. 2005), compel the opposite result and will therefore reverse the District Court‘s grant of summary judgment and remand for further proceedings.
Appellants worked twelve-hour shifts at DuPont‘s manufacturing plant in Towanda, Pennsylvania.1 In addition to working their twelve-hour shifts, Plaintiffs had to be on-site before and after their shifts to “don and doff” uniforms and protective gear. DuPont also required them to participate in “shift relief,” which involved employees from the outgoing shift sharing information about the status of work with incoming shift employees. The time spent donning, doffing, and providing shift relief varied, but ranged from approximately thirty to sixty minutes a day.
DuPont chose to compensate Plaintiffs for meal breaks2—despite no FLSA requirement to do so—during their twelve-hour shifts. The employee handbook set forth DuPont‘s company policy for compensating meal breaks, stating that “[e]mployees working in areas requiring 24 hour per day staffing and [who] are required to make shift relief will be paid for their lunch time as part of their scheduled work shift.” Employees who worked twelve-hour, four-shift schedules, as did Plaintiffs in this case, were entitled to one thirty minute paid lunch break per shift, in addition to two non-consecutive thirty minute breaks. The paid break time always exceeded the amount of time Plaintiffs spent donning and doffing and providing shift relief.
DuPont treated the compensation, for meal breaks similarly to other types of compensation given to employees. It included the compensation given for paid meal breaks when it calculated employees’ regular rate of pay, and meal break time was included in employees’ paystubs as part of their total hours worked each week.
Plaintiffs brought this putative collective action and class action against DuPont, claiming that DuPont violated the FLSA and WPCL by requiring Plaintiffs to work before and after their twelve-hour shifts without paying them overtime, i.e., time and one-half, compensation. Plaintiffs sought to recover overtime compensation for time spent donning and doffing their uniforms and protective gear and performing shift relief. DuPont argued that their claims fail because it could offset the paid breaks DuPont voluntarily provided Plaintiffs against the unpaid donning and doffing and shift-relief time. Plaintiffs filed a motion to conditionally certify a FLSA collective action, which the District Court granted. Plaintiffs’ counsel sent a notice of the FLSA class to the prospective class members, and more than 160 workers opted in. Following the close of discovery, DuPont filed its motion for summary judgment.
The District Court granted DuPont‘s motion for summary judgment, holding that the FLSA allowed DuPont to use paid non-work time to offset the required overtime and dismissing the lawsuit entirely.3 The District Court held that Plaintiffs were not owed any additional compensation because the amount of paid non-work time exceeded unpaid work time. Although it recognized that “[t]he FLSA does not expressly grant employers permission to use paid non-work time to offset unpaid work time,” App. 12, the District Court
Prior to oral argument, we invited the Department of Labor (“DOL“) to file an amicus brief to assist us in understanding the intricacies of the important FLSA issue presented by this case. At our request, the DOL and DuPont each filed letter briefs further addressing how we should analyze the issue of offsetting paid non-work time against unpaid time worked under the FLSA. We are to give deference to the DOL‘s position and guidelines under Skidmore v. Swift, 323 U.S. 134, 65 S.Ct. 161, 89 L.Ed. 124 (1944). See Madison v. Res. for Human Dev., Inc., 233 F.3d 175, 186 (3d Cir. 2000) (“[I]nformal agency interpretations in ‘opinion letters and similar documents’ are . . . ‘entitled to respect’ under Skidmore v. Swift . . . but only to the extent they have the ‘power to persuade.‘“) (internal footnote omitted). Under Skidmore, “[t]he weight of [an agency‘s] judgment in a particular case will depend upon the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control.” Skidmore, 323 U.S. at 140, 65 S.Ct. 161.
II.
The District Court had jurisdiction pursuant to
III.
To provide context for the ultimate issue before us, we begin by reviewing the contours of the FLSA and the circumstances in which an employer may offset compensation already given to an employee against required overtime.4
A. Overtime and Calculating Regular Rate Under the FLSA
We have noted that the FLSA has a “broad remedial purpose.” De Asencio v. Tyson Foods, Inc., 500 F.3d 361, 373 (3d Cir. 2007). “The central aim of the Act was to achieve . . . certain minimum labor standards.” Mitchell v. Robert DeMario Jewelry, Inc., 361 U.S. 288, 292, 80 S.Ct. 332, 4 L.Ed.2d 323 (1960). The Act established baseline standards through “federal minimum-wage, maximum-hour, and overtime
Among the bedrock principles of the FLSA is the requirement that employers pay employees for all hours worked.
The regular rate at which an employee is paid for “straight time“—or the first forty hours of work in a week—is integral to the issue of overtime payment under the FLSA. The regular rate is determined by way of a calculation. It is a “rate per hour” that “is determined by dividing [the] total remuneration for employment (except statutory exclusions) in any workweek by the total number of hours actually worked by him in that workweek for which such compensation was paid.”
The FLSA characterizes the compensation that must be included in the dividend of the regular rate calculation broadly. It “include[s] all remuneration for employment paid to, or on behalf of, the employee” except the exclusions that are listed in section 207(e)(1)-(8).
The divisor in the regular rate calculation is comprised of all “hours worked.”
Thus, if the time at issue is considered hours worked under the Act, the corresponding compensation is included in the regular rate of pay.
B. Permissible Offsetting Under the FLSA
The FLSA explicitly states when an employer may use certain compensation already given to an employee as a credit
(1) Except as provided in paragraph (2), sums excluded from the regular rate pursuant to subsection (e) shall not be creditable toward wages required under section 6 or overtime compensation required under this section.
(2) Extra compensation paid as described in paragraphs (5), (6), and (7) of subsection (e) of this section shall be creditable toward overtime compensation payable pursuant to this section.
IV.
Nothing in the FLSA authorizes the type of offsetting DuPont advances here, where an employer seeks to credit compensation that it included in calculating an employee‘s regular rate of pay against its overtime liability. Rather, the statute only provides for an offset of an employer‘s overtime liability using other compensation excluded from the regular rate pursuant to sections 207(e)(5)-(7) and paid to an employee at a premium rate.
In Wheeler, as here, the employer, Hampton Township, had voluntarily included non-work pay—which did not need
We based our conclusion that offsetting was limited to the type addressed by section 207(h) on our recognition that Section 207(h) offsetting pertained only to “extra compensation,” which is distinct from regular straight time pay. Wheeler, 399 F.3d at 245. Indeed, “such ‘extra compensation’ is a kind of overtime compensation, and thus need not be added to the regular rate. Likewise, such compensation may be credited against the Act‘s required overtime pay.” Id. Courts have widely recognized that an employer may offset its overtime liability with accumulated premium pay given to employees under sections 207(e)(5)-(7). See, e.g., Singer v. City of Waco, 324 F.3d 813, 828 (5th Cir. 2003); Kohlheim v. Glynn Cty., 915 F.2d 1473, 1481 (11th Cir. 1990). The offset created by section 207(h) is logical because it authorizes employers to apply one type of premium pay to offset another, both of which are excluded from the regular rate.7 See
DuPont argues that the FLSA‘s failure to expressly prohibit offsetting where the compensation used to offset is included in the regular rate indicates that offsetting is allowed. We disagree with DuPont‘s notion that the FLSA‘s silence indicates permission. While it is true that the statute does not explicitly set forth this prohibition, the policy rationales underlying the FLSA do not permit crediting compensation used in calculating an employee‘s regular rate of pay because it would allow employers to double-count the compensation. The DOL convincingly urges this viewpoint. It observes that “[t]here is no authority for the proposition that compensation already paid
The statutory scheme that limits crediting to the three types of “extra compensation” excluded from the regular rate against overtime obligations makes sense. “To permit overtime premium to enter into the computation of the regular rate would be to allow overtime premium on overtime premium—a pyramiding that Congress could not have intended.” Bay Ridge Operating Co. v. Aaron, 334 U.S. 446, 464, 68 S.Ct. 1186, 92 L.Ed. 1502 (1948). Excludable premium compensation may offset other excludable premium compensation. To allow compensation included in the regular rate to offset premium-rate pay, however, would facilitate a “pyramiding” in the opposite direction by allowing employers to pay straight time and overtime together. This approach fundamentally conflicts with the FLSA‘s concern that employees be compensated for all hours worked. As the Ninth Circuit observed in Ballaris, “it would undermine the purpose of the FLSA if an employer could use agreed-upon compensation for non-work time (or work time) as a credit so as to avoid paying compensation required by the FLSA.” Ballaris, 370 F.3d at 914.
While Ballaris is distinguishable because the employer in that case excluded meal break compensation when calculating the employee‘s regular rate and the parties agreed that the meal break period was excluded from each employee‘s hours worked, its reasoning nonetheless applies here. The Ninth Circuit concluded that “[c]rediting money already due an employee for some other reason against the wage he is owed is not paying that employee the compensation to which he is entitled by statute. It is, instead, false and deceptive ‘creative’ bookkeeping that, if tolerated, would frustrate the goals and purposes of the FLSA.” Ballaris, 370 F.3d at 914 (internal footnote omitted). Here, permitting DuPont to use pay given for straight time—and included in the regular rate of pay—as an offset against overtime pay is precisely the type of “creative bookkeeping” that the Ninth Circuit cautioned against and the FLSA sought to eradicate.
While the District Court cited Wheeler in passing, it did not apply our holding but, instead, looked at the two circumstances that the statute expressly states preclude offsetting by an employer:
First, employers cannot use paid non-work time to offset unpaid work time when the paid non-work time is excluded from the regular rate of pay. Second, if the parties agree to treat paid non-work time as “hours worked,” and this time is included in the regular rate of pay, the employer cannot offset.
App. 12. The District Court concluded that because neither of these circumstances was present in this case, the FLSA does not expressly prohibit an offset. It recited the prohibition set forth in
Moreover, we do not accept the significance that the District Court and DuPont place on two lingering issues: first, whether the parties had an agreement to treat the breaks in question as hours worked, and second, whether the FLSA required DuPont to compensate the employees for the breaks in question. With respect to the former, both the Ninth Circuit in Ballaris and the FLSA‘s implementing regulations advance the notion that employers may not offset if there is an agreement to treat otherwise uncompensable time as “hours worked,” and the compensation at issue is included in the regular rate. But inclusion in the regular rate is sufficient for our purposes, as noted above, so the existence of an agreement is beside the point.8 As to the latter,
worked, but it does not prohibit them from doing so. Indeed, section 778.320 expressly contemplates that an employer may agree to treat non-work time, including meal breaks, as compensable hours worked.
The District Court relied on the Seventh Circuit‘s opinion in Barefield v. Village of Winnetka, 81 F.3d 704 (7th Cir. 1996), and the Eleventh Circuit‘s opinion in Avery v. City of Talladega, 24 F.3d 1337 (11th Cir. 1994), in concluding that DuPont could offset using meal break compensation. The two opinions did not analyze the offset issue in detail, but instead focused on compensability. The courts in both Barefield and Avery presumed an offset was permissible and focused on the fact that the FLSA did not require employers to compensate employees for the bona fide meal break periods at issue. Notably, neither opinion addresses the most relevant provision in the FLSA on the issue of offsetting—
V.
For the reasons discussed above, we will reverse the District Court‘s decision of November 5, 2014, and remand for further proceedings consistent with this opinion.
Notes
(5) extra compensation provided by a premium rate paid for certain hours worked by the employee in any day or workweek because such hours are hours worked in excess of eight in a day or in excess of the maximum workweek applicable to such employee under subsection (a) or in excess of the employee‘s normal working hours or regular working hours, as the case may be;
(6) extra compensation provided by a premium rate paid for work by the employee on Saturdays, Sundays, holidays, or regular days of rest, or on the sixth or seventh day of the workweek, where such premium rate is not less than one and one-half times the rate established in good faith for like work performed in nonovertime hours on other days;
(7) extra compensation provided by a premium rate paid to the employee, in pursuance of an applicable employment contract or collective-bargaining agreement, for work outside of the hours established in good faith by the contract or agreement as the basic, normal, or regular workday (not exceeding eight hours) or workweek (not exceeding the maximum workweek applicable to such employee under subsection (a) of this section, where such premium rate is not less than one and one-half times the rate established in good faith by the contract or agreement for like work performed during such workday or workweek; . . . .