Supreme Court.jpgThis month marked the opening of the Supreme Court’s new term. For employment law practitioners, this session will be particularly busy with seven cases analyzing a range of employment questions, from the scope of the EEOC’s duty to conciliate discrimination claims (Mach Mining v. EEOC, oral argument set for January 2015 or later) to the applicability of a whistleblower protection law to employees who make disclosures “specifically prohibited by law” (Dep’t of Homeland Security v. MacLean, oral argument November 8). Over at the FMLA Insights blog, my colleague Jeff Nowak discusses Young v. UPS, where the Court will consider whether, and in what circumstances, the Pregnancy Discrimination Act requires an employer that provides work accommodations to non-pregnant employees with work limitations to also provide work accommodations to pregnant employees with similar work limitations.

In this post and our next post, we’ll cover the two cases from this term of particular interest to the wage and hour world. The first, Integrity Staffing Solutions, Inc. v. Busk, concluded oral arguments earlier this month. There, the Court will consider whether time spent in security screenings is compensable under the Fair Labor Standards Act (FLSA). Warehouse workers sued Integrity Staffing under the FLSA for uncompensated time they were required to spend in lengthy security screenings of up to 25 minutes at the end of the shifts during their assignments to work in Amazon warehouses.

Under the FLSA, as amended by the Portal-to-Portal Act, employers generally need not compensate employees for “preliminary” (pre-shift) and “postliminary” (post-shift) activities, unless the activities are “integral and indispensable” to an employee’s principal activities. To be “integral and indispensable,” an activity must be (1) “necessary to the principal work performed” and (2) “done for the benefit of the employer.”  The district court initially dismissed the warehouse workers’ claims on the grounds that such post-work activities were not compensable under the FLSA. However, the Ninth Circuit reversed, agreeing with the workers that passing through security stations was done for Integrity’s benefit and was necessary, not ancillary, to the worker’s principal duties as warehouse employees. Integrity has asserted that the Ninth Circuit’s decision “squarely conflicts with decisions from the Second and Eleventh Circuits holding that time spent in security screenings is not subject to the FLSA because it is not ‘integral and indispensable’ to employees’ principal job activities.”

The oral argument transcript is posted on the Supreme Court’s website, but the questions seemed to fall along the same lines as we saw in the Court’s decision last term in Sandifer v. U.S. Steel. In that case (admittedly different because it involved a collective bargaining agreement and not the FLSA), the majority decided that time spent putting on and taking off certain protective gear is not compensable. For instance, the questions asked from those Justices in the Sandifer minority to Integrity Staffing’s counsel and the Solicitor General attempted to cast the security screening as a compensable task – like showering off chemicals at the end of a shift or closing out a cash register. On the flip-side, the questions from those Justices in the Sandifer majority cast the screening as part of the non-compensable process of clocking out.

In particular, one of the central (and hard to define) points in this analysis is the scope of a “principal” activity. At one point, the Chief Justice noted that “no one’s principal activity is going through security screening,” but that employers hire workers to do something else. He viewed “principal” as meaning “things that are more significantly related” to the job itself. Other Justices argued that the importance of “inventory control” to Amazon’s business made the security screening integral and indispensable. Questions like these show the struggle that the Justices had (as they did in Sandifer) in determining whether “principal” refers only to the narrow, central duty, or whether it could include a broader list of integral tasks. Could the location of the conduct matter?  Is there a corollary to “on call” time and the concept of a person either waiting to be engaged or being engaged to wait?  The oral argument demonstrated the difficulty for employers in understanding a clear definition of this concept.

Insights for Employers

It is hard to envision a result different from Sandifer given the makeup of the Court, but a “win” for the employer here could be a mixed bag. Both commentators and practitioners have struggled to identify clear concepts and rules in the Sandifer majority’s opinion. A similarly opaque opinion in Integrity Staffing could present even greater challenges for employers and wage and hour practitioners, particularly if it is not limited solely to security screenings. A broadly worded opinion could easily blur the lines between other compensable and non-compensable pre- and post-shift activities and lead to a whole new round of litigation over this volatile area.

Aside from the statutory interpretation arguments under the FLSA, cases like these also set incentives for both employers and employees. Integrity Staffing argues that if the security time is compensable, then employees will have a strong incentive to “take their time” on their way through the security screen, behavior that would be difficult to discipline. On the other hand, if security time is not compensable, then employers would have little reason to worry about committing resources to alleviate wait times at security screening stations, time clocks, lockers, entry/exit gates, or other pre- and post-shift bottlenecks. Across companies and industries, small shifts in incentives like these carry substantial financial implications for everyone in the workplace.

We expect a decision early in 2015, and we will cover it in detail here as soon as the opinion is released. In Part 2 of this series, we’ll look at Perez v. Mortgage Bankers Association, where the Court will resolve the question of whether a federal agency must engage in notice-and-comment rulemaking before it can significantly alter an interpretive rule that articulates an interpretation of an agency regulation—an issue of particular interest to wage and hour, labor, and employment lawyers of all stripes.