LenderLaw Watch
May 22, 2017

SCOTUS Poised to Resolve Circuit Split Over Offsetting Unpaid Work Time with Paid Breaks

On May 15, 2017, petitioners in E.I. du Pont de Nemours & Co. v. Bobbi-Jo Smiley filed a reply brief with the U.S. Supreme Court defending their petition for certiorari and arguing that the Court should take up review of the Third Circuit’s revival of their employees’ claims for overtime pay.  Supreme Court intervention, according to the petitioners, would resolve a circuit split on the issue of whether paid break time can offset otherwise compensable work time.

The E.I. du Pont respondents—hourly manufacturing plant workers employed by the petitioners—first filed their claims against their employers on November 28, 2012 (followed by a March 15, 2013 amended complaint), in which the respondents alleged that they were owed overtime compensation under the Fair Labor Standards Act (FLSA) because they were required to be present at manufacturing plants both before and after their regularly-scheduled shifts to don and doff protective gear, yet their employers did not pay them for this time.

Granting the petitioners’ motion for summary judgment, the district court held that the respondents were not entitled to overtime pay because their employers provided them with paid meal breaks and the FLSA did not preclude the petitioners from offsetting the respondents’ unpaid time with the paid break time—which actually exceeded the unpaid time.  In so holding, the district court stated that it followed comparable decisions issued by the Seventh and Eleventh Circuits.

The respondents appealed the district court’s holding to the Third Circuit, which unanimously reversed and remanded the district court’s holding on October 7, 2016.  The Third Circuit held that nothing in the FLSA authorized the type of offsetting advanced by the petitioners and that the paid break time at issue in E.I. du Pont could not be allocated to the employees’ unpaid work time.

The petitioners appealed the Third Circuit’s holding to the Supreme Court on March 30, 2017.  In their petition for certiorari, the petitioners argued that the Third Circuit was wrong to conclude that silence by the FLSA amounted to a prohibition on offsetting.  In support of this argument, the petitioners pointed to the fact that the FLSA explicitly prohibits employers from using certain categories of extra compensation to offset overtime pay—none of which include the paid meal breaks provided by the petitioners.  In addition, the petitioners argued that the Third Circuit’s holding effectively created a circuit split, as it directly contradicted the Seventh and Eleventh Circuit opinions that the district court relied on, which both stated that employers can use paid break time to offset otherwise compensable work time.  Finally, the petitioners argued that the Third Circuit opinion was in conflict with the Supreme Court’s FLSA jurisprudence, which—according to the petitioners—has established that pay practices are legal under the FLSA unless they are explicitly prohibited.

The respondents filed their opposition to certiorari on April 28, 2017, arguing that the petitioners overstated the Supreme Court’s FLSA jurisprudence, that the Seventh and Eleventh Circuit opinions are factually dissimilar, and that the Third Circuit opinion should remain in place.  In the petitioners’ May 15, 2017 reply in support of their petition for certiorari, the petitioners reasserted their argument that the circuit split is genuine and that Supreme Court guidance is necessary to resolve this conflict.

This issue is now ripe for the Supreme Court to weigh in.  Financial services companies who employ hourly workers should stay apprised of these ongoing developments.  If the Supreme Court takes up this case, it could issue a final opinion on whether paid break time can be used to offset otherwise compensable work time.  If the Supreme Court sides with the petitioners, financial services employers may have confirmation that they can employ creative methods of offsetting overtime compensation, such as providing paid break time.  On the other hand, if the Supreme Court sides with the respondents, financial services employers who currently offset otherwise compensable work time with paid break time may need to rethink their practices or face potential litigation exposure.  In the event the Supreme Court declines to take up this case, financial services companies should recognize that, moving forward, this issue will remain a grey area in the law and may pose potential risks for employers.