Seyfarth Synopsis: Employers frequently struggle with questions around the compensability of certain activities, classification of employees, and how to structure their policies to avoid Fair Labor Standards Act violations. Getting the answers wrong can be costly. But getting them wrong without making reasonable efforts to comply with the law doubles an employer’s exposure. According to a recent Eastern District of Pennsylvania decision, consulting an experienced labor and employment attorney and implementing policies responsive to that advice can avoid that double trouble.
Many a manufacturer requires its line level employees to wear protective clothing on the job. And many a case has been litigated over whether time spent donning and doffing that clothing is compensable.
East Penn Manufacturing Co. found itself embroiled in one such case brought by the Department of Labor that involved employees who worked with lead while making batteries and related components. A trial determined that East Penn violated the FLSA and owed $22,253,087.56 in back wages. The DOL asked the court after trial to impose liquidated damages (which double the amount of a back pay award) on East Penn, arguing that the company had not acted in good faith in its attempts to comply with federal law and had no reasonable grounds to believe it had complied with the FLSA.
The court disagreed. To avoid liquidated damages in FLSA cases, an employer must show that it acted in good faith and had reasonable grounds to believe it complied with the law. Good faith, said the court, is a subjective requirement that requires employers to “have an honest intention to ascertain and follow” the FLSA. Reasonableness, meanwhile, “imposes an objective standard” that asks what a reasonably prudent [person] would” do “under the same circumstances.”
East Penn proved both that it acted in good faith and reasonably. Every time a donning and doffing issue arose—something that happened in 2003 and 2016—East Penn “took affirmative action to ascertain its FLSA obligations.” In 2003, the company directed its outside labor and employment attorney to analyze two DOL donning and doffing settlements and advise East Penn about its own compensation policies. Upon receipt of the lawyer’s memo and recommendations, East Penn adopted one of their attorney’s “solutions” and promulgated a new compensation policy for donning and doffing time.
In 2016, East Penn learned of an OSHA complaint “about the amount of paid time allotted for showering.” The company revised its compensation policy yet again and solicited the same lawyer’s input on the new proposed policy’s legal compliance. The lawyer approved the policy and the company implemented it.
“In other words,” said the court, “East Penn relied in good faith on the advice of a properly experienced labor and employment attorney” who himself tried to ascertain if the company’s donning and doffing policies complied with the FLSA. Indeed, East Penn “tailored its policies in response to, and consistent with” its lawyer’s advice.
For many of the same reasons, the court also held that East Penn acted in an objectively reasonable manner. The “legitimate legal uncertainty about the compensable status” of donning and doffing time coupled with the company’s actions in response to that uncertainty led the court to conclude “that East Penn was objectively reasonable as a matter of law.” The court thus denied the DOL’s request for liquidated damages and East Penn was able to avoid paying an extra $22,253,087.56.
For employers facing uncertainty about their compensation policies, classification decisions, or other wage and hour related issues, this opinion provides a roadmap for how to avoid the imposition of liquidated damages in the event liability is found. Step one is diligently endeavoring to learn what the FLSA requires of an employer. Step two is structuring policies and conduct accordingly. And the most efficient, easy-to-prove way of doing both of those is, according to East Penn, by consulting experienced wage and hour counsel.
Those with questions or concerns about compliance with the FLSA or similar state laws should feel free to reach out to a member of Seyfarth Shaw LLP’s world class wage and hour team for additional guidance.