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When Pennies Become Thousands of Dollars: Are Courts Eroding the De Minimis Rule?

For decades courts have followed the de minimis rule when analyzing whether small fractions of time are compensable under the Fair Labor Standards Act (“FLSA”).  However, recent court cases may be eroding the application of this de minimis rule. Employers should carefully assess whether the time employees spend on short tasks before they clock in for work, and after they punch out, must be considered compensable worktime under the FLSA and related laws.

As far back as 1946, the U.S. Supreme Court recognized the “de minimis rule” and held that small amounts of worktime could be negligible, and it would not be considered a violation of the FLSA if employers did not pay employees for such time.  In the words of the Supreme Court, “[w]hen the matter in issue concerns only a few seconds or minutes of work beyond scheduled working hours, such trifles may be disregarded.”  Additionally, the U.S. Department of Labor has implemented analogous regulations.  For example, 29 C.F.R. § 785.47 indicates that “insubstantial or insignificant periods of time beyond the scheduled working hours... may be disregarded” when three factors are met:

  1. There must be practical administrative difficulties in precisely recording the time for payroll purposes;
  2. The time worked must consist of “uncertain and indefinite periods of time involved of a few seconds or minutes duration”; and
  3. An employer may “not arbitrarily fail to count as hours worked any part, however small, of the employee’s fixed or regular working time or practically ascertainable period of time he is regularly required to spend on duties assigned to him.”

Under this de minimis rule, numerous courts have held that small amounts of time spent booting up computers or quickly responding to emails, for example, are not compensable.  However, recent case law seems to be trending away from the application of the de minimis rule.

In Cadena v. Customer Conexx LLC, the Ninth Circuit recently reversed a Nevada district court’s grant of summary judgment – finding that the time call center workers spent booting up their computers was compensable worktime.  According to the Ninth Circuit, employers must focus on the importance of booting up the computer to the employees’ primary duties of answering calls.  Because the call center employees could not perform their jobs without functioning computers, the court held they must be paid for the boot-up time.  The Ninth Court refused to consider whether the time was non-compensable under the de minimis rule.

The Tenth Circuit reached a similar conclusion.  In Peterson v. Nelnet Diversified Solutions, the Tenth Circuit ruled that the time call center workers spent booting up their computers was compensable time because it was an integral part of their jobs and rejected the argument that it should be considered de minimis time.  The Peterson court found that the integral-and-indispensable inquiry was the sole test as to whether employees must be paid for time spent on job-related tasks.

While the de minimis rule is not dead, its application in certain jurisdictions has been significantly curtailed.   Moreover, some states have held that the de minimis rule is not applicable whatsoever under their state and local wage and hour laws.  Failing to account for small fractions of worktime in these locations can lead to significant class action lawsuits.  Not only could there be minimum wage violations, they also could lead to inadvertent overtime claims.  What amounts to a few cents for minor fractions of worktime could literally add up to “bet the business” litigation.

The de minimis rule and other wage and hour laws have become a hotbed for litigation over the last few years.  Failing to stay apprised of the frequent changes to these employment laws can expose companies to serious risk of liability.  Honigman can assist employers with undertaking the necessary analysis of their timekeeping and payroll practices to minimize these risks.

  • Matthew S. Disbrow

    Matt Disbrow is a labor and employment attorney who advises clients concerning a wide spectrum of employment matters, including wage and hour issues, overtime issues, executive employment and compensation, employment ...

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