Jury Awards $22 Million in Back Pay to Manufacturing Employees
The U.S. Department of Labor (DOL) recently made an announcement regarding the outcome of a groundbreaking case, Walsh v. East Penn Manufacturing Co, Inc., DC-PA. In this landmark verdict, a jury has granted more than $22 million in back wages to approximately 7,500 employees of a battery manufacturer. This award represents the largest recorded verdict under the Fair Labor Standards Act (FLSA). Additionally, the DOL, as the plaintiff, intends to seek an equal amount in liquidated damages and an injunction mandating future FLSA compliance by the battery manufacturer.
The basis for the jury’s decision was the manufacturer’s failure to compensate its workers for all of their working time, including the time required for putting on and removing protective equipment and showering to mitigate lead exposure and other hazards encountered on the manufacturing line. As a result, overtime violations occurred. This case serves as a wakeup call for manufacturers to closely adhere to FLSA rules and regulations concerning time tracking and fair pay practices.
Understanding FLSA Pay Regulations
Under the FLSA, employees are entitled to overtime pay, one and a half times their regular pay rate, for hours worked beyond forty hours per week, unless specific exemptions apply. These exemptions typically exclude certain executives, administrative and professional (EAP) employees, outside salespeople, and computer employees from federal overtime rules.
Defining “Hours Worked” under the FLSA
The concept of a “workday” generally refers to the period between when employees commence their “principal activities” and when they conclude such activities on any given day. Principal activities encompass the tasks employees are employed to perform, such as the work done by manufacturing employees during their shifts on the manufacturing floor, which must be compensated.
However, employees must also be compensated for all activities essential to performing their principal tasks, even if these activities occur before or after their scheduled work hours. Consequently, the workday may extend beyond the employees’ official shifts, hours, or production line time.
For instance, if employees in a chemical plant cannot carry out their principal activities without donning specific clothing, changing clothes on the employer’s premises before and after the workday would be deemed essential to their tasks. The time spent changing would be considered part of the workday and therefore, must be compensated.
Details of the Case
The battery manufacturer maintained two sets of time records for its employees. The first set was based on a card system, requiring employees to swipe in no more than 14 minutes before or after their shifts. The second set of “adjusted” records did not reflect this 14-minute rule.
The manufacturer paid its employees based on the adjusted time records, without considering the additional time required for activities before and after the shift. Despite being aware of the need for employees to conduct these activities, the employer did not comply with the 14-minute rule. Following an employee complaint, the employer modified its policy to include a five-minute grace period before shifts for changing into uniforms and additional time for post-shift cleanup, subject to manager approval. Additionally, employees were given 10 minutes for post-shift shower time.
Both parties agreed that the activities before and after the employees’ eight-hour shifts were “integral and indispensable.” However, they disagreed on how to measure this compensable time. The DOL argued for recording the actual time taken for employees to put on and take off their protective gear, while the employer contended that it was only required to compensate for a “reasonable time” to complete these tasks, citing the 15-minute pre-shift and 10-minute post-shift activities as sufficient.
Ultimately, the court upheld the continuous workday rule as the appropriate method for measuring compensable time, ensuring employees are compensated for all time spent during the continuous workday. The court found no binding legal precedent for using a “reasonable” amount of time. The court clarified that the “reasonable” time standard was only applied to calculate back-pay damages and not regular pay. Thus, it agreed with the DOL’s position that compensation should be based on the actual time spent on the activities, rather than a “reasonable” estimation.
In addition to ruling in favor of employees on overtime pay, the court found that the manufacturer had violated FLSA recordkeeping provisions. The reason was the manufacturer’s admission that it did not record the actual time spent on pre- and post-shift activities.
Learning from Others’ Mistakes
This case serves as a cautionary tale for employing companies in similar situations. It emphasizes the importance of accurately tracking employees’ work hours in accordance with FLSA regulations and other applicable laws to ensure fair compensation.
How NAFA can Help
North American Forensic Accounting has experience in calculating lost wages as part of wage and hour claims. Our forensic tools allow us to manage large data sets and expedite large calculations. Contact us today to find out how we can support your case.