De Minimis Time Must Be Compensated, Tenth Circuit Rules

Employment Law


Although the unpaid time employees spent booting up their computers was relatively small, it was compensable and the employer failed to establish the practical administrative difficulty of estimating the time at issue, which occurred with “exceeding regularity,” the U.S. Court of Appeals for the Tenth Circuit held, reversing summary judgment in favor of an employer in a Fair Labor Standards Act (FLSA) case.

Call center representatives (CCRs) who worked for Nelnet Diversified Solutions filed an FLSA action, alleging that they were not paid for the time devoted to booting up their work computers and launching certain software before they clocked in.

A CCR must insert a security badge into the computer and enter his or her credentials before the computer launches a specialized software program, that in turn loads the CCR’s personal desktop and Nelnet’s intranet, which contains a link to the timekeeping system. Only then can a CCR clock in and begin receiving payment.

The median amount of time devoted to these preshift activities—which vary slightly between Nelnet’s three call center locations—is approximately two minutes per shift.

A district court held that these preshift activities were compensable, but ruled that the time at issue was de minimis and granted summary judgment to Nelnet. It also awarded costs to Nelnet as the prevailing party.

The plaintiffs appealed, arguing that the preshift activities were not de minimis.

A panel of the Tenth Circuit agreed, reversing the summary judgment in favor of Nelnet as well as the award of costs.

The parties agreed that the CCRs are employed to perform the principal activity of servicing student loans, which they do by interacting with debtors over the phone and through email. What remained in dispute was whether the preshift activities are integral and indispensable to the principal duties such that they are compensable under the FLSA, the court said.

Nelnet contended that the activities required “little to no concentration” and should not properly be considered work. But “exertion” isn’t the measurement of “work” under the FLSA, the Tenth Circuit said, further determining that the preshift activities were integral and indispensable to the CCRs’ principal activities.

The very data that allows the CCRs to service student loans—such as borrower information and payment history—resides within the computer system, and the CCRs necessarily use their computers to access the information and to communicate with borrowers via email.

“Nelnet effectively concedes indispensability, noting ‘the necessity of booting up and logging in to access job-related programs,’” the court wrote. “As for the integral prong, there is a clear connection between the computers and software programs and the work the CCRs are employed to perform—the CCRs make consistent use of the computer and its programs to perform their work. So preparing those tools is integral to the CCRs’ work.”

Nelnet could not have eliminated these activities without impairing the employees’ ability to complete their work, the panel added, and such integral and indispensable activities are compensable under the FLSA.

Applying the three-factor balancing test of the de minimis doctrine, the Tenth Circuit found the factors weighed in favor of compensation. Nelnet failed to demonstrate the practical administrative difficulty of recording the additional time, particularly as its expert already had done so for the case at hand and the preshift time did not vary greatly from employee to employee, the court pointed out.

The reality is “that it is entirely possible—and not significantly burdensome—for Nelnet to estimate the amount of time that the CCRs devote to these compensable preshift activities based on precise data that it already maintains and controls,” the court wrote. “And critically, Nelnet provides no other evidence to support its assertion that estimating the amount of time at issue would be administratively burdensome.”

Considering the second factor, the aggregate amount of compensable time, the panel found that the individual employee claim of approximately $125 per year did not weigh in favor of either party.

The third factor weighed in favor of the employees, as the preshift activities at issue occurred with regularity before every shift for approximately the same amount of time.

“Balancing these three factors, we ultimately conclude that the relatively small size of the claims is not enough to outweigh the regularity of the work and the absence of any significant practical administrative burden in estimating the amount of time involved,” the Tenth Circuit wrote. “We therefore hold that Nelnet has not shown that the time at issue is de minimis.”

The panel reversed summary judgment in favor of Nelnet and remanded for further proceedings.

To read the opinion in Peterson v. Nelnet Diversified Solutions, LLC, click here.

Why it matters: The Tenth Circuit’s decision provides an important reminder to employers that even two minutes spent on preshift activities can be compensable under the FLSA and the de minimis doctrine.

manatt-black

ATTORNEY ADVERTISING

pursuant to New York DR 2-101(f)

© 2022 Manatt, Phelps & Phillips, LLP.

All rights reserved