Sales Reps Owed Pay for Flex Time, Third Circuit Says

By Jon Steingart

An employer that let its workers take unscheduled short breaks during the workday must pay them for those periods, a federal appeals court ruled ( DOL v. Am. Future Sys., Inc. , 2017 BL 367399, 3d Cir., No. 16-2685, summary judgment affirmed 10/13/17 ).

Progressive Business Publications had a “flexible time” policy under which it let sales representatives take breaks “at any time, for any reason, and for any duration” by logging off their computers. They were free during breaks to remain at their workstations or leave. The policy, also known as “flex time,” was intended to maximize employees’ ability to take breaks, the company said in a brief.

Progressive, officially known as American Future Systems Inc., only paid employees when they were signed into their computers. The company should have paid employees for intraday breaks, the Department of Labor said in a lawsuit. A lower court awarded summary judgment to the DOL.

The lower court’s decision, affirmed on appeal, rested on a DOL regulation interpreting the Fair Labor Standards Act. The regulation says rest periods up to 20 minutes promote employee efficiency and should be paid as compensable time. An employer should pay for short breaks because it benefits from having refreshed workers, courts have explained.

Company Benefits When Sales Reps Take Breaks

Progressive shouldn’t be required to pay employees during breaks because they were free to spend the time however they wanted, the company said. Although employees may benefit from the break policy, it also benefits the company by helping sales representatives set themselves up for successful sales calls, Judge Theodore A. McKee wrote Oct. 13 for the U.S. Court of Appeals for the Third Circuit.

The DOL’s interpretation is entitled to “substantial deference” because it’s the agency Congress charged with administering the Fair Labor Standards Act, McKee said. Its position has been consistent for at least 50 years, he said. Judges Marjorie O. Rendell and Julio M. Fuentes joined the opinion.

In the event an employee takes advantage of the requirement that Progressive pays for breaks up to 20 minutes by taking multiple breaks of 19 minutes in length, Progressive would be required to pay for the time, McKee said. But it would also be free to discipline or terminate the employee, he said.

“We’re disappointed with the result and we disagree with it,” Alfred Putnam, Jr., a lawyer for Progressive, told Bloomberg Law Oct. 16. “We’re considering all the options we have.”

A DOL spokesman declined to comment Oct. 16.

Rachel Goldberg with the DOL solicitor’s office in Washington represented the department.

Putnam and Dorothy Hickok with Drinker Biddle & Reath in Philadelphia; Sarah Bouchard with Morgan, Lewis & Bockius in Philadelphia; and Lincoln Bisbee with Morgan, Lewis & Bockius in Washington represented Progressive.

To contact the reporter on this story: Jon Steingart in Washington at jsteingart@bna.com

To contact the editor responsible for this story: Terence Hyland at thyland@bna.com

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