Yes to Getting Paid for Getting Dressed? Doesn’t Meet the Test, Says 11th CircuitWhen do you have to pay an employee before a shift? In Llorca v. Sheriff (Collier County, Florida), the Eleventh Circuit waded into the rich history of what types of pre-shift activities might qualify for hourly compensation. As we have written about before, the primary legislation dealing with dressing for and driving to and from work is the Portal-to-Portal Act of 1947, as amended by the Employee Commuting Flexibility Act of 1996. That act states that an employer is not on the hook to pay its employees for time travelling to and from work (a regular commute) or for activities that are “preliminary to or postliminary to” the “principal activity” of the job. The U.S. Supreme Court established a test that preliminary or postliminary work could only be compensable if it was an “integral and indispensable part of the principal activities.” Easy, right?

The Facts

Mr. Llorca and his cohorts were deputy sheriffs in Collier County, Florida, and were required to show up for work wearing their uniforms and certain protective gear. They were allowed to put on this equipment and clothing at home—and they did that. The deputies also commuted to and from work in marked patrol cars. During that commute, they were required to have their radios on and to respond to any emergencies if they heard them. The county did not pay the deputies for the time spent donning the protective equipment and uniform or for any time just riding to and from work—although they were paid if they had to respond to an emergency. Plaintiffs filed suit under the FLSA for that uncompensated time. The lower court dismissed their case, and they appealed.

Where and How You Get Dressed May Matter

The Eleventh Circuit opinion addressed the donning protective equipment and commuting claims separately. On the dressing claim, the court looked at whether putting on the protective equipment was both integral and indispensable to the deputies’ primary job of law enforcement. The opinion notes that this inquiry is “fact-intensive and not amenable to bright-line rules.” The court found that donning and doffing the uniform and protective equipment was an entirely separate activity from the deputies’ principal law enforcement duties—enforcing traffic laws, responding to emergencies and engaging in crime protection—so not compensable. The court also relied on DOL regulations that held that changing clothes normally is among the preliminary and postliminary activities that are non-compensable.

The court also found it significant that the deputies were allowed to dress at home. The DOL has found that changing clothes at home is not compensable and the court compared the situation to a chemical plant employee who has  to don specific chemical exposure suits while at the plant. That type of changing activity would be considered both integral and indispensable to the job and therefore recoverable. In this case, the Eleventh Circuit denied the wage claim.

Riding to and from Work

With regard to the commuting time claim, the court stated that this type of travel is exactly what the Portal-to-Portal Act attempted to exempt from the wage requirements of the FLSA—even if you are in a company vehicle. The fact that the officers might also have to be responsive to possible emergencies did not trouble the Eleventh Circuit in finding that it was not compensable time. Again, a DOL regulation also provided the court with support by holding that a police officer who is off duty, but has to have the radio on for emergency calls, is not working during the travel time. Other circuits had agreed on this point and the court noted those cases in denying the claim.

Is Dressing and Driving Always Non-Compensable?

As the court explicitly stated, these types of claims are decided on a case-by-case basis and are very fact driven. However, there are some good tips we can take from this case.

  • If an employee is able to dress at home, that is most likely not going to be a compensable activity. However, if there are pre-or post-shift activities that have to occur on site–specific location-based protective equipment, showering due to workplace exposures, etc.–that might be compensable.
  • Just because an employee drives a company vehicle doesn’t make the time compensable. But if you require someone to check the mail on the way into work or deliver a bank deposit on the way home that may turn part of the ride into a compensable event.

Again, the best bet is to have discussions with your employees about their work requirements and set expectations for how you plan to pay them.

Cooperate or Pay: Recovering Attorneys’ Fees to Get to ArbitrationDoes your arbitration agreement allow you to recover attorneys’ fees if the employee rebels against arbitration and you have to compel it? Maybe it should. In Aralar v. Scott McRea Automotive Group, a court in Florida recently affirmed an arbitrator’s award of nearly $20,000 in attorney’s fees for the defendant’s hassle of moving for arbitration. Employers with arbitration agreements should be encouraged that the fees incurred for moving for arbitration (when it should be clear cut) may be recoverable with the contract clause.

The Facts and the Arbitration Clause

Aralar worked in the McRea auto service center and filed a lawsuit in court under the FLSA for unpaid overtime and back wages. Pursuant to an arbitration agreement Aralar signed as a condition of employment, McRea notified Aralar’s counsel multiple times that he could not pursue the matter in court — it had to go to arbitration.

The arbitration clause provided that if one of the parties filed an action in court that was subject to arbitration, the other party would provide notice of the arbitration requirement and request to have the case dismissed. If the party who filed the court action did not dismiss the case within 10 days and the case ultimately ended up in arbitration following a motion, the moving party could recover reasonable attorneys’ fees incurred “because of the filing of the complaint.”

Aralar did not respond, and McRae filed a motion to dismiss the case and compel arbitration. Yet again Aralar failed to respond, although he eventually agreed to the arbitration forum about six weeks after it was filed. The court then compelled the matter to arbitration and stayed the case pending the results. Aralar did not end up filing his request for arbitration for another six months after the court’s ruling.

About a year later, the arbitrator granted McRae’s motion for judgment on the pleadings, finding that Aralar’s job as a service advisor was exempt from FLSA requirements. A few months later, the arbitrator awarded McRae the fees and costs incurred up through the time the case was stayed by the court, a sum totaling $19,291.58. The fees and costs awarded were about half of the amount requested.

After no further response was received from Aralar, McRae filed a motion with the court to confirm the arbitration award. Aralar finally woke up and filed to vacate the attorneys’ fee award.

The Court’s Decision

In his ruling, the judge conveyed that any party seeking to vacate an arbitrator’s findings must clear a high hurdle because federal courts defer to an arbitrator’s decisions whenever possible. Then the judge said the same standard applies for award of attorneys’ fees. Aralar contended that (1) fees should only be awarded as a sanction, and (2) that because his FLSA claim was not frivolous, the awarding of fees was inappropriate based on rulings in civil rights cases. The judge rejected those contentions and found that because the parties contractually agreed to the arbitration agreement’s fee shifting provision and Aralar did not withdraw his lawsuit within 10 days of notice, McRae was entitled to enforce the contract terms and recover the fees incurred to get the matter into arbitration.

Takeaways

The decision makes sense and these fee shifting clauses could be a useful tool to avoid fights about arbitration. Where the employer has to have its attorneys compel a matter into arbitration when the employee should have agreed to it, that unnecessary expense should come out of the plaintiff’s pocket. Employers should find some small encouragement that fee recovery provisions will be enforced. At the very least, the Aralar decision provides leverage towards peaceful agreements into arbitration rather than a fight. No plaintiff wants to pay a former employer—especially when they filed a lawsuit to try and get money.

When Lump-Sum Payments to Employees are Earnings for Garnishment Purposes

Welcome to Part 3 of our series on the Department of Labor’s three new opinion letters. We previously looked at the opinion letters on FMLA intermittent breaks and travel time compensation. If you missed those posts, you can catch up here (FMLA breaks) and here (travel time).

When Lump-Sum Payments to Employees are Earnings for Garnishment PurposesNext up is the wage garnishment letter, which analyzes when a lump-sum payment to an employee constitutes “earnings” subject to garnishment under Title III of the Consumer Credit Protection Act (CCPA). As background, the CCPA limits the amount of earnings that may be garnished pursuant to court orders, such as for child support. Those limits are 50% of an employee’s disposable earnings (i.e., earnings after applicable withholdings) if the employee is supporting another spouse or child, or up to 60% of disposable earnings if the worker is not. (Garnishments may be subject to additional limits under applicable state law.)

The CCPA recognizes “earnings” as any “compensation paid or payable for personal services, whether denominated as wages, salary, commission, bonus, or otherwise, and includes periodic payments pursuant to a pension or retirement program.” As the DOL has previously noted, earnings under the CCPA include lump-sum payments made in exchange for the employee’s services. This new opinion letter addresses three categories of lump-sum payments: earnings, partial earnings, and not earnings.

Earnings Subject to Garnishment

Most lump-sum payments to employees are earnings and thus, as subject to garnishment. Though the CCPA specifically identifies commissions and bonuses as earnings, the letter emphasizes that bonuses in particular come in many forms: signing bonus, referral bonus, relocation incentive, attendance award, etc. Regardless of its name, all of these are still bonuses subject to garnishment. Similarly, retroactive merit increases, holiday pay, or termination pay are all tied to an employee’s work and thus are earnings and garnishable.

Partial Earning Maybe Subject to Garnishment

Some lump-sum payments are partially earnings, such as workers’ compensation and lawsuit settlements. In the workers’ compensation context, for example, an employee may receive payments to replace lost wages as well as medical expenses. The wage substitute payments are earnings (subject to a garnishment order), and the medical expenses are not. Similarly, for a lawsuit settlement, if an employee receives some portion for lost wages and another portion for compensatory damages, any payment for wages counts as an earning (garnishable), but compensatory or punitive damages would not.

Not Earnings Not Subject to Garnishment

Lastly, the letter recognizes only one instance in which a lump-sum payment is categorically not an earning: the buyback of company shares from the employee.

As always, ask your lawyer if you have questions about what constitutes earnings. Questions about lump-sum payments also appear frequently in the wage and hour context—if a non-exempt employee receives a non-discretionary bonus, that amount should be factored into his or her hourly rate for overtime calculations.