Paid Lunches Cannot Offset Unpaid Overtime

Edgar M. Rivera, Esq.

In Smiley v. E.I. DuPont de Nemours & Co., the Court of Appeals for the Third Circuit held that employers could not offset compensation given to their employees for bona fide meal breaks against required overtime.

Plaintiffs filed a putative collective action and class action against DuPont—the world’s fourth largest chemical company—seeking overtime compensation for time they spent donning and doffing their uniforms and protective gear and performing “shift relief” before and after their regularly scheduled shifts. DuPont contended that it could offset compensation it gave plaintiffs for meal breaks during their shift—for which DuPont was not required to provide compensation under the FLSA—against such required overtime. Under the FLSA, an employer must pay its employees for time worked, which does not include bona fide meal breaks.

Plaintiffs worked 12-hour shifts at DuPont’s manufacturing plaint in Towanda, Pennsylvania. In addition to working their shifts, DuPont required Plaintiffs to be onsite before and after their shifts to “don and doff” uniforms and protective gear. DuPont also required them to participate in “shift relief,” which involved employees from the outgoing shift sharing information about the status of work with incoming shift employees. The time spent donning, doffing, and providing shift relief generally ranged from 30 to 60 minutes per day, time for which DuPont refused to pay Plaintiffs. DuPont, however, did pay Plaintiffs for meal breaks despite no FLSA requirement to do so.

Pursuant to the FLSA, employers cannot employ any non-exempt employee “for a workweek longer than 40 hours unless such employee receives compensation for his employment … at a rate not less than one and one-half times the regular rate at which he is employed.” The regular rate is a “rate per hour” that “is determined by dividing the total remuneration for employment (except statutory exclusions) in any workweek by the total number of hours actually worked by him in that workweek for which such compensation was paid.” In other words, divide the total remuneration, less statutory exclusions, by all hours worked in a week to find the regular rate:

(Remuneration – statutory exclusions) / Hours worked in a week = Regular Rate

There are several statutory exclusions: gifts, vacation pay, travel payments, bonuses, benefits, extra pay for hours worked in excess of 8 in a day, extra pay for hours worked on a weekend or holiday, extra pay under an employment contract, and stock options. A meal break is not one of these exclusions. “Only the statutory exclusions are authorized … all remuneration for employment paid which does not fall within one of these … exclusionary clauses must be added into the total compensation received by the employee before his regular hourly rate of pay is to be determined.” In other words, only statutory exclusions dealing with extra pay may offset overtime pay; no other form of compensation may offset overtime liability.

The Department of Labor, which filed an amicus brief in support of the Plaintiffs, observed that “there is no authority for the proposition that compensation already paid for hours of work can be used as an offset and thereby be counted a second time as statutorily required compensation for other hours of work” and that there was “no reason to distinguish between compensation for productive work time and compensation for bona fide meal breaks.” The Third Circuit agreed, noting that nothing in the FLSA authorized offsetting overtime pay with compensated meal breaks and that allowing employers to credit that compensation against overtime would necessarily shortchange employees. In the end, the Third Circuit held that, because the FLSA limited offsetting to “extra compensation” not included in the regular rate and DuPont included the bona fide meal break in its employee’s regular rate, the meal break could not offset uncompensated time worked.

If you are not being compensated for your work, contact The Harman Firm, LLP.