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Manufacturer Must Pay Record $22 Million for Wage and Hour Violations

By Leah ShepherdMay 19, 2023

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Afederal court jury recently required East Penn Manufacturing Co. to pay $22.25 million for wage and hour violations, the largest recorded jury verdict under the Fair Labor Standards Act (FLSA), according to the U.S. Department of Labor (DOL).

The DOL will ask the U.S. District Court for the Eastern District of Pennsylvania to award an equal amount in liquidated damages for the affected workers and an order requiring future FLSA compliance by the manufacturer.

The DOL sued East Penn, alleging the company failed to pay 11,400 employees who worked at its battery plants in Lyons Station, Pa., between November 2014 and September 2021 for all the time they spent putting on protective clothing at the beginning of their shifts and undressing and showering at the end of their shifts. East Penn is a private, nonunionized company that manufactures and recycles batteries.

The DOL claimed East Penn did not pay employees based on their actual clock-in and clock-out times. Instead, it adjusted times to pay employees only for their scheduled shifts.

"Decades of settled law states that employers must pay employees for all hours worked, and this includes the time employees spend changing into and out of uniforms and showering where such activities, as here, were necessary and indispensable to their work. Contrary to the law, East Penn allowed employees to work off-the-clock for years," said U.S. Solicitor of Labor Seema Nanda. "The jury's verdict will go a long way toward making the employees whole and serves as a stark reminder for employers like East Penn to think twice before instituting policies designed to skirt the law."

Donna Snyder, vice president of marketing and advertising for East Penn said, "East Penn had made every effort to comply with the laws as it understood them. As a company, it stands behind the time paid to employees to put on and take off uniforms and to shower. The company believes it provided proper compensation for these activities and was fair in determining the reasonable time required to perform them."

The jury rejected claims that related to employees who didn't wear uniforms.

"We are pleased that the jury saw the government's overreaching in this case, in particular as to its claims that employees must be paid to put on and take off everyday protective items, such as safety shoes, safety glasses and earplugs that supposedly start and end the workday," said Michael Mueller, an attorney with Hunton Andrews Kurth in Washington, D.C., who led the defense for East Penn. "In the damages portion of the trial, the jury's various findings are a rejection of 90 percent of the government's wage claim because the jury agreed with us that East Penn did not willfully violate the FLSA and rejected the government's unsupported high time estimates. On all the remaining liability issues, the jury agreed with our position entirely."

Timekeeping Systems

East Penn used two timekeeping systems. The time and attendance system registered when an employee swiped in and out for the shift. The Human Machine Interface (HMI) system registered when the employee started work on the production line, according to court documents. East Penn used HMI data to calculate hourly pay, overtime and bonuses. Employees were required to swipe in no more than 14 minutes before the start of their shift and 14 minutes after the end of their shift.

Because of the risk of exposure to hazardous chemicals, the company required most employees to wear uniforms, with some employees also needing safety shoes, respirators and hard hats. The company gave workers a five-minute grace period to change clothes at the start of a shift, and a 10-minute grace period after the shift ended to change clothes and shower, according to court documents.

Activities before or after the workday that are an "integral and indispensable part of the principal activities" are compensable under the FLSA, the U.S. District Court for the Eastern District in Pennsylvania noted in an August 2021 opinion.

East Penn agreed that the time spent donning safety gear, shedding gear and showering is compensable under the FLSA, but it disputed that it was legally required to compensate for the actual time spent on those tasks. It claimed the difference between what it considered a reasonable amount of time and the actual amount of time spent by workers was de minimis, or so small it can be disregarded by law. The DOL maintained the company must pay for the actual time spent on those tasks at the worksite.

However, "where employees have the option to change into required gear at home, the DOL has taken the position that time spent changing into that gear is not compensable, even if the employee chooses to change at work," said Robert Pritchard, an attorney with Littler in Pittsburgh.

"Defining, identifying and capturing all time worked for purposes of minimum wage and overtime laws is seldom as easy as it sounds. That's particularly true at a time when, in many industries, the very concept of the workplace and workday is quickly evolving and changing in ways that are more flexible and less rigid," said Kevin Young, an attorney with Seyfarth in Atlanta.

Practical Tips

Employers should keep accurate time records and pay for actual work hours, rather than scheduled shifts, said William deMeza, an attorney with Holland & Knight in Tampa, Fla. "If the safety equipment is required for performance of the job, and there is meaningful time spent putting it on and taking it off, employees should be required to clock in before putting it on and clock out after taking it off," he said. "Meaningful time is hard to define, but one or two minutes per day likely would not be found compensable."

Even small tasks can be considered integral to the job. "For example, sharpening knives has been found an integral and indispensable activity for meat cutters, but going through post-shift security screenings to detect theft were found not to be integral and indispensable to Amazon warehouse workers' jobs," deMeza explained.

To avoid overtime payments, an employer could shorten the time the employee is engaged in productive work, so donning and removing gear can be completed within the eight-hour workday, Pritchard said.

Clear communication to employees can help prevent compensation mistakes. "This includes messaging on the importance of accurately recording work hours, how work time must be recorded, clear-cut expectations about not working off the clock, and well-established, effective avenues for reporting related concerns up the chain," Young said.