As published in. Vol. 40, No. 2, Fall 2014 SPLIT CIRCUITS. Howard S. Lavin and Elizabeth E. DiMichele

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1 As published in Employee Relations LAW JOURNAL Vol. 40, No. 2, Fall 2014 SPLIT CIRCUITS Is Time Spent in Mandatory Security Searches Compensable under the FSLA? H Howard S. Lavin and Elizabeth E. DiMichele oward S. Lavin is a partner and Elizabeth E. DiMichele a special counsel in the Employment Law Practice Group of Stroock & Stroock & Lavan LLP, concentrating in employment law counseling and litigation. The authors can be reached at hlavin@stroock.com and edimichele@stroock.com, respectively. The authors gratefully acknowledge the assistance of Michael A. Fernández, an associate in the firm s Litigation Department, in the preparation of this column. Is an employee entitled to compensation for time spent in security screenings under the Fair Labor Standards Act (FLSA) 1 as amended by the Portal-to-Portal Act of 1947 (Portal to Portal Act)? 2 The circuit courts are split on this issue. The Ninth Circuit has held that an employee is entitled to compensation for employer-mandated security screenings. By contrast, the Second and Eleventh Circuits have held that such time is not compensable. The Supreme Court has granted certiorari and will soon resolve the split U.S.C. 201 et seq. 29 U.S.C Howard S. Lavin concentrates in employment and labor law matters. Elizabeth DiMichele represents employers in connection with employmentrelated issues, including discrimination and compensation claims, before state and federal courts, arbitration panels, and local, state and federal fair employment agencies.

2 The Statutory Background The FLSA was originally enacted to achieve a uniform national policy of guaranteeing compensation for all work or employment engaged in by employees covered by the Act. 3 In a relatively short-lived 1946 opinion, the Supreme Court construed the FLSA generally to require pay for the time employees spent walking on the employer s premises before clocking in, and for other activities involved in preparing for work. 4 Congress responded by passing the Portal to Portal Act and creating two exceptions from FLSA-mandated compensation. 5 One of the exceptions created by the Portal-to-Portal Act exempts an employer from liability or punishment under the Fair Labor Standards Act of 1938, the Walsh-Healey Act, or the Bacon- Davis Act, on account of the failure of such employer to pay an employee minimum wages, or to pay an employee overtime compensation where such activities are preliminary to or postliminary to the employee s principal activity or activities. 6 That exemption has been interpreted by the Supreme Court as not requiring compensation for activities performed before or after an employee s regular work shift unless those activities are an integral and indispensable part of the principal activities for which covered workmen are employed. 7 In 2007, the Second Circuit addressed the applicability of the Portal-to-Portal Act exemption to ingress and egress security procedures required of employees at the Indian Point II nuclear power plant in Gorman v. Consolidated Edison Corp.. 8 Using broad, sweeping language, the Second Circuit held that security measures that are rigorous and that lengthen the trip to the job-site do not thereby become principal activities of the employment. 9 Coincidentally, on the very same day that the Second Circuit published its opinion in Gorman, the Eleventh Circuit published its own opinion construing the Portal-to-Portal Act in the context of security screenings. In Bonilla v. Baker Concrete Const., Inc., the Eleventh Circuit held that the Portal-to-Portal Act exempted a subcontractor from having to compensate its employees for time spent undergoing federally-mandated security screenings. 10 Most recently, in April 2013, the Ninth Circuit examined the scope of the Portal-to-Portal Act. In Busk v. Integrity Staffing Solutions, Inc., the Ninth Circuit held that security screenings to Tennessee Coal, Iron & R. Co. v. Muscoda Local No. 123, 321 U.S. 590, 602 (1944). Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680 (1946). Sandifer v. U.S. Steel Corp., 134 S. Ct. 870, 875 (2014). 29 U.S.C. 254(a)(2). Steiner v. Mitchell, 350 U.S. 247, 256 (1956). 488 F.3d 586, 593 (2d Cir. 2007). at F.3d 1340, 1345 (11th Cir. 2007).

3 prevent employee theft were not subject to the Portal-to-Portal Act and thus are compensable time worked under the FLSA. 11 In so doing, the Ninth Circuit distinguished the Second Circuit s Gorman and Eleventh Circuit s Bonilla opinions. In March 2014, the U.S. Supreme Court granted certiorari to consider whether time spent in security screenings is compensable under the FLSA, as amended by the Portal-to-Portal Act. 12 The Second Circuit s Gorman Decision In Gorman, employees of the Indian Point II nuclear power plant, which was owned and operated by defendant Consolidated Edison Company of New York, Inc. (Con Ed), and sold in September 2001 to Entergy Nuclear Operations, Inc., sued their present and former employers for, among other things, failure to pay wages for the time it took them to comply with security procedures related to the plant. 13 The district court ruled in favor of the defendant employers and the plaintiffs appealed to the Second Circuit. On appeal, the Second Circuit considered, among other issues, whether ingress and egress and donning and doffing security equipment and clothing are compensable under the FLSA. 14 Prior to assessing the merits of the employees claims, the Second Circuit undertook an extensive analysis of the legislative history of the FLSA and the Portal-to-Portal Act. 15 The Second Circuit then addressed the difference between indispensable and integral. The Second Circuit explained the distinction between the two concepts, in the context of the facts of the case, as follows: The activities required to enter and exit Indian Point from waiting in line at the vehicle entrance through the final card-swipe and handprint analysis are necessary in the sense that they are required and serve essential purposes of security; but they are not integral to principal work activities. 16 Relying on this distinction, the Second Circuit affirmed the decision of the district court and held that the time spent engaged in such activities was not compensable F.3d 525, 531 (9th Cir. 2013), cert. granted, 134 S. Ct (2014). 12 Integrity Staffing Solutions, Inc. v. Busk, , 13 Gorman, 488 F.3d at at at 593.

4 The Eleventh Circuit s Bonilla Decision In Bonilla, appellants were construction workers employed by appellee, a subcontractor for the lead contractor, Turner-Austin, for the North Terminal project at Miami International Airport (MIA project). 17 To reach their work sites inside the airport, appellants were required to pass through a single security checkpoint to the tarmac and then ride authorized vehicles to their particular work site. 18 Appellants, who were not compensated for the time spent passing through the security checkpoint and riding to their work sites, brought suit alleging, inter alia, violations of the FLSA. The district court granted summary judgment in favor of the appelleeemployer. 19 On appeal, the Eleventh Circuit first addressed which factors are considered to determine whether the appellants activities are so integral and indispensable as to be compensable under the FLSA. 20 Specifically, the Eleventh Circuit focused on (1) whether the activity is required by the employer, (2) whether the activity is necessary for the employee to perform his or her duties, and (3) whether the activity primarily benefits the employer. 21 In analyzing appellants claim, the Eleventh Circuit emphasized that the integral and indispensable test is not a but-for test of causal necessity, [and that] the fact that certain preshift activities are necessary for employees to engage in their principal activities does not mean that those preshift activities are integral and indispensable to a principal activity. 22 The Eleventh Circuit then explained that the activity in question must be work in the benefit of the employer. 23 Because the Eleventh Circuit concluded that appellee did not primarily or even particularly benefit from the security regime, the Eleventh Circuit affirmed the decision of the district court. 24 The Ninth Circuit s Busk Decision In Busk, the appellants, Jesse Busk and Laurie Castro, sued their former employer Integrity Staffing Solutions, Inc. (Integrity) on behalf of themselves and a putative class of workers in two warehouses for which Integrity provided staffing services to clients, claiming violations of, among other things, the FLSA. 25 Appellants alleged that Integrity violated the FLSA by requiring Bonilla, 487 F.3d at at at (citing Dunlop v. City Elec., Inc., 527 F.2d 394, 401 (5th Cir.1976)). at at Busk, 713 F.3d at 527.

5 them to pass through a security clearance at the end of each shift, for which they were not compensated. 26 The appellants alleged the clearances were necessary to the employer's task of minimizing shrinkage or loss of product from warehouse theft. 27 Integrity moved to dismiss the amended complaint for failure to state a cause of action. 28 The district court granted the motion. 29 The court cited cases from other jurisdictions to support its finding that the time employees spent passing through security screenings was noncompensable. 30 On appeal, the Ninth Circuit reversed the district court and found in favor of appellants. The Ninth Circuit explained that an activity is integral and indispensable if it is (1) necessary to the principal work performed and (2) done for the benefit of the employer. 31 In applying that standard, the court held that the security clearances required of Integrity s employees were necessary to [the] employees primary work as warehouse employees and done for Integrity s benefit because (i) the security screenings were required by the employer and (ii) intended to prevent employee theft. 32 The Ninth Circuit distinguished the Gorman and Bonilla decisions on the grounds that, among other reasons, in those cases, everyone who entered the premises was required to pass through the security clearance and, therefore, Gorman and Bonilla did not concern a security screening put in place because of the nature of the employee s work. 33 By contrast, the court stated, Integrity required employees to be screened when departing the warehouses to prevent employee theft, a concern that stems from the nature of the employees work (specifically, their access to merchandise). 34 The Ninth Circuit further held that the district court erred in assuming Gorman and Bonilla created a blanket rule that security clearances are noncompensable instead of assessing the plaintiffs claims under the integral and indispensable test at 530 (citing Alvarez v. IBP, Inc., 339 F.3d 894, (9th Cir.2003), aff d on other grounds, 546 U.S. 21 (2005)). 32 Busk, 713 F.3d at at

6 Looking Ahead Notwithstanding the Ninth Circuit s effort to distinguish Gorman and Bonilla, the Supreme Court granted certiorari to review the Ninth Circuit s decision in Busk. As a result, the Supreme Court will likely issue a decision addressing the compensability for time spent in security screenings under the FLSA, as amended by the Portal-to-Portal Act, sometime next term. Hopefully, the Supreme Court will provide meaningful guidance that helps employers navigate the sometimes complex issues that arise with FLSA compliance. In any event, until the Supreme Court speaks, whether an employee must be compensated for undergoing security clearance will depend upon the circuit.