Pennsylvania Supreme Court Widens the Gap Between PA and Federal Overtime Laws, Creating More Compliance Challenges for PA Employers

By Adam R. Long & Austin Wolfe on July 29, 2021

POSTED IN WAGE & HOUR

Last week, the Pennsylvania Supreme Court issued a decision that has broad implications for Pennsylvania employers.  The Court’s decision in In Re: Amazon.com, Inc., which can be read here, established two important differences between Pennsylvania’s overtime law and the federal Fair Labor Standards Act (FLSA).  These differences are likely to create significant potential compliance and liability risks for Pennsylvania employers.

The case arose after Amazon employees claimed they were required to undergo anti-theft security screenings after clocking out for the day but before leaving the work facility.  These screenings included metal detectors, bag searches, and secondary screenings if the employee set off an alarm.

In its decision, the Court considered the following two questions as to Amazon’s pay practices under Pennsylvania law:

1)         whether time spent on an employer’s premises waiting to undergo, and undergoing, mandatory security screening is compensable as “hours worked” within the meaning of the Pennsylvania Minimum Wage Act (PMWA); and

2)         whether the de minimis exception recognized under the federal FLSA exists under the PMWA.

On both questions, the Court’s majority (in a 5-2 decision that fell on political party lines) provided answers that were unfavorable for employers and inconsistent with the established requirements of the FLSA.

I.        Time Spent in Mandatory Security Screenings

On the first question, the Court began by noting that the U.S. Supreme Court held in a 2014 decision that time spent by Amazon workers going through the same security screenings was not compensable as “hours worked” under the FLSA, due to amendments made to the FLSA by the federal Portal to Portal Act of 1947.  See Integrity Staffing Solutions v. Busk, 574 U.S. 27 (2014).

However, the Pennsylvania Supreme Court found that the definition of “hours worked” in the PMWA regulations was both different and broader than the definition found in the Portal to Portal Act.  The Court also noted that Pennsylvania has never adopted the Portal to Portal Act’s amendments to the FLSA.

As a result, consistent with the PMWA regulations, the Court held that compensable hours worked under the PMWA for minimum wage and overtime pay purposes include any of four categories of time:

• time during which the employer requires an employee to be on the employer’s premises;
• time during which the employer requires an employee to be on duty or to be at the prescribed workplace;
• time spent in traveling as part of the duties of the employee during normal working hours; and
• time during which an employee is employed or permitted to work.

In so finding, the Court reaffirmed the principle that the PMWA manifests Pennsylvania’s “strong public policy protecting an employee’s right to be adequately compensated for all hours for which they work.”  The Court also cited two of its prior decisions finding that the FLSA “establishes only a national floor under which wage protections cannot drop, but more generous protections provided by a state are not precluded.”

With this analysis, the Court held that time spent by the Amazon employees waiting to undergo and undergoing mandatory security screenings on Amazon’s premises constitutes compensable hours worked for minimum wage and overtime pay purposes under the PMWA, because Amazon required the employees to remain on their premises for the screenings.

II.        De Minimis Exception

On the second question, a 1946 U.S. Supreme Court decision and U.S. Department of Labor regulations established a de minimis exception under the FLSA, providing that insubstantial and insignificant periods of time performing work outside scheduled work hours need not be treated as hours worked for overtime pay and minimum wage purposes.  See Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680 (1946); 29 C.F.R. § 785.47.

However, the PA Court again declined to apply this settled FLSA precedent to the PMWA, holding that there is no de minimis exception under the PMWA.  The Court found that recognizing a de minimis exception would be inconsistent with the underlying legislative purpose of the PMWA.

III.        Takeaways

The Amazon.com decision has enormous potential ramifications for Pennsylvania employers, reaching well beyond the realm of mandatory on-site security screenings.  The decision is the latest in a series of decisions issued by the Pennsylvania Supreme Court holding that the PMWA’s requirements are broader and more pro-employee than the established requirements of the FLSA.  Simply put, compliance with the FLSA’s overtime pay and minimum wage requirements, which are not simple or easy in their own right, will not ensure compliance with the PMWA.

Some areas where these laws’ requirements now differ include:

• the white-collar overtime exemption tests;
• the PMWA lacks an overtime exemption for the computer professional and highly compensated employee;
• the fluctuating workweek method of computing overtime pay for salaried non-exempt employees is unavailable under the PMWA; and
• thanks to the com decision, the Portal to Portal Act exclusion for certain preliminary and postliminary activities from “hours worked” and a de minimis exception are not recognized under the PMWA.

Pennsylvania employers should review their pay practices and determine whether non-exempt employees spend any time that the employer is not capturing as compensable hours worked, as this time may qualify under the hours worked test set forth in Amazon.com.  As explained above, this would include a number of situations that do not constitute hours worked under the FLSA.

Risk areas include, in particular, any time that a non-exempt employee is required by the employer to be on the employer’s premises.  Examples include time spent on mandatory security screenings, COVID-related screenings, and donning and doffing equipment or uniforms.  If non-exempt employees are spending any time engaged in such activities on the employer’s premises, this time may need to be included in hours worked for overtime pay purposes under the PMWA.  And these examples may be the tip of the iceberg.

The hours worked definition adopted by the Pennsylvania Supreme Court is broad and seemingly straight-forward.  But, as we’ve seen, it is also inconsistent with the long-standing definition applied under the FLSA.  And, without a potential de minimis exception, even a few minutes here or there could result in a class action lawsuit for the unwary employer.

Wage and hour compliance has long been a significant concern for Pennsylvania employers, even before the Amazon.com decision.  This decision only complicates an employer’s compliance challenges.  Failing to consider and address these issues could result in a heightened risk of expensive and time-consuming class action litigation.