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Mar 5, 2014

A case that has the potential to cost staffing companies — and, in turn, their clients — hundreds of millions of dollars is headed to the U.S. Supreme Court.

The justices agreed to hear a Fair Labor Standards Act suit against Amazon’s temporary worker provider, Integrity Staffing Solutions, over whether workers should be paid for the time they spend going through company security on their way home.

Two former employees provided by Integrity who worked at Amazon’s two Nevada warehouses sued the retailer’s staffing firm demanding to be paid for the 20-25 minutes it routinely takes them to clear the daily security check.

Because the case was filed as a class action, it could affect many or most of the estimated 38,000 temps at Amazon’s three dozen U.S. warehouses and distribution centers.

Case could cost hundreds of millions of dollars

Mark Thierman, a labor and employment attorney with Thierman Law Firm in Reno, represents the workers. He says that with turnover, the number of potential class action participants could reach 100,000, and if they should win, the cost could reach into the hundreds of millions.

“If you want to take the pencil to paper we’re talking hundreds of millions of dollars,” the lawyer says, noting most of the workers are paid between $9 and $12 an hour. Thierman has successfully sued multiple big-name companies over overtime and related FLSA claims, recovering by his reckoning several hundred million in pay for the plaintiffs.

In the lawsuit, he and the workers argued that going through security checks at the end of the day was at the employer’s insistence and was “necessary to the employer’s task of minimizing ‘shrinkage’ or loss of product from warehouse theft.”

The Fair Labor Standards Act, as explained by the U.S. Department of Labor, says, “The work week ordinarily includes all time during which an employee is necessarily required to be on the employer’s premises, on duty or at a prescribed work place.” It goes on to explain that a work day:

…means the period between the time on any particular day when such employee commences his/her ‘principal activity’ and the time on that day at which he/she ceases such principal activity or activities. The workday may therefore be longer than the employee’s scheduled shift, hours, tour of duty, or production line time.”

Over the decades since the FLSA was enacted in 1938, courts have interpreted such things as “principal activity” and have often been called upon to decide whether waiting in line to punch in, or putting on or taking off uniforms (donning and doffing), are compensable. In 1947, Congress enacted the Portal-to-Portal Act to clarify and limit what is compensable work time.

Court will hear case during 2014-15 term

However, as the San Francisco-based 9th U.S. Circuit Court of Appeals explained in the Amazon case,

Preliminary and postliminary activities are still compensable under the Portal-to-Portal Act if they are “integral and indispensable” to an employee’s principal activities. …To be “integral and indispensable,” an activity must be (1) “necessary to the principal work performed,” and (2) “done for the benefit of the employer.”

In the Amazon case, the appeals court said that “the security clearances are necessary to employees’ primary work as warehouse employees and done for Integrity’s benefit.” It ruled that the federal district court in Las Vegas was mistaken when it decided against the workers and reinstated the action.

With so many millions of dollars at stake, Integrity Staffing appealed to the Supreme Court, which announced yesterday that it would hear the case in its next term, which starts in October 2014.

The high court was urged to take up the case by the U.S. Chamber of Commerce and others, who pointed out that different Circuit Courts of Appeal have interpreted the application of the Fair Labor Standards Act differently in similar situations. According to Bloomberg News, Amazon is facing suits against it directly, as are Apple and CVS Pharmacy.