Almost all employers are business people. They are used to credits and debits in handling and accounting for commercial accounts, they are used to the application of credit in one transaction to make up for a shortfall in another. A customer over pays for a delivery in March but under pays by the same amount for a delivery in April. Most businesses are satisfied to have the debit in one month offset the credit in another. A recent Third Circuit Court of Appeals case reminds employers that payments to employees can only rarely be treated in the same way as commercial accounts.
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In Smiley v. DuPont, plaintiffs in a class action unpaid wage lawsuit, claimed that they had not been paid wages and overtime for time spent “donning and doffing” equipment and apparel necessary to perform work. DuPont sought to offset this allegedly unpaid work time by pointing to the fact that DuPont voluntarily paid its workers for meal periods. That voluntary lunch payment is not required by law. Thus, DuPont argued that the voluntary meal period payment should offset any wages not paid for “donning and doffing” time.
The trial court agreed with DuPont’s analysis, but the Third Circuit reversed. In a close analysis of the federal Fair Labor Standards Act (“FLSA”) the appeals court found that the statute does not permit the offset of the kind urged by DuPont.
This decision underlines an important lesson for employers. Many employment obligations imposed by federal and state laws are freestanding and independent. These obligations include minimum wage and overtime. Employers should exercise great caution in considering any voluntary payments as an offset for the wages required by federal or state law. Employers should reevaluate their wage payment practices if they are looking to the total compensation paid to an employee and saying that minimum wage and overtime obligations “come out in the wash” by the payment of additional non-required wages.
The take away from the DuPont decision is that overtime obligations under the FLSA are freestanding an independent and can only be offset by certain wage overpayments.
Any employer who seeks to offset these minimum wage or overtime obligations should seek the advice of legal counsel.