A Fair Day's Pay for a Fair Day's Work': Why Congress Should Amend the Fair Labor Standards Act to Include an Actual Time Test for Retroactive Damages

“A Fair Day’s Pay for a Fair Day’s Work”: Why Congress Should Amend the Fair Labor Standards Act to Include an Actual Time Test for Retroactive Damages Leslie E. Barron  ABSTRACT: In 1938, Congress passed the Fair Labor Standards Act (“FLSA”) with the support of President Franklin D. Roosevelt, who said every worker deserved “a fair day’s pay for a fair day’s work.” 1 In an Eighth Circuit case decided in 2012, the court addressed an important and persistent ambiguity in the FLSA regarding calculating compensable time, but failed to clarify the issue. The question that has split the federal circuits is whether a “reasonable time” test or an “actual time” test is the appropriate calculation method for compensable time when a plaintiff successfully sues for unpaid wages in violation of the FLSA. One likely reason neither Congress nor the Supreme Court has yet resolved the issue is that disagreement over the calculation method for damages is usually not the primary impetus for a FLSA case. Courts are more concerned with making the proper decision for the preliminary issue: whether the alleged activities for which the employees were not paid are compensable. Nonetheless, the appropriate test for retroactive damages is an important issue and one that Congress can easily resolve. To resolve this circuit split, this Note proposes changes to the FLSA that would incorporate the actual time test as the appropriate calculation method to use for retroactive damages. This Note suggests that Congress should codify the actual time test because it is the more logical of the two tests under current law, because it will result in more desirable practical implications for the modern working world, and because it is supported by public policy.  J.D. Candidate, The University of Iowa College of Law, 2014; B.A., University of Illinois at Urbana-Champaign, 2011. I would like to thank the student writers and editors of Volumes 98 and 99 of the Iowa Law Review for their hard work on this Note. 1. Message From Franklin D. Roosevelt to the Congress (May 24, 1937), The President Recommends Legislation Establishing Minimum Wages and Hours , in 1937 THE PUBLIC PAPER AND ADDRESSES OF FRANKLIN D. ROOSEVELT 209, 210 (1941). 1298 IOWA LAW REVIEW [Vol. 99:1297 I. INTRODUCTION ................................................................................... 1299 II. HISTORY AND INTERPRETATION OF THE FAIR LABOR STANDARDS ACT ...................................................................................................... 1299 A. H ISTORY AND O VERVIEW ................................................................. 1300 B. “C OMPENSABLE T IME ” A MBIGUITY ................................................. 1302 1. Early Supreme Court Cases ................................................. 1303 2. Subsequent Supreme Court Interpretation and Statutory Expansion of “Compensable Time” ................... 1304 3. Further Clarification of “Compensable Time” ................... 1306 C. T HE S UPREME C OURT ’ S L ATEST I NTERPRETATION : IBP, INC. V. ALVAREZ ....................................................................................... 1308 III. THE CIRCUIT SPLIT OVER COMPENSABLE TIME CALCULATION ........... 1309 A. R EASONABLE T IME T EST ................................................................ 1309 B. A CTUAL T IME T EST ........................................................................ 1312 IV. CONGRESS SHOULD CODIFY THE ACTUAL TIME TEST ......................... 1315 A. T HERE I S S TRONGER L EGAL S UPPORT FOR THE A CTUAL T IME T EST . 1316 1. The Actual Time Test Is the Most Logical Interpretation of Existing Precedent ........................................................... 1317 2. The Actual Time Test Better Effectuates the Purpose of the FLSA ............................................................................... 1319 B. A PPLICATION OF THE A CTUAL T IME T EST W ILL R ESULT IN M ORE D ESIRABLE P RACTICAL I MPLICATIONS ............................................. 1321 1. The Actual Time Test Will Create Better Incentives for Employers ............................................................................. 1322 2. The Actual Time Test Is the More Straightforward and Objective Legal Standard for Courts to Apply ................... 1325 V. CONCLUSION ....................................................................................... 1327 2014] “A FAIR DAY’S PAY FOR A FAIR DAY’S WORK” 1299 I. INTRODUCTION Imagine that you are an elderly, hourly factory worker who is a member of a class action lawsuit against your corporate employer to recover unpaid wages for activities you thought were compensable. Now imagine after months or even years of litigation that you are successful and the court holds that your employer owes all employees in the class action suit retroactive damages for those unpaid wages. Finally, imagine that, because your employer did not keep accurate time records, you do not receive back pay for the actual amount of time it took you to perform the work. Instead, you only receive a reasonable amount of back pay based on the time it took the majority of much younger workers to complete the same work tasks. Uncertainty over how to determine the correct amount of retroactive damages or back pay for activities deemed to be compensable time is just one issue that has permeated the vast amounts of litigation surrounding the Fair Labor Standards Act (“FLSA”) since its implementation. Each time the Supreme Court attempted to clarify “compensable time,” additional ambiguities surfaced. After the last Supreme Court decision interpreting the FLSA, IBP, Inc. v. Alvarez , 2 there remain unanswered questions including the issues in the scenario above. What happens after a court determines that an employer owes back pay to many of its employees for FLSA overtime violations? How should courts calculate that back pay? Should employers pay for all the time employees were actually working or should they pay for the amount of time that would have been reasonable for the employee to complete the particular activity? Although the issue of how to calculate the amount of retroactive damages employers owe to employees for wages and overtime is not the primary issue addressed in FLSA cases, it remains a question in each and every case requiring back pay and therefore merits examination. Part II of this Note discusses Congress’s enactment of the FLSA and courts’ attempts to clarify the numerous ambiguities relating to “compensable time” provisions through case law and statutory interpretation. Part III outlines the current circuit split regarding the appropriate test courts should use to calculate compensable time. Finally, Part IV outlines the legal, practical, and policy reasons why courts should use an actual time test and recommends that the best way to resolve the circuit split is with a congressional amendment to the FLSA. II. HISTORY AND INTERPRETATION OF THE FAIR LABOR STANDARDS ACT In litigation surrounding FLSA provisions, the Supreme Court has consistently interpreted the statute to ensure that employers are treating 2. IBP, Inc. v. Alvarez, 546 U.S. 21 (2005). 1300 IOWA LAW REVIEW [Vol. 99:1297 their workers fairly. 3 With the underlying principle of fairness at the forefront, the Court has continued to broaden the definition of compensable time in order to guarantee that the main purpose of the FLSA—to ensure that employees get paid for all time worked—is fulfilled. 4 However, as with many complicated federal statutes, important questions and ambiguities remain unresolved. A. H ISTORY AND O VERVIEW Congress enacted the FLSA 5 during the Great Depression in 1938 to protect workers’ rights and address concerns about employees’ living and working conditions. 6 President Franklin D. Roosevelt supported the bill, saying that America “should be able to devise ways and means of insuring to all our able-bodied working men and women a fair day’s pay for a fair day’s work.” 7 The FLSA went into effect on October 24, 1938. 8 Though the federal government’s power to regulate minimum wage and overtime pay may seem like an obvious concept today, the federal government has not always had this power. Before Congress enacted the FLSA, the Supreme Court viewed federal and state regulation of maximum hours and minimum wage as unconstitutional. 9 Today, the United States Department of Labor (“DOL”) enforces the FLSA, which impacts approximately 130 million workers, including part-time and full-time 3. See, e.g. , Tenn. Coal, Iron & R.R. Co. v. Muscoda Local No. 123, 321 U.S. 590, 597–98 (1944) (“But these provisions . . . of the Fair Labor Standards Act, are remedial and humanitarian in purpose. We are not here dealing with mere chattels or articles of trade but with the rights of those who toil . . . . To hold that an employer may validly compensate his employees for only a fraction of the time consumed in actual labor would be inconsistent with the very purpose and structure of those sections of the Act.”). 4. See id. at 592 (noting that the FLSA is “a statute that is intended to secure to [nonexempt workers] the fruits of their toil and exertion.”). 5. Fair Labor Standards Act of 1938, 29 U.S.C. §§ 201–219 (2006). 6. Daniel V. Dorris, Comment, Fair Labor Standards Act Preemption of State Wage-and-Hour Law Claims , 76 U. CHI. L. REV. 1251, 1252–53 (2009); Harris Pogust & Andrew Sciolla, Making Up for Lost Time, TRIAL, Aug. 2010, at 28, 29. 7. Message from Franklin D. Roosevelt to Congress, supra note 1, at 210; see also Jonathan Grossman, Fair Labor Standards Act of 1938: Maximum Struggle for a Minimum Wage , U.S. DEP. LAB., http://www.dol.gov/oasam/programs/history/flsa1938.htm#3. 8. Grossman, supra note 7. 9. See, e.g. , Morehead v. N.Y. ex rel. Tipaldo, 298 U.S. 587, 618 (1936), overruled in part by Olsen v. Neb. ex rel. W. Reference & Bond Ass’n, 313 U.S. 236 (1941) (holding that regulation of minimum wage laws...