Peterson v. Nelnet Diversified Solutions, LLC

15 F.4th 1033

Jeff PETERSON, personal representative of the Estate of Andrew Peterson, on behalf of himself and all similarly situated persons, Plaintiffs - Appellants,

v.NELNET DIVERSIFIED SOLUTIONS, LLC, Defendant - Appellee.

Nos. 19-1348

20-1217

United States Court of Appeals, Tenth Circuit.

FILED October 8, 2021

Adam W. Hansen of Apollo Law LLC, Minneapolis, Minnesota (Eleanor E. Frisch of Apollo Law, LLC, Minneapolis, Minnesota; Gregg I. Shavitz of Shavitz Law Group, P.A., Boca Raton, Florida; Michael Palitz of Shavitz Law Group, P.A., New York City, New York; and Brian Gonzales of Brian D. Gonzales Law Offices, Fort Collins, Colorado, with him on the briefs), for Plaintiffs – Appellants.

Julian R. Ellis and Matthew C. Arentsen (Richard B. Benenson, Martine T. Wells, and Sean S. Cuff with them on the briefs) of Brownstein Hyatt Farber Schreck, LLP, Denver, Colorado, for Defendant – Appellee.

Before MATHESON, EBEL, and MORITZ, Circuit Judges.

MORITZ, Circuit Judge.

Over 300 call-center representatives (CCRs) who work or worked at call centers operated by Nelnet Diversified Solutions, LLC (Nelnet) allege that Nelnet fails to pay them for time devoted to booting up their work computers and launching certain software before they clock in. The district court concluded that these activities are integral and indispensable to the CCRs' principal activities of servicing student loans by communicating and interacting with borrowers over the phone and by email and therefore constitute compensable work under the Fair Labor Standards Act (FLSA) of 1938, 29 U.S.C. §§ 201 – 19. But it nevertheless denied the CCRs' claim, finding that the de minimis doctrine—which applies a multi-factor balancing test to determine whether an employer must compensate employees for small or insignificant periods of time outside scheduled working hours—applied to excuse Nelnet's obligation to pay the CCRs for this work. After granting summary judgment to Nelnet, the district court awarded costs to Nelnet as the prevailing party.

The CCRs appeal the district court's de minimis ruling (Appeal No. 19-1348), and separately appeal the district court's order awarding prevailing-party costs to Nelnet (Appeal No. 20-1217). We agree with the district court that the CCRs' preshift activities are compensable work under the FLSA. But our application of the three-factor de minimis doctrine leads us to a different result. We conclude that although the CCRs' individual and total aggregate claims are relatively small, Nelnet fails to establish the practical administrative difficulty of estimating the time at issue, which occurs with exceeding regularity. Therefore, in Appeal No. 19-1348, we reverse the district court's order awarding summary judgment to Nelnet. And because we reverse on the merits, Nelnet is no longer the prevailing party. Accordingly, in Appeal No. 20-1217, we reverse the district court's order awarding costs to Nelnet and dismiss the CCRs' costs appeal as moot.

Background

Nelnet is a student-loan company that operates several call centers—located in Lincoln, Nebraska; Omaha, Nebraska; and Aurora, Colorado—where its employees "service student loans and interact with debtors over the phone and through email."¹ App. vol. 2, 494.² This case involves Nelnet employees with the job titles of Flex Advisor, Collector, or Advisor I, all of whom are essentially CCRs. Nelnet pays the CCRs "once they clock into the timekeeping system at their individual workstations." Id.

But the CCRs must perform several preshift tasks before they can clock in. Specifically, a CCR must first wake up his or her work computer. The CCR next inserts his or her security badge into the computer and enters his or her credentials. The computer then automatically launches the specialized software program Citrix, which in turn "loads the CCR's personal desktop[ ] and Nelnet's Intranet[,] which contains a link to the timekeeping system." Id. at 495. "Once the Intranet has loaded, an employee has access to the timekeeping system and may, and nearly always does, clock into the system and begin receiving payment." Id. The district court found that the median amount of time that the CCRs devote to these preshift activities, which varies between the three call-center locations, is approximately two minutes per shift.

Andrew Peterson³ filed this collective action—to which over 350 individuals opted in—seeking payment from Nelnet for the time he and other CCRs devoted to booting up their computers and launching software, arguing that such activities were compensable work for which Nelnet failed to pay them, in violation of the FLSA. The parties filed cross-motions for summary judgment on whether the preshift activities were compensable work and, if so, whether the time the CCRs devoted to these activities was de minimis such that Nelnet need not compensate them for it.

The district court (a magistrate judge presiding by consent of the parties) resolved the first issue in favor of the CCRs, finding that the preshift activities were compensable. But it concluded that the time at issue was de minimis and therefore granted summary judgment to Nelnet.⁴ The CCRs appealed, arguing in Appeal No. 19-1348 that the time at issue is both compensable and not de minimis.

Nelnet then sought to recover certain of its costs as the prevailing party under Federal Rule of Civil Procedure 54(d). The district court awarded Nelnet approximately $58,000, including over $33,000 in e-discovery costs related to exemplification and making copies. It entered the award jointly and severally against Peterson and the opt-in plaintiffs and denied their subsequent motion for reconsideration. The CCRs appealed, arguing in Appeal No. 20-1217 that—assuming Nelnet was entitled to summary judgment and therefore prevailed on the merits—the district court erred in awarding the e-discovery costs and entering the award jointly and severally.⁵

Analysis

The CCRs argue that the preshift activities are compensable and not de minimis, and Nelnet argues to the contrary. In considering these issues, "[w]e review the district court's summary[-]judgment decision de novo, applying the same standards as the district court." Punt v. Kelly Servs. , 862 F.3d 1040, 1046 (10th Cir. 2017). Under such standards, summary judgment is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a).

I. Compensability

Nelnet urges us to affirm the judgment in its favor on the alternative basis that—contrary to the district court's conclusion—the time the CCRs devote to booting up their computers and launching software is not compensable under the FLSA.⁶ "The FLSA requires an employer to pay employees for their work, but it does not define what kinds of activities qualify as compensable work." Aguilar v. Mgmt. & Training Corp. , 948 F.3d 1270, 1276 (10th Cir. 2020). Faced with that absence, the Supreme Court initially defined the term "work" broadly, "as ‘physical or mental exertion (whether burdensome or not) controlled or required by the employer and pursued necessarily and primarily for the benefit of the employer and his business.’ " Integrity Staffing Sols., Inc. v. Busk , 574 U.S. 27, 31, 135 S.Ct. 513, 190 L.Ed.2d 410 (2014) ( Busk ) (quoting Tenn. Coal, Iron & R. Co. v. Muscoda Loc. No. 123 , 321 U.S. 590, 598, 64 S.Ct. 698 (1944) ). Similarly, the Court "defined ‘the statutory workweek’ to ‘includ[e] all time during which an employee is necessarily required to be on the employer's premises, on duty or at a prescribed workplace.’ " Id. (alteration in original) (quoting Anderson v. Mt. Clemens Pottery Co. , 328 U.S. 680, 690–91, 66 S.Ct. 1187, 90 L.Ed. 1515 (1946) ).

But Congress narrowed these broad definitions in the Portal-to-Portal Act of 1947, 29 U.S.C. §§ 251 – 62. Aguilar , 948 F.3d at 1276. The Portal-to-Portal Act excludes from the definition of compensable work any time devoted to "walking, riding, or traveling to and from the actual place of performance of the principal activity or activities which such employee is employed to perform"—in other words, commute time. 29 U.S.C. § 254(a)(1). And it further excludes preliminary and postliminary activities from the definition of compensable work, providing "that the time devoted to ‘activities which are preliminary to or postliminary to [the employee's] principal activity or activities’ is not compensable." Aguilar , 948 F.3d at 1276 (alteration in original) (quoting § 254(a)(2) ).

These exclusions require identifying an employee's principal activities. See id. And an employee's principal activities include both the principal activities themselves and "all activities which are an ‘integral and indispensable part of the principal activities.’ " Busk , 574 U.S. at 33, 135 S.Ct. 513 (quoting IBP, Inc. v. Alvarez , 546 U.S. 21, 29–30, 126 S.Ct. 514, 163 L.Ed.2d 288 (2005) ( Alvarez )). "[A]n activity is ‘integral and indispensable ... if it is an intrinsic element of those [principal] activities and one with which the employee cannot dispense if [the employee] is to perform his [or her] principal activities.’ " Aguilar , 948 F.3d at 1276 (alterations and omission in original) (quoting Busk , 574 U.S. at 33, 135 S.Ct. 513 ). Unlike the earlier judicial definitions of the term "work," "the integral-and-indispensable inquiry does not turn on whether the employer requires the activity or whether the activity benefits the employer." Id. at 1276 ; cf. Tenn. Coal , 321 U.S. at 598, 64 S.Ct. 698 (defining "work or employment" as "physical or mental exertion (whether burdensome or not) controlled or required by the employer and pursued necessarily and primarily for the benefit of the employer "). "Instead, the question is ‘tied to the productive work that the employee is employed to perform.’ " Aguilar , 948 F.3d at 1277 (emphasis omitted) (quoting Busk , 574 U.S. at 36, 135 S.Ct. 513 ).

Here, the...