## Facts

- The Secretary of Labor sued American Future Systems, Inc. (doing business as Progressive) and its CEO under the Fair Labor Standards Act (FLSA) on behalf of telemarketing employees.
- Telemarketers worked at computer workstations and used a computer-based system to log in and out for timekeeping.
- The employer maintained a “flexible break” policy allowing employees to take breaks when desired, but required employees to log off whenever not working.
- The employer treated all logged-off time as unpaid, including breaks lasting only a few minutes.
- The Secretary relied on 29 C.F.R. § 785.18, which states that rest periods of short duration (about 5 to 20 minutes) are customary, improve efficiency, and must be counted as hours worked.
- The Secretary alleged that excluding short breaks from compensable time reduced paid hours and caused minimum-wage violations for some employees.
- Defendants argued that logged-off time was noncompensable because employees were relieved of duty and free to use the time for personal purposes, and because employees controlled the timing and duration of breaks.

## Issues

1. Whether 29 C.F.R. § 785.18 is entitled to judicial deference as an interpretation of “hours worked” under the FLSA.
2. Whether an employer violates the FLSA minimum-wage requirement by refusing to pay for logged-off breaks of 20 minutes or less.
3. Whether characterizing a policy as “flexible,” with employee control over break timing and length, removes the policy from § 785.18’s rule for short rest breaks.

## Decision

- The court granted the Secretary’s motion for partial summary judgment on liability and denied defendants’ summary-judgment motion to the extent inconsistent with that ruling.
- The court held that § 785.18 is an interpretive rule entitled to Skidmore deference and is persuasive as a longstanding, consistent interpretation of the FLSA.
- The court ruled that breaks of 20 minutes or less must be treated as compensable hours worked, even if employees can choose when to take them.
- The court held that the employer’s log-off policy, to the extent it made all breaks of 20 minutes or less unpaid, violated the FLSA’s minimum-wage provisions.
- The matter proceeded on remedies, including monetary and injunctive relief.

## Legal Principles

- Interpretive regulations under the FLSA may receive Skidmore deference based on their consistency, thoroughness, and persuasiveness.
- Under 29 C.F.R. § 785.18, rest breaks of short duration (about 5 to 20 minutes) must be counted as hours worked and paid.
- An employer may not avoid paying for compensable short rest breaks by requiring employees to clock out or log off for any nonwork time.
- Minimum-wage compliance under the FLSA depends on paying at least the statutory minimum for all compensable hours worked; excluding compensable break time can create a minimum-wage violation.

## Conclusion

The court treated § 785.18 as a persuasive, longstanding interpretation of “hours worked” and held that an employer’s policy making all logged-off time unpaid violates the FLSA when it results in nonpayment for breaks of 20 minutes or less, which must be compensated.


Perez v. Am. Future Sys., Inc., No. 12-6171, 2015 WL 8973055 (E.D. Pa. Dec. 16, 2015)