Federal Court Issues Important Ruling Interpreting Nevada Wage-and-Hour Law Unfavorably for Nevada Employers

By XobeeAdmin on September 25, 2018 in Uncategorized
0

A federal appeals court has decided that Amazon warehouse workers in Nevada can move forward with a class action for unpaid wages, based on uncompensated time they spent going through mandatory security screenings at the end of each shift.

Under the employer policy at issue in the case, employees were required to undergo a daily security clearance check at the end of each shift to discover and deter employee theft and to reduce “inventory shrinkage.” Employees were not paid for the time it took them to go through security, and the plaintiffs alleged the screening process could take up to 25 minutes each day.

Background

The case has a long and tortuous history. It began in Nevada federal court in 2010, when two Amazon warehouse workers brought a class action asserting state and federal claims for unpaid wages. The case was dismissed, appealed to the Ninth Circuit, and eventually ended up before the U.S. Supreme Court in 2014. The Supreme Court held that that the security screenings at issue are not compensable under federal law, due to an amendment to the Fair Labor Standards Act (FLSA) known as the Portal-to-Portal Act. (For more information regarding the Supreme Court opinion, see our December 2014 blog post here .)

Therefore, the plaintiffs’ federal-law claims were defeated, and their state-law claims were sent back to the Nevada trial court. The case was then consolidated with other similar actions in a “multidistrict litigation,” and transferred to the Western District of Kentucky for more efficient administration of all proceedings. In Kentucky, the workers’ state-law claims were again dismissed.

The Decision

The Kentucky dismissal was appealed to the Sixth Circuit Court of Appeals, which sits in Cincinnati. The Sixth Circuit reversed the decision of the Kentucky court as to the Nevada state law claims. The court first found that Nevada law provides employees with a private right of action to recover unpaid wages. This finding is in accord with the Nevada Supreme Court’s opinion in Neville, Jr. v. Eighth Judicial District Court, which reached the same conclusion. (See our December 2017 blog post regarding the Neville opinion here .)

Next, the Sixth Circuit found that, under Nevada law, “work” includes any activity “controlled or required by the employer and pursued necessarily and primarily for the benefit of the employer and his business.” Therefore, this includes time spent waiting in line and undergoing mandatory security screenings, because such screenings are required by the employer and are for the employer’s benefit.

Definition of Workweek

A very important aspect of the decision relates to the definition of “workweek” under Nevada law. Under the FLSA, an employer can satisfy its minimum wage requirements by using the “average” hourly rate for a given workweek. In other words, the minimum wage requirement is met so long as an employee’s total compensation for the week divided by the total number of hours worked equals or exceeds the minimum wage, even if the employee spent some amount of time working without compensation. For example, if a nonexempt employee making $9.00 per hour were paid for 36 hours of work, but actually spent 39 hours engaged in compensable activities, this would not be a minimum wage violation under federal law because her average hourly rate would still be above the federal minimum wage of $7.25:

36 on-the-clock hours  @  $9.00/hr.  =  $324 total weekly pay

39 actual hours worked  /  $324  =  average hourly rate of $8.30

The Kentucky trial court had ruled that Nevada law incorporates the FLSA, and therefore dismissed the Nevada claims because the plaintiffs had not alleged that their average hourly rate ever fell below the Nevada minimum wage.

However, the Sixth Circuit held there is no basis for concluding that Nevada law incorporates the FLSA’s workweek requirement. In contrast to the FLSA, Nevada employees must be paid “wages for each hour the employee works.” Nev. Rev. Stat. § 608.016. According to the Sixth Circuit, therefore, failure to pay a Nevada employee minimum wages for even minutes of work would result in a minimum wage violation, regardless of the average hourly wage paid to the employee over the course of the workweek.

Take-Away for Employers

This case presents an interesting issue in that an aspect of Nevada state law has been decided by a federal appeals court in Ohio. Ultimately, the Nevada Supreme Court is the final authority on interpretations of Nevada state law, and it is difficult to predict how that Court would rule on this issue.

However, the Sixth Circuit’s decision does increase the risk to Nevada employers for failing to compensate employees for any time during which they perform tasks their employer requires them to perform, or tasks which are primarily for the employer’s benefit. The conservative approach would be to follow the “each hour worked” approach adopted by the Sixth Circuit. Next, employers should implement an effective attestation clause, requiring employees to certify that all hours worked have been accurately recorded. Employers should also have a “drop-box” or notification policy that obligates employees to inform the employer whenever any work is performed off the clock. Lastly, employers should adopt strong written policies prohibiting all off-the-clock work.

Upcoming Events

SHLC attorneys will be addressing this new case and its significant implications in greater detail during our December 2018 webinar entitled 2019 Legal Update for Nevada Employers: What You Need to Do Now. In addition, the case will be covered by Brett Sutton on October 10, 2018, during his Nevada Employment Law Update for the NNHRA in Reno, and by Jared Hague on December 13, 2018, during his Year-End Employment Law Update for Southern Nevada SHRM in Las Vegas. For more information, visit our Events page .