Amazon Workers Lose on Screening Pay

Supreme Court says warehouse employees don’t have to be paid for post-shift security searches.

Workers don’t have a federal right to be paid for time spent in post-shift security searches, the U.S. Supreme Court ruled in a decision that will help Inc. fend off lawsuits seeking more than $100 million.

The justices unanimously rejected claims by former Amazon warehouse workers against the company that staffs many of the online retailer’s facilities. The case centered on the reach of federal wage laws.

The ruling, which comes in the middle of the retail industry’s busy holiday season, may shield other companies as well as Amazon. Apple Inc., CVS Health Corp., J.C. Penney Co., TJX Cos. and Ross Stores Inc. are all battling similar cases involving either distribution centers or stores.

Companies say screening is a valuable tool to guard against theft. Employees say what’s being stolen is their time.

In the case before the court, Jesse Busk and Laurie Castro said workers in two Nevada warehouses had to spend as much as 25 minutes after their shifts waiting to pass through metal detectors. Amazon disputes that characterization.

Amazon wasn’t directly involved in the Supreme Court case, which concerned its staffing company, Integrity Staffing Solutions Inc.

Under the 1938 Fair Labor Standards Act, workers are entitled to compensation for their “principal activities.” Although a 1947 statute known as the Portal-to-Portal Act limited compensation for pre- and post-work activities, the Supreme Court in 1956 said workers must be paid for activities that are “integral and indispensable” to the job itself.

Writing for the court today, Justice Clarence Thomas said the security screenings didn’t meet that test.

“The screenings were not an intrinsic element of retrieving products from warehouse shelves or packaging them for shipment,” Thomas wrote.

Thomas said it wouldn’t matter if Integrity could have made the screenings more efficient, saving employees time. Those issues “are properly presented to the employer at the bargaining table” and not to a court, he said.

Integrity, backed in the case by the Obama administration, likened the security screenings to the process of checking out at the end of a work day, something that longstanding Labor Department regulations say isn’t compensable.


400,000 Workers

The San Francisco-based 9th U.S. Circuit Court of Appeals had let the suit proceed. Amazon and various staffing agencies it uses could have been required to pay as many as 400,000 workers back wages amounting to $100 million or more, according to plaintiffs’ attorneys involved in the case.

“The 9th Circuit decision was really an aberration, and the Supreme Court has basically restored the law that we all thought existed,” said Edward Brill, a New York lawyer with Proskauer Rose LLP who filed a brief on behalf of a retail industry trade group and the U.S. Chamber of Commerce.

The high court ruling doesn’t preclude workers from pressing similar claims in states that have their own wage laws. The workers’ lead lawyer, Mark Thierman, said workers should be able to press state-law claims in California, Nevada and Pennsylvania.

“I’m disappointed in the result because as a practical matter, it leaves all those employed in FLSA-only states without redress for a half-hour of time required by the employer to be away from their families,” Thierman said.

Brill said the ruling might also preclude state-law claims because many of those laws mirror the federal statute.

Kelly Cheeseman, a spokeswoman for Seattle-based Amazon, said the allegations of long warehouse security lines were false.

“Data shows that employees typically walk through security with little or no wait, and Amazon has a global process that ensures the time employees spend waiting in security is less than 90 seconds,” she said in an e-mail.

Busk, 37, said he thinks the lawsuit made conditions better for workers.

“At least this brought some attention to how Amazon treats its employees,” he said. “Hopefully, other companies that saw this won’t treat people this way.”

Amazon, the world’s No. 2 online retailer by market capitalization after Alibaba Group Holding Ltd., has built a reputation for selling goods at low prices and delivering them quickly and inexpensively, with tiny margins.


Fulfillment Centers

That success rides on the company’s network of massive warehouses -- more than 40 so-called fulfillment centers in the U.S. alone, according to the company, staffed by 40,000 workers, swelling to 110,000 during the holiday season.

Amazon is under increasing pressure to contain costs. Its operating expenses have grown at a faster pace than revenue in each of the past four years, and the gap between the two is widening.

The company is borrowing to fill the gap. On Dec. 2 it announced a $6 billion bond issuance -- the largest in Amazon’s history -- which follows a $2 billion credit agreement it entered in September with Bank of America Corp. Its efforts to contain costs have strained relations with its largely blue-collar warehouse workforce, with some calling for better working conditions.

The case is Integrity Staffing Solutions v. Busk, 13-433.


Bloomberg News


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