Duane Morris Takeaway: This week’s episode features Duane Morris partner Jerry Maatman and associates Olga Romadin and Elizabeth Underwood with their analysis of a key wage & hour ruling from the Northern District of New York addressing warehouse workers’ walking time between security checkpoints and timeclock stations.
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Episode Transcript
Jerry Maatman: Hello, everyone, and thank you for being here again for the next episode of our weekly podcast series entitled The Class Action Weekly Wire. I’m Jerry Maatman, a partner at Duane Morris, and joining me today are my colleagues, Elizabeth and Olga, to speak about all things class actions. Thank you both for being here on the podcast.
Elizabeth Underwood: Glad to be here, Jerry.
Olga Romadin: Thanks for having me, Jerry.
Jerry: Today, we’re discussing a significant wage and hour ruling from the U.S. District Court for the Northern District of New York called Kratzert, et al. v. Target Corporation. The decision addresses whether warehouse employees must be compensated for time working and walking from security checkpoints to their work areas before clocking in and after clocking out. The court’s ruling is an important development for employers operating large warehouses, distribution centers, and fulfillment facilities throughout New York and, in essence, throughout the United States. Elizabeth, can you walk us through the facts of this lawsuit?
Elizabeth: Absolutely, Jerry. The plaintiffs were current and former warehouse workers at Target facilities in Wilton and Amsterdam, New York. They allege that after entering the facilities and passing through security checkpoints, they had to walk substantial distances to reach time clocks located near their workstations. According to the complaint, some employees spent 3 or 4 minutes walking each way, while others spent as much as 10 to 15 minutes walking each way. They claimed that this time should have been paid under the New York labor law, and sought to bring the case on behalf of a class of similarly situated employees. The workers asserted four causes of action, including claims for unpaid minimum wages, unpaid overtime, failure to pay promised wages, and inaccurate wage statements. Their theory was straightforward: because Target required employees to be present in the warehouse and walk these distances before reaching their work areas, that time should qualify as compensable work under New York law.
Jerry: What’s notable here is that the gravamen of the case, the case theory, had more to do with New York state law requirements than federal law, is that right?
Olga: That’s right. The plaintiffs acknowledged that their claims would fail under federal law. The Fair Labor Standards Act, as amended by the Portal-to-Portal Act, generally excludes ordinary pre-shift and post-shift walking time within a facility from compensable work time. The Portal-to-Portal Act was enacted in 1947 specifically to reverse earlier Supreme Court decisions that had treated certain intro facility walking time as compensable. The parties agreed that if federal law alone controlled, the plaintiffs could not recover. The real fight was over New York law. The plaintiffs argued that New York had chosen to provide greater protections than federal law, and that the state’s wage regulations required compensation, even where federal law did not.
Jerry: Well, certainly not an academic question insofar as New York law is much more generous in terms of statute of limitations going back six years. How did the judge approach the state law questions?
Elizabeth: The court spent a considerable amount of time analyzing New York’s miscellaneous wage order, which regulates minimum wages and overtime for most New York employees. One provision, Section 142-2.1, states that minimum wages must be paid for time an employee is permitted to work or is required to be available for work at a location prescribed by the employer. The plaintiffs focused heavily on this language and argued that it covered the walking time at issue. But the court looked at another provision, Section 142-2.2., governing overtime compensation. That regulation requires employers to calculate overtime using the manner and methods provided by Sections 7 and 13 of the Fair Labor Standards Act, as amended. The judge concluded that this language incorporates not only the FLSA itself, but also the Portal-to-Portal Act amendments that limit compensable walking time.
Olga: The court’s reasoning was particularly interesting because it examined the history behind the Portal-to-Portal Act. The judge pointed out that the Supreme Court once held that certain walking time within an employer’s facility qualified as working time. Congress responded by passing the Portal Act specifically to eliminate liability for those claims. Because those decisions involved interpretation of Section 7 of the FLSA, the court concluded that what counts as compensable work is central to the manner and method of calculating overtime under Section 7. Therefore, when New York incorporated Section 7 as amended, it also incorporated the Portal Act’s limitations.
Jerry: As I read it, the opinion also seemed concerned about creating inconsistent results between minimum wage obligations and overtime obligations and calculations.
Elizabeth: Exactly. The court recognized that the plaintiff’s interpretation would lead to what it viewed as an unusual outcome. Under the plaintiff’s reading, the walking time might count toward minimum wage obligations, but would not count for overtime purposes. The judge said the New York Department of Labor likely did not intend for such an inconsistent result when adopting the wage regulations. Reading the provisions together, the court concluded that New York intended to incorporate the federal limitations on compensable walking time.
Jerry: This case is a great illustration of the patchwork quilt that employers much deal with, where not only compliance is required under federal law, but state and local laws, or state laws throughout the United States, that so-called patchwork quilt. In this instance, the judge was reviewing regulatory guidance of the New York Department of Labor, didn’t it?
Olga: It did, and that guidance played an important role. The judge examined a series of New York Department of Labor opinion letters dating back to the late 1990s and 2000s. Several of those letters directed employers and employees to federal regulations interpreting travel time and compensable work time. So, in the court’s view, those opinion letters demonstrated that the Department of Labor has historically interpreted New York’s wage regulations in line with federal travel time principles. The court also distinguished a 1997 opinion involving Yankee Stadium employees who reported to management, received work assignments, and then traveled to their work locations. The court noted that those facts were materially different because the employees had already begun performing activities directly related to their work duties.
Jerry: How did the court dispose of the other subsidiary claims once the walking time theory was rejected?
Elizabeth: The plaintiffs’ remaining claims fell with it. Because the court determined that the walking time was not compensable under New York law, it dismissed the minimum wage and overtime claims. It then held that the promised wage and wage statement claims were derivative of those underlying wage claims and dismissed those as well. Importantly, the court dismissed the case with prejudice and denied leave to amend, concluding that additional factual allegations about how employees walked the warehouse would not solve the legal defect identified by the court.
Jerry: Let’s talk about what this ruling means for employers in general at a 100,000-foot level. Olga, what are the takeaways here?
Olga: This is a significant victory for employers operating large facilities in New York. The decision provides strong authority that ordinary pre-shift and post-shift walking time inside a warehouse is generally not compensable under New York law, at least where employees are simply traveling to or from their work areas and have not yet began performing principal job duties. The ruling also reinforces the importance of federal Portal-to-Portal Act principles in New York wage litigation. Plaintiffs’ attorneys have increasingly argued that state wage laws are broader than federal law. This decision rejects that argument in the warehouse walking time context, and may make similar lawsuits more difficult to pursue in New York.
Elizabeth: I would add a note of caution for employers. This case involved ordinary walking time. The decision does not necessarily resolve disputes involving other activities that occur before or after a shift. Security screenings, equipment retrieval, donning and doffing protective gear, waiting for assignments, or other activities that are integral and indispensable to employees’ principal duties may raise different legal issues altogether. Employers should continue reviewing their timekeeping practices and compensation policies, rather than assuming every pre-shift activity is automatically non-compensable.
Jerry: Well, great insights from both of you. My takeaway is that decision certainly provides welcome relief and clarity for New York-based employers facing warehouse walking time claims, but it also underscores how important the language of relevant New York state agency regulations are and the specific meaning of the phrases used in those regulations, as well as the interaction between state law and federal law. We’ll be closely watching these issues in the Second Circuit and the New York Court of Appeals, its highest court, in terms of the defenses that employers can bring to bear in facing similar claims. So, thanks, Elizabeth and Olga, for joining me today, and thanks to our listeners for tuning in to this installment of the Class Action Weekly Wire. We’ll see you next time as we continue to track issues in the class action space.
Olga: Thanks for having me, Jerry, and thank you listeners.
Elizabeth: Thanks everyone for listening.