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Peterson v. Nelnet Diversified Solutions, LLC.

No. 19-1348.  D.Colo. Judge Moritz. Fair Labor Standards Act—Compensable Work Standards—De Minimis Doctrine—Prevailing Party Costs.

October 4, 2021


Nelnet Diversified Solutions, LLC (Nelnet) is a student loan company that operates several call centers where its employees service student loans and interact with debtors over the phone and through email. Nelnet call center representatives (CCRs) must perform several computer-related pre-shift tasks before they can clock into the timekeeping system at their individual workstations. The CCRs filed this collective action under the Fair Labor Standards Act (FLSA) seeking payment from Nelnet for its failure to compensate the pre-shift activities. On cross-motions for summary judgment, the district court found that the pre-shift activities were compensable but determined that the time at issue was de minimis. It therefore granted summary judgment to Nelnet and awarded it prevailing party costs, jointly and severally against the CCRs.

On appeal, the CCRs argued that the pre-shift activities are compensable under FLSA, and Nelnet argued to the contrary. FLSA requires an employer to pay employees for their work, but it does not define the kinds of activities that qualify as compensable work. The Portal to Portal Act of 1947 excluded time for commuting and performing preliminary and postliminary activities from the definition of compensable work. Under US Supreme Court precedent, an employee’s principal activities include the principal activities themselves and all activities that are an “integral and indispensable part of the principal activities.” Here, the pre-shift activities of booting up a computer and launching software are integral and indispensable to the CCRs’ principal duties of servicing student loans by communicating with borrowers over the phone and by email. The duties are therefore compensable under FLSA.

The CCRs also argued that the district court erred in concluding that Nelnet need not compensate them for their pre-shift activities because that time is de minimis. Under the de minimis doctrine, “insubstantial or insignificant periods of time beyond the scheduled working hours, which cannot as a practical administrative matter be precisely recorded for payroll purposes, may be disregarded.” In determining whether work time is de minimis, courts balance (1) the practical administrative difficulty of recording the additional time, (2) the size of the claim in the aggregate, and (3) whether the employee performed the work on a regular basis. Here, as demonstrated by Nelnet’s expert, defendant could simply estimate the amount of time at issue because the activities were performed by every CCR at the start of every shift. Therefore, given the data it already maintains, Nelnet did not meet its burden of showing that it was significantly burdensome to estimate the amount of time CCRs devoted to pre-shift activities. As to the second factor, while the average pre-shift time was only two minutes per employee per shift, the aggregate claim per full-time employee was $125 per year, which is not insignificant for employees who earn $13.50 per hour, so this factor did not weigh in favor of either party. Lastly, the regularity with which the tasks were performed weighed heavily in the CCRs’ favor. Balancing the three factors, Nelnet’s ability to estimate the amount of time at issue and the consistent regularity with which CCRs perform these activities weigh more heavily than the relatively small size of the claims, and the de minimis doctrine does not apply to excuse Nelnet’s obligation to pay its employees for their pre-shift work.

The summary judgment was reversed and the case was remanded for further proceedings consistent with this opinion.

Official US Court of Appeals for the Tenth Circuit proceedings can be found at the US Court of Appeals for the Tenth Circuit website.

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