Dive Brief:

• The 3rd U.S. Circuit Court of Appeals has decertified a class of American Airlines employees who sued the airline over its timekeeping system. The plaintiffs claimed the system improperly defaulted to paying employees based on their work schedules, even if they worked additional hours (Ferreras et. al, v. American Airlines, Inc., No. 18-3143 (3rd Cir. Oct. 15, 2019)). 
• The airline’s timekeeping system "is programmed to calculate pay for employees only for the duration of their shifts, excluding an automatic deduction for a 30-minute meal break," the court said. The system does not account for early clock-ins or late clock-outs, which American refers to as "grace periods." If employees actually perform work during grace periods or meal periods, they must have a supervisor approve that time as an exception. The employees claim, however, that management regularly refuses to pay for any additional time worked.
• The 3rd Circuit did not rule on the merits of the employees' claims but reversed a lower court's order granting class certification. The appeals court said it agreed with American that "the case cannot proceed as a class action because determining when each employee was actually working will necessarily require individualized inquiries." In a statement emailed to HR Dive, American Airlines said it is pleased with the decision.

Dive Insight:

With very few exceptions, wage and hour laws require that nonexempt employees be paid for all time worked. This is true even if an employee has worked without authorization. Employees may be disciplined, when appropriate, but the time must still be paid.

And while automatic deductions for breaks aren't illegal, they can create problems for employers, especially when the nature of an employee's job means that meal breaks are often skipped or cut short. Moreover, errors can prove costly. A California electronics company recently paid nearly $5 million to employees subject to an auto-deduct policy, while Kraft Heinz paid $3 million to settle a similar lawsuit.

Experts say employers that wish to implement auto-deduct policies should keep good records, require workers to approve the records, include an override mechanism and establish a "culture of compliance" that includes regular training and adherence to the rules. Additionally, regardless of the timekeeping method chosen, employers should keep track of the actual hours worked by employees, experts suggest.