By Mica Rosenberg NEW YORK (Reuters) - The U.S. Supreme Court will hear arguments on Wednesday on whether companies have to pay workers for time spent undergoing security checks, in a case challenging how hourly employees are compensated for tasks outside the regular work shift.
Employees of Integrity Staffing Solutions, an Amazon.com Inc (O:AMZN) contractor handling merchandise shipped out of vast warehouses, brought a class-action lawsuit in Nevada in 2010, claiming they were forced to spend up to a half hour daily without pay while they went through security screenings aimed at protecting against theft.
Led by employee Jessie Busk, the workers sued for back wages and overtime pay.
In April, the 9th U.S. Circuit Court of Appeals found the screenings were an integral part of the warehousing job, done for the benefit of the employer and should be compensated under the federal Fair Labor Standards Act.
"This case has implications for every hourly paid worker," said Mark Thierman, Busk's Nevada-based lawyer. "The employers get to call the work day over and then give you more work."
Integrity Staffing asked the Supreme Court to reconsider the opinion from the San Francisco-based 9th Circuit, which had reversed a lower court decision.
Retail groups, the U.S. Chamber of Commerce and local governments say the appeals court ruling, if upheld, could lead to hundreds of millions of dollars in potential liabilities for employers.
The U.S. Solicitor General's office also backed the warehousing company's position in a 'friend of the court' brief. The government took a position as a large public sector employer that often requires employees to undergo security checks.
The company and the government both argue that the security checks are not central to warehouse work and instead are more like waiting in line to punch a time clock, an activity some courts have found does not require compensation.
Amazon, the world's largest online retailer, is not directly involved in the lawsuit. An Amazon spokeswoman said the company has "a long standing practice of not commenting on pending litigation, but data shows that employees walk through post shift security screening with little or no wait."
The Retail Litigation Center, in a brief supporting the warehousing company, said the industry in general loses $16 billion annually because of thefts.
Costs to companies could rise if retailers are forced to scale back security checks or pay workers for more time, said Edward Brill, an attorney from Proskauer Rose who filed the retailers' brief. Those costs could then conceivably be passed along to customers, he said.
Former Secretary of Labor Robert Reich said he was surprised the Solicitor General sided with Integrity Staffing in this case.
"Certainly the Labor Department is looking for ways, as is the White House, to raise wages rather than reduce wages," said Reich, now a University of California, Berkeley professor. "I would have expected the Solicitor General's office to be on the side of the employees."
Spokesmen from Integrity Staffing Solutions and the U.S. Department of Labor declined to comment on the litigation.
The case is Integrity Staffing Solutions, Inc v. Jesse Busk and Laurie Castro, U.S. Supreme Court, No. 13-433.
(Reporting by Mica Rosenberg; editing by Alexia Garamfalvi, Dan Grebler and Gunna Dickson)