Published: October 14, 2026
Author / Source: HR Dive Reporting (Adapted)
Main Facts
In a significant legal development for retail labor practices, the 2nd U.S. Circuit Court of Appeals has ruled that grocery chain Lidl must continue facing a collective action lawsuit brought by employees. The workers allege that the company routinely required them to report to work ahead of their scheduled shifts but barred them from clocking in until a store manager physically arrived to unlock the premises.
At the center of the dispute is the practice of "time-shaving"—specifically, whether workers must be compensated for mandatory arrival times when they are kept waiting outside or inside a locked store before officially starting their duties. The class-action lawsuit contends that employees were routinely instructed to arrive approximately 15 minutes before their morning shifts commenced, only to be left unpaid during this pre-shift window because the store’s electronic and physical time-tracking systems were inaccessible.
The appellate court’s decision vacates a lower court ruling that had previously dismissed the claims under the Portal-to-Portal Act amendments to the Fair Labor Standards Act (FLSA). By reviving the case, the 2nd Circuit underscored the critical legal distinction between employees who "wait to be engaged"—which is generally unpaid—and those who are "engaged to wait," a status that demands full financial compensation under federal labor law.
Chronology of the Case
The legal trajectory of Santos v. Lidl highlights the complex nature of modern wage-and-hour litigation, particularly regarding pre-shift routines in the retail sector.
- The Pre-Shift Practice: Lidl employees routinely arrived at their assigned store locations ahead of their scheduled morning hours, following directives to be on-site approximately 15 minutes early. However, because store managers held sole responsibility for unlocking the buildings and activating the timekeeping systems, workers were unable to log their hours immediately upon arrival.
- Lower Court Dismissal: Lidl moved to dismiss the claims, arguing that the time spent waiting for a manager to unlock the store constituted a noncompensable "preliminary activity" under the Portal-to-Portal Act. A federal district court agreed, ruling in favor of the employer and dismissing the time-shaving allegations.
- The Appeal: The plaintiff appealed the district court’s decision to the 2nd U.S. Circuit Court of Appeals. The appellant argued that because the reporting time was strictly mandated by Lidl, the enforced presence at the workplace transformed the waiting period into compensable hours worked.
- Appellate Reversal (October 2026): The 2nd Circuit vacated the lower court’s dismissal and remanded the case for further proceedings. The appellate panel relied heavily on long-standing Department of Labor (DOL) regulations to conclude that the employees were "engaged to wait," making the time an integral part of their principal activities.
Supporting Data and Legal Framework
Questions surrounding whether employees must be compensated for waiting time have been extensively litigated across various industries, yet judicial outcomes remain heavily dependent on the specific facts of each case. The legal arguments in Santos hinge on the interpretation of the Fair Labor Standards Act (FLSA) as amended by the Portal-to-Portal Act.
The Portal-to-Portal Act and Federal Regulations
Enacted to clarify ambiguities regarding what constitutes working time, the Portal-to-Portal Act generally exempts employers from paying for activities performed before or after an employee’s main duties, such as walking to a workstation or preliminary routine preparations.
However, federal regulations provide clear boundaries. Under 29 CFR § 790.7:
- Waiting to be Engaged: "Waiting before the time established for the commencement of work would be regarded as a preliminary activity when the employee voluntarily arrives at his place of employment earlier than he is either required or expected to arrive." In this scenario, the time is unpaid.
- Engaged to Wait: Conversely, "where, however, an employee is required by his employer to report at a particular hour at his workbench or other place where he performs his principal activity, if the employee is there at that hour ready and willing to work but for some reason beyond his control there is no work for him to perform until some time has elapsed, waiting for work would be an integral part of the employee’s principal activities."
The appellate court emphasized that the core difference lies in whether the employer dictated the arrival time and controlled the worker’s presence before operations could formally begin.
Department of Labor Guidance and Precedents
The U.S. Department of Labor (DOL) relies on practical examples to guide employers through these nuanced distinctions:
- The Engaged-to-Wait Standard: According to DOL compliance materials, a messenger who works on a crossword puzzle while awaiting dispatch assignments is considered "engaged to wait" and must be paid. Similarly, a factory employee who chats with colleagues while waiting for broken machinery to be repaired is performing compensable work because their time is under the employer’s command.
- The Waiting-to-Be-Engaged Standard: In contrast, the DOL cites the example of a truck driver sent from Washington, D.C., to New York City who arrives at noon but is "completely and specifically relieved from all duty until 6:00 p.m." Because the driver is free to use that extended block of time entirely for personal pursuits, they are "waiting to be engaged," and those hours are unpaid.
In the case of Lidl, the plaintiffs argued they were not genuinely free to leave or use their time as they pleased while waiting in the parking lot or outside the doors, as they were required to be present and ready to open the store the moment management arrived.
Official Responses and Corporate Stance
As the case returns to the lower court for renewed scrutiny, corporate accountability and legal defense strategies remain under a microscope.
- The Defense Position: During appellate arguments, Lidl maintained that the unclocked waiting time did not require compensation. The company’s legal counsel argued that nothing physically prevented employees from utilizing that time for personal activities—such as reading a book—or from leaving the immediate vicinity of the parking lot.
- Media Inquiries: HR Dive reached out to Lidl representatives for additional commentary regarding the appellate court’s decision and potential plans for settlement or trial. However, the company did not respond to requests for comment by press time.
- Employee Representation: Attorneys for the class argued that framing a mandatory, employer-enforced arrival time as "free time" misconstrues both the reality of retail shift work and the letter of federal labor law. They maintain that workers who are tethered to a location under the threat of disciplinary action for tardiness are inherently under the control of the employer.
Implications for Employers and Retail Operations
The 2nd Circuit’s decision serves as a vital cautionary tale for organizations operating in retail, logistics, hospitality, and other shift-based sectors where opening procedures often require early employee arrival.
1. Re-Evaluating Timekeeping Policies
Employers must audit their operational procedures to ensure that time tracking begins the moment an employee’s presence is legally or practically mandated. If staff members are instructed to arrive early—whether to prep inventory, attend morning briefings, or simply wait for a facility to be unlocked—that time generally crosses the threshold from "preliminary" to "compensable."
2. The Danger of "Manager Bottlenecks"
A common vulnerability for multi-unit retail chains is reliance on a single manager to unlock a store. When scheduling software automatically sets employee arrival times to match the scheduled arrival of management (or expects workers to be on-site before the manager arrives), systemic wage violations can occur. Companies must ensure that time-tracking systems allow workers to log hours immediately upon arrival, or adjust scheduling so that employees are only required to report when the store is open and ready for them to clock in.
3. Increased Litigiousness Over Micro-Vulnerabilities
Wage-and-hour attorneys closely monitor these rulings. Collective actions targeting 15-minute increments of unpaid time can rapidly escalate into high-stakes class-action lawsuits involving millions of dollars in back pay, liquidated damages, and attorney’s fees across nationwide store footprints.
As Santos v. Lidl proceeds back to the district court, it reinforces the principle that control equals compensation under the FLSA. Retailers nationwide would be wise to review their pre-shift protocols immediately to mitigate the risk of similar multi-plaintiff litigation.
