July 31, 2018

CA Supreme Court Rejects FLSA De Minimis Rule, Opening the Floodgates for Off-the-Clock Claims

,

In a long-awaited decision, the California Supreme Court has just rejected the applicability of the Fair Labor Standards Act’s “de minimis” doctrine to California wage and hour law, in Troester v. Starbucks.

Troester was an hourly Starbucks employee who claimed unpaid wages for performing store-closing tasks after clocking out. These tasks included transmitting daily sales, profit and loss, and store inventory data to Starbucks’ corporate office, as well as activating the alarm and locking the front door. Starbucks conceded this was work time, but asserted that under the de minimis rule, this time could be ignored as these tasks took only 4-10 minutes each day (totaling 12 hours and 50 minutes over Troester’s 17 months of employment).

A U.S. District Court judge granted summary judgment to Starbucks based on the de minimis doctrine as developed under the FLSA, under which small amounts of work time may be disregarded in determining non-exempt employee compensation. To determine whether the doctrine applies in a given case, the federal courts look to “(1) the practical administrative difficulty of recording the additional time; (2) the aggregate amount of compensable time; and (3) the regularity of the additional work.” Under the FLSA test, federal courts have held that up to 10 minutes of work time might qualify as de minimis.

When that decision was appealed to the Ninth Circuit, the federal court punted to the California Supreme Court, certifying the question of the applicability of the FLSA’s de minimis doctrine to claims for unpaid wages under California law. The California Supreme Court first ruled that California had not adopted the FLSA’s de minimis doctrine. It reasoned that California wage/hour law is more protective than the FLSA and explicitly requires that employees be paid for “all hours worked.”

The court then turned to the issue whether a more generic “de minimis principle” developed by California courts in various other contexts applies to wage and hour claims.” In response to that question, the court acknowledged that some extremely limited form of the de minimis doctrine might be applicable to wage/hour claims but held that it was not applicable in this case. Specifically, the court held that under California law, time worked on a regular basis and/or that is an expected part of an employee’s job is compensable and could not be considered de minimis. The court left open the possibility that the de minimis principle might apply where the work periods are so “irregular” or “brief” “that it would not be reasonable to require employers to compensate employees for the time spent on them.”

The court also addressed rounding practices, which both shave and add time. It noted that California law allows for employers to minimally round employees’ actual time punches, even after this decision, as long as rounding does “not result, over a period of time, in the failure to compensate the employees for all the time they actually worked.”

This decision makes the de minimis defense unavailable, except perhaps in very narrow circumstances that remain undefined. Previously, the California Division of Labor Standards Enforcement had seemed to endorse the FLSA doctrine, which California employers have relied upon in defending against off-the-clock claims for time spent on discrete tasks that were difficult to capture on timekeeping systems. It is unclear, for example, whether the defense might still apply to small increments of time spent checking emails or texts from home, answering sporadic calls on the weekends, or answering questions after clocking out.

The decision is also important because many California employers still have rounding policies in place that allow employees flexibility with how they spend small periods between the time they start or stop work and the time they clock in or out. Employers who maintain these flexible schedules for employees, affording them a few minutes here or there, and who do not routinely audit their systems to ensure that employees are being paid properly under these rounding practices for all time actually worked, may find their practices under new threats.

In addition, due to the court’s focus on technology’s ability to capture minute amounts of time as a reason for limiting or rejecting the de minimis defense, its decision may well lead to more workplace monitoring, surveillance, and disciplinary action as employers attempt to avoid major increases in their labor costs by ensuring that they are paying only for time actually spent working.

For more information, please contact Kirstin Muller in our Santa Monica office, KMuller@hkemploymentlaw.com, or Felicia Reid in our San Francisco office, FReid@hkemploymentlaw.com.

Category: Wage-Hour,