August 3, 2018

Kirstin Muller on Law360: Gap Between Calif. And Federal Wage And Hour Law Grows

The following article was originally published on Law360.com, August 2, 2018. Posted with permission.

 

Expert Analysis: Gap Between Calif. And Federal Wage And Hour Law Grows

 

by Kirstin Muller

Law360, August 2, 2018, 1:41 PM PDT

California employers have long relied on the Fair Labor Standards Act’s de minimis rule as a defense to off-the-clock claims. Courts have applied the FLSA’s de minimis rule to find that employers need not compensate employees for all time worked under certain circumstances. The FLSA’s de minimis test asks “whether otherwise compensable time is de minimis,” by considering “(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, courts had found that up to 10 minutes of work time might qualify as de minimis and, therefore, employers need not pay employees for this time.

In the long-awaited Douglas Troester v. Starbucks Corp. decision, however, the California Supreme Court has unanimously rejected application of the federal Fair Labor Standards Act’s “de minimis” doctrine to California wage and hour law. In setting the stage for its rejection of the doctrine, the California Supreme Court noted “[o]n a number of occasions, we have recognized the divergence between [Industrial Welfare Commission] wage orders and federal law, generally finding state law more protective than federal law.”

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

After Starbucks removed the case to federal court, a U.S. district court judge had granted summary judgment to Starbucks based on the de minimis defense. When Troester appealed that decision to the Ninth Circuit, it requested that the California Supreme Court weigh in, asking: “Does the federal Fair Labor Standards Act’s de minimus doctrine, as stated in Anderson v. Mt. Clemens Pottery Co. and Lindow v. United States, apply to claims for unpaid wages under California Labor Code sections 520, 1194 and 1197?” (citations omitted.)

The California Supreme Court addressed the request in two parts. In the first part of its decision, it asked whether “California’s wage and hour statutes or regulations adopted the de minimis doctrine found in the federal Fair Labor Standards Act?”

In ruling 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 second question the court answered was whether “the de minimis principle, which has operated in California in various contexts, applies to wage and hour claims?” Importantly, the court observed “application of a de minimus rule is inappropriate when ‘the law under which this action is prosecuted does care for small things.’” It then found “that the regulatory scheme of which the relevant statutes and wage order provisions are a part is indeed concerned with ‘small things.’’ It attempted to limit its holding to the facts before it and held that the doctrine was not applicable in Troester given the undisputed facts as described to it by the Ninth Circuit. It noted 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. California law, it determined, requires that employers pay for all time their employees are “subject to the control of an employer.”

The court left open the possibility that the de minimis principle might apply in future cases 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 “was used in a manner that did not result over a period of time in the failure to compensate the employees for all the time they actually worked.”

This decision changes the California wage and hour landscape in important ways. Previously, the California Division of Labor Standards Enforcement had endorsed the FLSA’s de minimis defense in its Enforcement Policies and Interpretations Manual and opinion letters, and employers across California had relied on the defense as protection from class actions or Private Attorneys General Act lawsuits when it came to time their employees spent on discrete tasks that were difficult to capture on timekeeping systems — for example, time spent checking emails or texts from home, answering sporadic calls on the weekends or answering questions after clocking out. Now, employers will need to capture this time or run increased legal risks in this area.

Of equal importance, 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, this decision will likely 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 their employees actually spend working.

The case will now head back to the U.S. District Court for the Central District of California to address equally weighty issues such as class certification.

Kirstin Muller is a partner in Hirschfeld Kraemer, LLP’s Santa Monica office. For more information, contact her at kmuller@hkemploymentlaw.com.

Practice Areas: Wage & Hour Counseling