July 31, 2018
Compliance Matters
California Supreme Court Rules That Employers Must Pay For All Work Hours

O n July 26, 2018, the C a lifornia Supreme Court issued its long-anticipated decision in a case involving coffee impresario Starbucks. The case addressed an important and yet unanswered question under California wage-hour law: Must an employer pay for every single minute that an employee works or may an employer ignore brief periods of work under the so-called "de minimis" doctrine used by federal wage-hour regulators?  The Supreme Court ruled that employers who do not pay for every minute worked could be sued for the unpaid time in a wage-hour class action. Here is what the Supreme Court's decision means to you.

In the 1940's, the United States Supreme Court formally recognized the de minimis doctrine (which is Latin for "[t]he law does not concern itself with trifles") when applying the federal Fair Labor Standards Act. The doctrine was then adopted into the U.S. Department of Labor's regulations enforcing the federal wage-hour law. Under the de minimis doctrine , the federal wage-hour watchdog agency excused employers f or non-payment of wages for insignificantly small amounts of otherwise compensable time (i.e., up to 10 minutes per day) because these small periods of time are so administratively difficult to record.

In the Starbucks case, an hourly paid Assistant Store Manager named Douglas Troester filed a class action suit alleging that Starbucks violated California law by not paying him for the few minutes he and his co-workers spent each day closing up the store after they clocked out. These tasks, which typically lasted anywhere from 4 to 10 minutes, included such tasks as uploading data to the Corporate office, walking out of the store after activating the security alarm, locking the store's front door, and occasionally re - opening the door so that patio furniture could be put inside. The Assistant Manager claimed that he was shorted $102.67 for a total of 12 hours and 50 minutes of unpaid work over his 17-month employment.

In analyzing whether the de minimis doctrine should be applied in California, the Supreme Court first noted that California's wage and hour statutes and regulations have never specifically adopted the doctrine. The Supreme Court then assessed whether doing so nevertheless was a good idea under California law.  On that question, the Court ruled that it would not be appropriate to do so under the facts of this case, and that Starbucks must compensate these hourly employees for their post-closing duties. The Justices emphasized that modern technology made it possible for employers like Starbucks to easily capture all employees' time, so it was no longer burdensome in most work settings for employers to capture and pay for all time worked. However, the Court specifically approved the use of neutral "rounding" policies which do not result in the failure to compensate employees for all time worked (link).

Significantly, the Court did not completely foreclose the possibility that the de minimis principle might apply in certain cases where, for example, the off-the-clock duties are not done on a regular recurring basis, and the activities are either so irregular or brief in duration that it would be unreasonable to require compensation for the time spent on them.  Unfortunately, the Court declined to articulate when such a standard would apply, and essentially endorsed what they referred to as a "common sense" approach.  As a result, although the justices did not ban employers from raising the de minimis defense, the Court emphasized that employers do so at their peril.

This can be an especially nettlesome problem in this 24/7 "always connected" world in which we live. Often, the expectation and work culture is that employees must respond to work related phone calls, email and text messages, regardless of the time of day. Up until now, a great many California employers routinely encouraged-and in some cases expected-employees to do so without pay. The Supreme Court's ruling would require employers to devise a system for capturing that time and paying employees for these work tasks if this occurs with any regularity.

In addition, many employers have security or other check in/out procedures which require employees to submit to an inspection of their personal belongings for a few minutes at the beginning and the end of each day.  This kind of routine expenditure of time has been the subject of a number of recent class action lawsuits for off-the-clock work.  Employers are also at risk for not paying employees for this time.

In light of this important new decision, it would be wise for employers in California to consider implementing one or more of the following best practices to avoid potential violations:
  1. Review which employees are overtime eligible because the ruling does not apply to salaried employees who are overtime exempt.  Be sure that the salaried employees are paid no less than the annualized equivalent of twice the state's current minimum wage (which is $45,760.00);
  2. Review your company's pre-shift and post-shift practices to ensure there are no regularly occurring off-the-clock tasks that should be compensated;
  3. Review and amend written policies as necessary to make it clear that employees must record all work time and may not perform any work before they clock in or after they clock out (and emphasize that employees who timely report any extra uncompensated work will be paid for the time);
  4. Consider using time keeping technology that will enable the company to capture all working hours, place time clocks in areas that will help capture all working time, or consider adding a few minutes to employees' recorded work hours each day to cover any work time which is not recorded;
  5. If the company has a "rounding" policy, ensure that the policy is facially neutral (i.e., you are just as likely to round up in the employee's favor as round down) and implemented in a neutral fashion; and
  6. Train managers on the legal requirements to pay employees for all working time and that they must encourage non-exempt staffers to report all of the off-the-clock time they perform.  
Please call your Firm contact if you have any questions after reading this bulletin. 

David J. Fishman
Jeffrey P. Fuchsman
Richard S. Rosenberg 
Ballard Rosenberg Golper & Savitt, LLP 

15760 Ventura Blvd.
Eighteenth Floor
Encino, CA 91436
(818) 508-3700

6135 Park Drive South
Suite 510
Charlotte, NC 28210
Matthew Wakefield:
(704) 846-2143 


Like us on Facebook  Follow us on Twitter  View our profile on LinkedIn
Join Our Mailing List