It is no secret that California’s wage-hour laws are complex and often raise questions that employers, employees and the courts struggle with. As we wrote here more than a year ago, faced with questions regarding California’s ambiguous “day of rest” laws, the Ninth Circuit Court of Appeals threw up its hands and asked the California Supreme Court to clarify those laws.

Among the questions to be answered was one that impacts a great many employers, particularly those in the retail and hospitality industries – does the requirement that an employee be provided a “day of rest” apply to each workweek (such that an employee could be scheduled to work 12 consecutive days over two workweeks), or does it apply to each rolling, 7-day period (such that employees could never be scheduled to work more than 6 consecutive days)?

Employers have been awaiting the Supreme Court’s decision, not just because it could require them to change their scheduling practices, but because an adverse interpretation of the “day of rest” laws could lead to a great many lawsuits and exposure over past practices.

The California Supreme Court issued its opinion in Mendoza v. Nordstrom, Inc. on Monday.  And the Court’s answers to the Ninth Circuit’s questions are ones that should please most employers.

Perhaps most importantly, the Supreme Court concluded that “a day of rest is guaranteed for each work week,” not for each rolling, 7-day period – a conclusion that would allow an employer to schedule an employee to work for as many as 12 consecutive days without violating the law (so long as the employee is not required to work 7 in one workweek).

The California answered the Ninth Circuit’s questions as follows:

  1. With regard to California Labor Code section 551, which  provides that “[e]very person employed in any occupation of labor is entitled to one day’s rest therefrom in seven,” is the required day of rest calculated by the workweek, or is it calculated on a rolling basis for any consecutive 7-day period?

As the Ninth Circuit Court noted, this question was no mere matter of semantics. One answer would lead to liability for the employer, while the other would not.

Reviewing the “manifestly ambiguous” statutory language and legislative history, the California Supreme Court concluded, “A day of rest is guaranteed for each workweek. Periods of more than six consecutive days of work that stretch across more than one workweek are not per se prohibited.”

The Court explained, “The Legislature intended to ensure employees, as conducive to their health and well-being, a day of rest each week, not to prevent them from ever working more than six consecutive days at any one time.”

  1. With regard to California Labor Code section 556, which exempts employers from providing such a day of rest when the total hours of employment do not exceed 30 hours in any week or six hours in “any” one day thereof, does the exemption apply when an employee works less than six hours in any one day of the applicable week, or does it apply only when an employee works less than six hours in each day of the week?

As the Ninth Circuit noted, the word “any” could support either interpretation. And, again, this was not a matter of semantics. The different interpretations of “any” would lead to very different liability determinations.

The California Supreme Court concluded, “The exemption for employees working shifts of six hours or less applies only to those who never exceed six hours of work on any day of the workweek. If on any one day an employee works more than six hours, a day of rest must be provided during that workweek, subject to whatever other exceptions might apply.”

  1. With regard to California Labor Code section 552, which provides that an employer may not “cause” his employees to work more than six days in seven, what does the word “cause” mean? Does it mean “force, coerce, pressure, schedule, encourage, reward, permit, or something else?”

Again, the different interpretations of “cause” would lead to different liability determinations.

The California Supreme Court concluded, “An employer causes its employee to go without a day of rest when it induces the employee to forgo rest to which he or she is entitled. An employer is not, however, forbidden from permitting or allowing an employee, fully apprised of the entitlement to rest, independently to choose not to take a day of rest.”

The California Supreme Court’s answers to these questions – particularly the first and third – will likely be greeted with much relief from employers in California, especially in the retail and hospitality industries where it is not uncommon to schedule employees to work 7 days or more in a row with shifts of varying lengths, and where employees may often swap shifts with each other such that they are working seven days or more in a row.

Our colleague Michael Kun, co-editor of this blog, shared his thoughts on various wage and hour issues in the publication of “7 Deadly Sins,”  which discusses FLSA violations that must be avoided to ensure compliance at your company, published by TSheets.

Following is an excerpt:

“The most common issues we see regarding meal and rest periods occur in states like California where state laws – rather than the FLSA – require that employees be provided those breaks at certain times during the day, and employees are entitled to significant penalties if they are not provided breaks in compliance with the law. …”

Read the full post here.

Overtime Clock Faces - Abstract PhotoNearly a year after the Department of Labor (“DOL”) issued its Notice of Proposed Rulemaking to address an increase in the minimum salary for white collar exemptions, the DOL has announced its final rule, to take effect on December 1, 2016.

While the earlier notice had indicated that the salary threshold for the executive, administrative, and professional exemption would be increased from $23,660 ($455 per week) to $50,440 ($970 per week), the final rule will not raise the threshold that far.  Instead, it will raise it to $47,476 ($913 per week).

According to the DOL’s Fact Sheet, the final rule will also do the following:

  • The total annual compensation requirement for “highly compensated employees” subject to a minimal duties test will increase from the current level of $100,000 to $134,004, which represents the 90th percentile of full-time salaried workers nationally.
  • The salary threshold for the executive, administrative, professional, and highly compensated employee exemptions will automatically update every three years to “ensure that they continue to provide useful and effective tests for exemption.”
  • The salary basis test will be amended to allow employers to use non-discretionary bonuses and incentive payments, such as commissions, to satisfy up to 10 percent of the salary threshold.
  • The final rule does not in any way change the current duties tests.

While it is certainly good news for employers that the duties tests will not be augmented and that non-discretionary bonuses and other incentive payments can be used to partially contribute to the salary threshold, the increase to the salary threshold is expected to extend the right to overtime pay to an estimated 4.2 million workers who are currently exempt.

With the benefit of more than six months until the final rule takes effect, employers should not delay in auditing their workforces to identify any employees currently treated as exempt who will not meet the new salary threshold. For such persons, employers will need to determine whether to increase workers’ salaries or convert them to non-exempt.

US Supreme CourtOn March 22, 2016, the United States Supreme Court issued its much anticipated decision in Tyson Foods, Inc. v. Bouaphakeo, a donning and doffing case in which a class of employees had been awarded $2.9 million following a 2011 jury trial that relied on statistical evidence. (A subsequent liquidated damages award brought the total to $5.8 million.)

In a 6-2 opinion, the Supreme Court affirmed that award.  While the Supreme Court’s decision may not have been the outcome many were expecting, the Court did not issue a broad ruling regarding the use of statistical evidence in class actions, and the decision may prove to have limited application.

In 2007, Tyson Foods employees at a meat processing facility in Iowa filed suit under both state law and the Fair Labor Standards Act (“FLSA”), alleging that they were not paid overtime for the time spent donning and doffing protective gear.  Because Tyson Foods did not have records of the amount of time employees actually spent in those activities, employees’ filled the “evidentiary gap” at through the presentation of representative evidence. This included not only employee testimony and video recordings, but, most importantly, an expert study showing the average time employees spent in such activities as observed by the expert.

In seeking to reverse the jury award, Tyson Foods argued to both the Eighth Circuit Court of Appeals and the Supreme Court that the amount of time spent donning and doffing varied from person to person – and that some persons did not work sufficient time to be entitled to overtime in any event – such that individualized issues predominated over common ones. And Tyson Foods argued that the use of statistical evidence presented it from presenting individualized defenses.

In making these and other arguments, Tyson Foods sought a broad ruling prohibiting the use of statistical evidence in class actions. The Supreme Court rejected that request, concluding that such a rule would “reach too far.” And it explained that its landmark 2011 Wal-Mart v. Dukes decision “does not stand for the broad proposition that a representative sample is an impermissible means of establishing class-wide liability.”

Instead, the Supreme Court held that a “representative or statistical sample, like all evidence, is a means to establish or defend against liability. Its permissibility turns not on the form a proceeding takes — be it a class or individual action — but on the degree to which the evidence is reliable in proving or disproving the elements of the relevant cause of action.” It further explained, “Whether and when statistical evidence can be used to establish classwide liability will depend on the purpose for which the evidence is being introduced and on ‘the elements of the underlying cause of action’ . . . .”

Under the facts presented to it, the Supreme Court  concluded that statistics could be used to infer the amount of time Tyson Foods employees spent donning and doffing because those statistics could have been used in individual suits by the employees.

Importantly, in reaching its conclusion, just as it declined to issue a blanket rule forbidding the use of statistical evidence, the Court also declined to issue a broad rule affirming the use of statistical evidence in all class actions.

The Court noted that its opinion “is not to say that all inferences drawn from representative evidence in an FLSA case are ‘just and reasonable.’ . . . . Representative evidence that is statistically inadequate or based on implausible assumptions could not lead to a fair or accurate estimate of the uncompensated hours an employee has worked.”  In other words, a defendant can challenge an expert’s methodology, which Tyson Foods did not do.

The Court concluded its discussion of representative evidence by declining to issue any broad rule: “The Court reiterates that, while petitioner, respondents, or their respective amici may urge adoption of broad and categorical rules governing the use of representative and statistical evidence in class actions, this case provides no occasion to do so. Whether a representative sample may be used to establish classwide liability will depend on the purpose for which the sample is being introduced and on the underlying cause of action. In FLSA actions, inferring the hours an employee has worked from a study such as [the expert’s] has been permitted by the Court so long as the study is otherwise admissible. . . . The fairness and utility of statistical methods in contexts other than those presented here will depend on facts and circumstances particular to those cases.”

While the decision is a victory for Tyson Foods employees, it is those sentences quoted directly above that will likely limit the decision from having widespread application.  The decision will no doubt be cited by plaintiffs’ counsel in class and collective actions to support their efforts to use statistical evidence to establish both liability and damages in their cases, even where there are individuals who have not been harmed. And defense counsel in those cases will just as certainly point to language in the decision that would indicate that it is a narrow ruling limited to its facts.

Not unimportantly, one issue left unaddressed by the Court pertains to Tysons Foods’ argument that uninjured class members should not recover damages.  The Court declined to address that issue, holding that that question was not fairly presented to it in this case because the damages award has not yet been distributed and  the record does not indicate how it will be done. Accordingly, Tyson Foods may raise a challenge to the allocation method when the case returns to the trial court for distribution of the award to address persons who were not injured.

Betty WhiteIt is often said that no employer is immune from a wage-hour lawsuit. That no matter how diligent an employer is about complying with wage-hour laws, there is nothing to prevent an employee from alleging that it did not comply in full with the law, leaving it to the attorneys and the court to sort things out. Perhaps the best evidence that no employer is immune from a wage-hour lawsuit came on Thursday, March 17, 2016. That is the date that history will always reflect that a wage-hour lawsuit was filed against Betty White.

Yes, that Betty White. Ninety-four year old Betty White. Sue Ann Nivens from The Mary Tyler Moore Show. Rose from The Golden Girls. Betty White from The Betty White Show, and hundreds of talk shows, game shows, and commercials. One of the most recognizable faces of television for the past 50 years.  And one of the most universally adored. That Betty White. Sued. For wage-hour violations.

On March 17, 2016, a former domestic named Anita Maynard filed suit against Betty White in state court in Los Angeles, alleging that she was not paid minimum wages or overtime, was not permitted to take meal and rest periods in compliance with the law, and was not paid all wages due to her when her employment ended. (The lawsuit is known as Anita Maynard v. Betty White Ludden.  Some will recall Ms. White’s late husband, Allen Ludden, who hosted Password in the 1960s and 1970s before succumbing to cancer.) Now, we have no idea whether the claims have any merit.  And, like many single-plaintiff wage suits, it may well be dismissed or settled quietly without anyone knowing much. But we do know this: if Betty White can be sued for wage-hour laws, then any employer can be.

And that is just another reminder of how important it is for employers to try to ensure compliance with wage-hour laws.

Wage and Hour Division’s Latest Newsletter Confirms Its Aggressive Approach
Infographic by DOL Wage and Hour Division.

The Department of Labor’s Wage and Hour Division, which is charged with enforcing federal wage laws, has just issued its latest newsletter.

Included in the newsletter is the Division’s presentation of a variety of statistics relating to its efforts.

Among the statistics reported by the Division:

  • It has assisted more than 1.7 million workers since 2009.
  • It has recovered approximately $1.6 billion for workers since 2009.
  • It recovered more than $246 million in back wages in 2015 alone for more than 240,000 workers.
  • In 2015, the Division found violations in 79% of its investigations.

What do these statistics mean for employers?

They mean that the Wage and Hour Division was not just talking when it said it would aggressively investigate and pursue wage-hour issues, including the misclassification of workers as independent contractors and the failure to pay employees for work performed off-the-clock.

Those statistics alone should serve as a reminder to employers to review their policies and practices to try to ensure compliance with wage-hour laws.  No employer wants to be part of these statistics next year.

Michael Kun, co-editor of this blog, has a post on the Hospitality Labor and Employment Law Blog that will be of interest to many of our readers: “Ninth Circuit Approves DOL Rule Prohibiting ‘Tip Pooling’ for Kitchen Employees Even Where No ‘Tip Credit’ Is Taken.”

Following is an excerpt:

The Fair Labor Standards Act (“FLSA”) permits employers to use “tip credits” to satisfy minimum wage obligations to tipped employees.  Some employers use those “tip credits” to satisfy the minimum wage obligations; some do not.  (And in some states, like California, they cannot do so without running afoul of state minimum wage laws.) …

On February 23, 2016, in Oregon Restaurant & Lodging Assoc. v. Perez, No. 13-25765 (9th Cir. Feb. 23, 2016), a divided Ninth Circuit Court of Appeals … [held] that the DOL in fact has the authority to regulate the “tip pooling” practices of employers even when they do not take tip credits — including prohibiting employers from including kitchen employees in “tip pools.” While confirming that the FLSA permits the use of “tip credits” to fulfill minimum wage requirements, the Court concluded that the DOL was acting within its authority in concluding that employers that establish “tip pools” may only do so when the persons who are included are persons who normally receive tips – and that, as kitchen staff do not normally receive tips, they cannot be included in “tip pools.”

The decision not only appears to be inconsistent with the Ninth Circuit’s own Cumbie decision, but with other courts that have reviewed this same issue. …

Read the full post here.

Employment Law This Week – Epstein Becker Green’s new video program – has a story this week on off-the-clock security screenings, which are under scrutiny around the country. Two federal class actions challenging them have reached different outcomes.

Bath & Body Works recently agreed to settle a suit in California over unpaid overtime and off-the-clock security inspections. But a federal judge in the same state dismissed a similar class action against Apple in which retail workers claimed that they should be compensated for time spent having their bags checked. The judge concluded that the employees were not performing job duties and could avoid the screenings by not bringing a bag or cell phone to work.

See below to view the episode and read our recent blog post “Have We Now Seen the Last of ‘Bag Check’ Class Actions?”

 

Bag Security CheckIn recent years, employers across the country have faced a great many class action and collective action lawsuits in which employees have alleged they are entitled to be paid for the time spent in security screenings before they leave their employers’ premises – but after they have already clocked out for the day.  Retailers have been particularly susceptible to these claims as many require employees to undergo “bag checks” before they depart their stores to ensure that employees are not attempting to carry merchandise out in their bags or coats.

In late 2014, in Integrity Staffing Solutions, Inc. v. Busk, the United States Supreme Court held that time spent in security screenings was not compensable under the federal Fair Labor Standards Act (“FLSA”).

While Busk would seem to leave few circumstances under which employees could bring viable “bag check” claims under the FLSA, it did not put an end to the claims.  Among other things, the compensability of such time under California state law, which defines compensable time differently than the FLSA, remained unaddressed.  Indeed, late last week, Bath & Body Works Inc. reportedly agreed to pay $2.25 million to settle a putative class action asserting claims under the California Labor Code for unpaid work hours that included claims that employees were not paid for time spent in security screenings.  The critical difference between the FLSA and California laws is that California law requires that employees be paid for all time when they are “subject to the control of the employer” or for all time that they are “suffered or permitted to work.” And, not surprisingly, plaintiffs’ lawyers in California have argued that employees are “subject to the control of the employer” and “suffered” to work while they wait for and participate in security screenings.

In many, if not most, security screenings, employees who do not have a bag or a coat are not subject to a screening. They simply leave without being checked.  Under those circumstances, we have always argued that time spent in security screenings is not compensable precisely because the employee can avoid the screening altogether by not bringing a bag or coat.

Earlier this week, in what appears to be the first published opinion on the issue, District Court Judge William Alsup reached that very conclusion.  In Frlekin v. Apple Inc., the Court dismissed a class-action lawsuit brought by Apple store employees seeking compensation under California law for time spent waiting for their bags to be searched before they left the stores where they worked.  Granting summary judgment to Apple, the Court concluded that the time was not “hours worked” because the searches were peripheral to the employees’ job duties and could be avoided if the employees chose not to bring bags to work.

The history of Frlekin largely describes the development of the law on “bag checks” this decade. The Frlekin plaintiffs initially pursued their “bag check” claims under the FLSA and various states laws, including California law.  The FLSA and non-California claims were dismissed following the Supreme Court’s decision in Busk, leaving just the California claims.

On those California claims, the District Court explained that, to prove that they were subject to the control of Apple during the bag checks, the plaintiffs had to show that:

  • Apple restrained their actions during the bag checks; and
  • the plaintiffs could not choose to avoid the activity.

The District Court found that the first element was met because, once a worker wished to leave with a bag, the worker was required to stand in line for the security screening. However, the District Court found that the second element was not met because a plaintiff could choose not to bring bags to work and thereby avoid the “bag check” altogether.  Distinguishing cases cited by the plaintiffs, the District Court further held that “employee choice” is a dispositive element in determining whether an employee is subject to the control of the employer.

The District Court then addressed whether the employees were “suffered or permitted to work” during the time they were awaiting security screenings.  The Court stated that liability arises when an employer knows that someone is performing work for its benefit, and allows that work to proceed.  Therefore, “the touchstone is the failure to prevent work.

On this issue, the District Court then held that time spent waiting for security screenings was not “work” because it had no relationship to plaintiffs’ job responsibilities; the plaintiffs merely waited passively as managers or security guards conducted the searches.  Accordingly, time spent waiting for bag checks was not time during which the plaintiffs were “suffered or permitted to work.”

In light of its conclusions that the time spent in security screenings was not time during which the plaintiffs were “subject to the control” of Apple or “suffered or permitted to work,” the District Court held that the time was not compensable under California law and granted summary judgment to Apple.

While the District Court’s ruling is, of course, a significant victory for Apple and for employers in California, it does not necessarily spell the end of class actions in California alleging that employees are entitled to compensation for time spent in security screenings.

First, the Frlekin plaintiffs are likely to appeal this decision.  It would be surprising if they did not.

Second, the decision is not binding on other courts, and in particular is not binding on California state courts.

Third, the decision will not be helpful to those employers who require all employees to undergo screenings regardless of whether they brought a bag or a coat.

For these reasons, it is too early to declare “bag check” lawsuits dead.

But, based on this decision, plaintiffs’ lawyers may think twice about bringing “bag check” class actions, and employers that have security screenings similar to Apple’s can take comfort that the first court to address the practice in a published decision has found that time spent in “bag checks” is not compensable time.

Wage & Hour Guide for Employers AppMany of our clients have downloaded our free, first-of-its-kind Wage & Hour Guide for Employers app, available for Apple, Android, and BlackBerry devices.

We have just updated the app, and the update is a significant one.

While the app originally included summaries of federal wage-hour laws and those for several states and the District of Columbia, the app now includes wage-hour summaries for all 50 states, as well as D.C. and Puerto Rico.

Now, more than ever, we can say that the app truly makes nationwide wage-hour information available in seconds. At a time when wage-hour litigation and agency investigations are at an all-time high, we believe the app offers an invaluable resource for employers, human resources personnel, and in-house counsel.

Key features of the updated app include:

  • New summaries of wage and hour laws and regulations are included, including 53 jurisdictions (federal, all 50 states, the District of Columbia, and Puerto Rico)
  • Available without charge for iPhoneiPad, Android, and BlackBerry devices
  • Direct feeds of EBG’s Wage & Hour Defense Blog and @ebglaw on Twitter
  • Easy sharing of content via email and social media
  • Rich media library of publications from EBG’s Wage and Hour practice
  • Expanded directory of EBG’s Wage and Hour attorneys

If you haven’t done so already, we hope you will download the free app soon.  To do so, you can use these links for iPhoneiPad, Android, and BlackBerry.