The Ninth Circuit Asks the California Supreme Court to Weigh in on Bag Checks

On August 16, 2017, the Ninth Circuit Court of Appeals issued an order certifying a question regarding an important wage and hour issue to the California Supreme Court: Is time spent on an employer’s premises waiting for and undergoing required exit searches of bags or packages voluntarily brought to work for purely personal convenience by employees compensable as “hours worked” under California law?

The question arose in Frlekin v. Apple, Inc., an appeal in a wage and hour class action brought against Apple, Inc., by current and former nonexempt California retail store employees. In the suit, the plaintiffs sought compensation for time that they spent waiting for and undergoing exit searches whenever they left Apple’s retail store locations, pursuant to the company’s Employee Package and Bag Searches policy. The at-issue policy, which is similar to ones in place at many other large retailers, required that employees undergo unpaid, manager-performed bag/package checks before leaving the stores—at breaks or at the end of their shifts.

In July 2015, a district court certified the case as a class action. However, in November 2015, the district court granted Apple’s motion for summary judgment and denied the plaintiffs’ motion for summary judgment and ruled that time spent by class members waiting for and undergoing exit-related bag searches pursuant to Apple’s policy was not compensable as “hours worked” under California law because such time was neither “subject to the control” of the employer nor time during which the class members were “suffered or permitted” to work.

On appeal, the plaintiffs argued that employees are under the control of the employer while waiting for and undergoing the bag checks because they are required whenever entering or leaving the premises. Apple countered that the time is not compensable because employees are not required to bring bags to work, and may avoid the searches altogether by not bringing a bag or package to the workplace. In its order certifying the issue for the California Supreme Court, the Ninth Circuit noted that Apple’s position “finds strong support” in the seminal California Supreme Court decision Morillion v. Royal Packing Co., 22 Cal. 4th 575 (2000), in which the court held that time spent by employees using employer-mandated transportation to get to a worksite was compensable, while noting that time spent on “optional free transportation” would not be compensable. However, the Ninth Circuit expressed questions about whether differences in context—i.e., employer-provided transport to and from the workplace versus searches at the worksite—rendered Morillion distinguishable.

Although the U.S. Supreme Court previously determined that similar bag checks were not compensable in Integrity Staffing Solutions, Inc. v. Busk, 135 S. Ct. 513 (2014), the California Supreme Court has not addressed the compensability of bag checks under California’s wage and hour laws, which involve a somewhat different definition of compensable work time. As the Ninth Circuit noted in its order, the consequences of any interpretation of California law with respect to bag searches “will have significant legal, economic, and practical consequences for employers and employees” throughout California and will materially affect the outcome of many pending lawsuits. For the time being, employers should consult with qualified employment counsel to mitigate risk while we wait for the California Supreme Court to weigh in.

This post was written by Philippe A. Lebel of  Drinker Biddle & Reath LLP.
Read more on litigation of wage and hour issues at the National Law Review.

How Does Supreme Court’s Remand of Transgender Discrimination Case Impact Wage-and-Hour Class Actions?

supreme court transgender discriminationOn March 6, 2017, the Supreme Court, in a one-sentence summary disposition, remanded the case of Gloucester County Sch. Bd. v. G.G. to the U.S. Court of Appeals for the Fourth Circuit “for further consideration in light of the guidance document issued by the Department of Education and Department of Justice on February 22, 2017.”  For those unfamiliar with Gloucester County, the case involves a public school’s obligations to a transgender student under Title IX and, in particular, whether Title IX’s prohibition against sex discrimination requires a school to treat transgender students consistent with their gender identity when providing sex-separated facilities, such as toilets, locker rooms, and showers.

So what does this have to do with wage-and-hour class actions?  As it turns out, in Gloucester County, the Supreme Court was poised to consider the scope, and perhaps the continuing viability, of the Auer doctrine, which frequently comes into play in wage-and-hour litigation.  Under the Auer doctrine, courts generally will enforce an agency’s interpretation of its own regulations unless that interpretation is “plainly erroneous or inconsistent with the regulation.”  In wage-and-hour class actions, this often results in cases being decided based on guidance issued by the Department of Labor through opinion letters, its Field Operations Handbook, and other sources.

This deference to the Department of Labor can be frustrating for employers and attorneys practicing wage-and-hour law because the guidance issued by the Department of Labor often changes with each new Presidential administration.  For example, an entire industry can decide to classify a group of employees as exempt from the FLSA’s overtime requirements based on an opinion letter from the Department of Labor only to learn years later that the Department has withdrawn the opinion letter after the start of a new administration.  If courts are obligated under Auer to defer to these shifting interpretations issued by the Department of Labor, it can create a great deal of uncertainty for employers seeking to comply with the FLSA and for parties litigating wage-and-hour class actions.

In the long term, eliminating or narrowing the Auer doctrine could provide more consistency for employers and litigants.  With the remand of Gloucester County, that is unlikely to happen in the near future.  In the short term, however, the continuing viability of the Auer doctrine may benefit employers who are hopeful that the Department of Labor, under the Trump administration, will take a more employer-friendly view of certain regulations.  For now, the Department of Labor remains free to shape FLSA through opinion letters and other guidance documents and without having to resort to the time-consuming process of issuing revised regulations.

Jackson Lewis P.C. © 2017

Winter Is Coming —Wage and Hour Considerations During Weather-Related Emergencies

winter weather winter is comingWith winter storms around the corner, it’s the right time to revisit employer rights and responsibilities during a weather-related emergency or other major disruption.  We discuss below some typical scenarios that you are likely to face during weather-related or other emergencies, and the consequences under the wage and hour laws.

“Our office was closed for a few days because of the storm.  Do we have to pay our employees for those days?”

Non-exempt (i.e., overtime-eligible) employees generally have to be paid only for hours they actually work.  So if a non-exempt employee cannot work because your office is closed—or because the employee cannot make it into the office because of weather-related conditions—the wage and hour laws do not require you to pay the employee for non-working time.  On the other hand, a non-exempt employee who performs work remotely (say, from home, from a temporary site, or from a coffee shop) is entitled to pay for the time worked.

An exception exists for salaried non-exempt employees, who may—depending on the terms of their agreement with the employer—expect to receive their full weekly salary regardless of how many hours they actually work that week.

Exempt employees (i.e., employees not entitled to overtime pay) generally receive their full salary for any week in which the office is closed for less than a full workweek.  Employers who prorate an exempt employee’s weekly salary because of office closure risk losing the exemption for the week in question—a consequence that may or may not be material depending on how many hours the employee works that week.  If your office is closed for an entire workweek, you can inform all employees of the closure and you need not pay them for that week (unless they are working remotely).

Be sure to check any agreements with exempt employees—as well as offer letters, policies, or other statements regarding the nature of their pay—which may also limit your ability to prorate salary during office closures and/or give rise to pay claims.

 “Our office was open, but some of our staff could not make it in because of the weather.  Do we need to pay them?

As described above, non-exempt employees generally must be paid only for hours they actually work, but salaried non-exempt employees may have a contractual right to receive their full salary for any week in which they perform any work.

Exempt employees who are absent from work for one or more full days because of inclement weather, including because of transportation difficulties, are considered to be absent for personal reasons (if the office is otherwise open).  Absent a contractual right to be paid, they do not have to be paid for the days they fail to report to work, and your failure to pay them for such days will not jeopardize their exempt status.  Deductions for partial-day absences under these circumstances, however, will violate the salary basis rules and jeopardize the exemption for that week.

“Because of flooding or another dangerous condition, we had to close our office after a number of employees had already reported for work.  Do we have to pay them for the day?” 

Exempt employees who report to work but are turned away or sent home by their employer generally must receive their salary for that day.  Non-exempt employees who report to work but are turned away or sent home must be paid for all hours actually worked that day.  In addition, some states have “reporting pay” or “call in” pay laws that require employers to pay non-exempt employees a minimum number of hours’ pay for any day in which they report to work.

“Our payroll records were destroyed in the storm, or are inaccessible.  How do we pay our employees?”

Exempt employees paid on a salary basis should receive their normal salary payment (less any permissible full-day deductions).  For hourly non-exempt employees, use a reasonable method to determine the number of hours worked, such as:

  • Asking the employees themselves to submit a certified time sheet indicating the number of hours they worked;

  • Recreating hours worked through electronic records (g., card/ID swipes or log-ins/log-outs);

  • Making assumptions based on an employee’s fixed or regular schedule of hours;

  • Asking managers to verify hours worked; or

  • Some combination of the above.

“Can we require our employees to use available vacation days or other paid time off during a weather-related office closure or absence?”

Yes.  Under federal law and the laws of most states, employers are not required to provide vacation benefits or other paid time off to employees.  Such benefits are generally a matter of agreement between employer and employee, or set forth in the employer’s handbook or policy.  Under these circumstances, there is no prohibition on an employer giving PTO and requiring that it be taken on specific days.  So long as it’s permitted under the applicable PTO policy or agreement, employers can reduce an employee’s accrued PTO bank for either partial or full day absences, without violating the wage and hour laws.

“Can we give our staff additional paid or unpaid time off to assist in recovery or relief efforts?”

Employers can grant their employees additional paid and unpaid time off for any reason, including assisting with storm-related recovery and relief efforts.

Employees who are assisting in relief efforts as part of the National Guard or Armed Forces Reserves may have additional rights under federal and state law.

Because of the snow, it took our employees twice as long to commute to work as opposed to most other days.  Do we need to pay them for the additional commute time?”

Time spent in an employee’s normal commute from home to work at the beginning of the workday, and from work to home at the end of the workday, is not considered time worked and need not be paid.

“Some of my employees are members of a union.  Do these rules apply to them as well?”

Collective bargaining agreements generally cannot waive or reduce the protections available to employees under federal, state, or local wage and hour laws.  Collective bargaining agreements can, however—and often do—impose different and additional pay, time off, and other obligations on employers.  Employers with unionized employees should consider all applicable agreements when analyzing their rights and responsibilities in the context of a weather-related emergency or other “force majeure” event.

“We want to do more for our employees, to go above and beyond what the law requires. What are some things we can do?”

There are many options available to an employer who wants to do more for its employees, including:

  • Granting additional paid or unpaid time off

  • Allowing employees to donate accrued paid time off to other employees (i.e., leave-sharing plans)

  • Allowing affected employees to work remotely for some period of time

  • Making emergency advances of salary or loans

  • Setting up disaster-relief programs or payments

  • Making certain payments to assist disaster victims that can be excluded from their taxable income

  • Setting up food and clothing drives

Final Thoughts

Employers making decisions about scheduling, pay, and time off during weather-related emergencies and disruptions should bear in mind the potential implications on employee morale.  Flexibility and support in times of need—or the absence of them—are likely to be remembered long after the storm passes.

As always, check state and local laws—as well as your contracts and policies—before making any final decisions regarding wages, hours, or time off.