High Court Deals Another Blow to Employers Regarding Clocking Out!

July 30, 2018

Last week, the California Supreme Court issued its opinion in Troester v. Starbucks, refusing to hold that the well-established de minimis doctrine applies under California law. The de minimis doctrine is a principle of law that has long been endorsed and applied by both federal and California state courts (as well as California’s Division of Labor Standards Enforcement), holding that employers need not compensate employees for insignificant amounts of time spent performing work-related tasks off the clock where such time is administratively difficult to track.

The high court made it clear that although the doctrine is widely accepted under the federal FLSA, California wage orders are more protective of employees and require payment for “all hours worked.”  The Court held that the de minimis doctrine cannot be used to allow an employer to avoid paying for tasks that take, on average, 4-10 minutes at the end of an employee’s shift. However, the Court stated that is was not prepared to hold that the doctrine could never be applied under California law on potentially different facts involving smaller amounts of time spent off the clock and/or only sporadically.

Troester was a shift supervisor for Starbucks who filed a class action lawsuit in California state court alleging that the coffee giant failed to compensate him and other employees for closing tasks (e.g. locking the door, setting the alarm) they performed after clocking out at the end of their shifts.  Starbucks removed the case to federal court and then moved for summary judgment, arguing that Troester’s claims had no merit because an employer is not required by law to pay employees for de minimis time associated with tasks that as a matter of practicality are performed after the employee has clocked out (such as locking the door or shutting down a computer).

The federal district court agreed with Starbucks and granted its motion for judgment. Troester appealed to the Ninth Circuit, which, in turn, certified the issue to the California Supreme Court to provide guidance on whether the de minimis doctrine applies for purposes of claims for unpaid wages brought under California law (as opposed to wage claims brought under federal law, the FLSA).

The Supreme Court’s Decision
So, last week, the California Supreme Court issued the requested guidance, rejecting application of the de minimis doctrine on the facts of the Starbucks case. The Court held that nothing in the text or legislative history of the wage orders or Labor Code suggested any legislative intent to allow employers to avoid paying for de minimis amounts of time spent on work tasks. The Court explained that on the facts of the case before it, it was undisputed that Troester spent an average of 4-10 minutes on closing tasks after he had clocked out. The Court also noted that over his entire period of employment, this was the equivalent of about $100 in unpaid wages. The off the clock tasks were regularly recurring tasks that were part of the employee’s closing responsibilities. On these facts, the Court held that the time had to be compensated.

However, the Court stopped short of providing a bright-line holding that the de minimis doctrine may never be applied under California law. Frustratingly for employers, the Court provided no guidance for employers on the parameters for when the doctrine would apply. Additionally, the Court’s opinion contains a lot of language explaining that there are many technologies available to employers and employees today (e.g. timekeeping apps on smart phones) that make tracking of time administratively easier, implying that it will be a difficult burden for an employer to successfully prevail on a de minimis theory in most any case.

Even more frustrating, the Court acknowledges in its opinion that California’s DLSE and courts have held that the de minimis doctrine indeed applies under California law.  Nonetheless, the Court basically distinguished the cases and rejected the DLSE interpretive guidance. This is patently unfair to employers that have justifiably relied on this precedent and DLSE interpretive guidance in adopting timekeeping and pay practices.  Now they face potential retroactive (4 years back) liability for unpaid wages due to the Supreme Court’s effective changing of the law to the detriment of employers.

Today’s decision is another employee-sided opinion that hurts California employers. Although the state high Court stopped short of holding that the de minimis doctrine never may be used to defend against California wage claims, the Court rejected it on the facts of the Starbucks case, and made it difficult for employers to safely rely on the doctrine going forward in most any factual setting. California employers should ensure that all time spent by employees performing work tasks (and/or time when employees are under the control of the employer) is tracked and compensated — no matter how minimal the time.

Meal Break Decision that Favored Employers!

July 23, 2018

Here is a good decision on behalf of employers. This decision has a national impact. The Ninth Court Circuit of Appeals issued a recent opinion in Rodriguez v. Taco Bell Corp., upholding the district court’s grant of summary judgment in favor of Taco Bell on class claims for alleged meal break violations.  In this case, Taco Bell authorized and permitted employees to take meal breaks during which they were relieved of duty and free to leave the premises.  However, Taco Bell offered employees the option of purchasing a discounted meal at Taco Bell, in which case they had to remain on site to eat it (in order to prevent theft/abuse associated with employees bringing discounted food to third parties outside the restaurant).  Because no good deed ever goes unpunished in California, a class action lawsuit was filed against Taco Bell alleging that their practices violated California law by denying employees lawful meal breaks.

Fortunately, the courts seem to have actually got this one right, finding the plaintiffs’ claim to be without merit and undeserving of a trial.  The plaintiffs had argued that time spent eating discounted meals in the restaurant had to be compensated as work time because they purportedly were subject to Taco Bell’s “control” during this time by virtue of not being allowed to leave the premises.  The Ninth Circuit flatly rejected this argument, appropriately reasoning that the choice to purchase a discounted meal was purely voluntary (and optional) on the part of employees.  If they didn’t wish to remain on the premises for a meal break, they simply could have chosen not to purchase a discounted meal, in which case they would have been free to leave the premises for their meal break.

This decision could have a far reaching effect on businesses that have opportunities to get discounted or free meals. Besides restaurants, other businesses like automobile dealerships, sometimes have a snack bar whereby employees get either free lunch or a discounted cost for the food they order. This decision can put these employers at ease under the circumstances presented.

This seems like a no-brainer, right?  If only Taco Bell could recover all of its fees incurred to defend this claim but unfortunately, not going to happen. The courts, “generally” do allow this because it may deter current or former employees from pursuing their rights if they thought in the event of a loss they would have to pay the attorney fees.


The Employer’s Duty to Protect the Personal Information of its Employees!

July 16, 2018

Let’s explore this a little bit.

In one case, Enslin v. Coca-Cola, the employer discovered that an employee who worked in its information technology department had been stealing older laptop computers. Some of those computers had been used in the employer’s human resources department and contained former employees’ personal information (including social security numbers and drivers’ license numbers), which the company collected on each employee at the time of hire.

The employer attempted to recover the stolen computers and informed its employees of the data breach. Now, at some point, the plaintiff had learned that several of his accounts with online retailers were compromised and used to make unauthorized purchases.

He sued his employer for, among other claims, breach of contract (based on the company’s data security policy in its employee handbook) and negligence.

Well, the court found for the employer. It concluded that the employee could not prevail because he could not establish that the employer caused his damages. The harm flowed “from the compromise of his retail accounts rather than directly from the theft of his personal information,” and the employee presented “no evidence from which a reasonable jury could conclude that his accounts were compromised because information was gleaned from the stolen laptops.”

In another case similar to this one, an appellate court held that an employer “did not owe a duty of reasonable care in its collection and storage of the employees’ information and data.” The court found it “unnecessary to require employers to incur potentially significant costs to increase security measures when there is no true way to prevent data breaches altogether.”

Do not, however, allow these cases to lull you, as an employer, into a false sense of immunity from claims by employees following data breaches. Indeed, several other courts that have examined this issues have reached the opposite result.

So, keep in mind, regardless of whether you, as an employer, have a “legal duty” to protect the personal information and data of your employees, you still have a significant financial and reputational incentive to take reasonable steps to maintain the privacy and security of the information.

Here are some common sense suggestions.

  1. Talk to your IT person and implement some safeguards which includes encryption, firewalls, secure and updated passwords, and employee training on how to protect against data breaches.
  2. If you suffer a data breach, timely advising employees of the breach as required by all applicable state laws.
  3. Train your staff on appropriate data security.
  4. Draft a policy (if you do not have one) that explain the scope of your duty as an organization to protect employee data.
  5. Maintain an updated data breach response plan.

Remember, in today’s climate of cyber attacks, data breaches are not an if issue, but a when issue. Once you understand the fact that you will suffer a breach, you should also understand the importance of making the issue of data security a priority in your organization. The cost of data breaches is significant. Get ahead of the curve.


Minimum Wage Update & Rounding Practices

July 9, 2018

REMINDER: Many California City and local governments increased the minimum wage hourly pay requirements on July 1, 2018, including:

  • City of Los Angeles – $12.00 (25 or fewer employees)/$13.25 (26+ employees)
  • County of Los Angeles – $12.00 (25 or fewer employees)/$13.25 (26+ employees)
  • Emeryville – $15 (1-55 employees)/$15.60 (56+ employees)
  • Malibu – $12.00 (25 or fewer employees)/$13.25 (26+ employees)
  • Milpitas – $13.50
  • Pasadena – $12.00 (25 or fewer employees)/$13.25 (26+ employees)
  • San Francisco – $15.00
  • San Leandro – $13.00
  • Santa Monica – $12.00 (25 or fewer employees)/$13.25 (26 or more employees)

The following is a favorable ruling for employers!

New California Decision Upholding Practice of Rounding Time Entries to Nearest Quarter Hour

Recently, a California Court of Appeal issued a published decision in AHMC Healthcare, Inc. v. Superior Court, holding that an employer’s practice of rounding employee time entries to the nearest quarter hour for payroll purposes was lawful and that the employees did not have valid claims for unpaid wages.  In this case, two hospital employees filed a class action for unpaid wages based on the employer’s rounding practice, alleging the practice resulted in employees being undercompensated.  The employer had an expert conduct an analysis of employee time and pay records at two different hospital locations to determine how the rounding practice operated in practice and whether it had a net effect of overcompensating or undercompensating employees.  At one location, rounding caused the majority of employees to be overcompensated.  At the other location, the practice had the net effect of undercompensating a very slight majority of employees.  As for the two named plaintiffs specifically, the practice resulted in very slight under compensation.  Taking all of these results together, the practice had the net effect of overcompensating employees on the whole.  Based on this evidence, the court held that the employer’s rounding practice was lawful and that the employer was entitled to judgment as a matter of law on the employees’ claims for unpaid wages.

This is another favorable decision on the use of rounding practices in California.  However, it also demonstrates that the use of such practices makes an employer an easy target for class action litigation, and the employer will only prevail in such litigation if it can establish, through expert analysis of its pay records over a period of time, that the rounding practice did not have a net effect of undercompensating employees.  This is an expensive task, and most employers will not know how the results will turn out.  If the results are unfavorable (reveal net underpayment of wages), the employer may well be staring at class liability for unpaid wages (and attorneys’ fees of course).  For these reasons, the use of rounding practices in California still poses costly litigation risk to employers.  Employers who use rounding practices should audit those practices to determine the net effect of the practice on wages.

New Guidance on Employee Handbooks!

July 2, 2018

Recently, the National Labor Relations Board (NLRB) General Counsel issued new guidance on employer handbook rules, in an effort to provide more clarity to employers on which rules are permissible and which rules will be deemed to violate employee rights under the National Labor Relations Act (NLRA).  This has been an area that has plagued many employers before the NLRB in recent years, since the Obama-era NLRB sought to expand its regulation of neutral workplace conduct policies, often finding that standard handbook rules (e.g. on insubordination, recording of conversations, confidentiality, etc.) violate employee rights under Section 7 of the NLRA to engage in “concerted activity” for “mutual aid and protection.”

Since 2004, the test for assessing whether an employer policy violated Section 7 rights was set forth in the Lutheran Heritage case, in which the NLRB held that a workplace policy or rule would be found unlawful if, among other things, employees could “reasonably construe” the rule as prohibiting them from engaging in conduct protected by Section 7.  Following Lutheran Heritage, the Obama-era NLRB issued a number of decisions and guidance suggesting that many standard employer policies/rules violate Section 7 based on the NLRB’s overbroad interpretation of the circumstances in which an employee could “reasonably construe” such rules to restrict them from exercising the right to engage in concerted activity for mutual aid and protection.

Finally, in December 2017, the NLRB issued its Boeing decision, overruling the Lutheran Heritage “reasonably construe” test and laying out a new test for assessing whether a facially neutral workplace rule violates the NLRA.  Under the new Boeing test, the NLRB reviews a facially neutral workplace rule to determine whether the rule, when reasonably interpreted, would potentially interfere with the exercise of employee rights.  If so, the NLRB will engage in a balancing test that weighs the nature and extent of the potential impact on those rights against the legitimate business justifications associated with the rule.  When legitimate justifications outweigh a rule’s potential impact on protected rights, it will be found lawful.

While Boeing provided a more positive test assessing employer workplace rules, it still left employers without a lot of clarity on whether specific rules would be lawful or not.  The recent General Counsel guidance is intended to provide more clarity.  The guidance describes three categories of rules:  (1) generally lawful rules; (2) generally unlawful rules; and (3) rules requiring individualized assessment to determine their lawfulness.

Generally Lawful Rules:

The Guidance states that the following workplace rules are generally lawful and that regional NLRB offices should dismiss unfair labor practice charges alleging that such rules are unlawful:

  • Civility Rules:  Rules that prohibit rude and disrespectful behavior, or disparagement of company employees.
  • Rules Prohibiting Photos/Recordings:  Rules that generally prohibit the use of cameras or recording devices in the workplace.
  • Insubordination Rules:  Rules that prohibit insubordinate conduct, uncooperative behavior, or other conduct that adversely affects operations.
  • Disruptive Behavior Rules:  Rules that prohibit disruptive or disorderly conduct.
  • Confidentiality Rules:  Rules that generally protect an employer’s confidential, proprietary, or trade secret information (note, of course, that an employer cannot prevent an employee from discussing their wages or conditions of employment).
  • Defamation Rules:  Rules that prohibit employees from engaging in defamation, slander, or misrepresentation of facts about the company or its employees.
  • Rules Limiting Ability to Speak for Company:  Rules that prohibit employees from responding to media requests, commenting on behalf of the company, or otherwise purporting to speak on behalf of the company.
  • Employer Logos and Trademarks:  Rules that prohibit use of the employer’s logo or trademarks.
  • Conflict of Interest Rules:  Rules prohibiting certain competitive activities, nepotism, or disloyalty

Generally Unlawful Rules:

The guidance identifies only the following rules that generally will be considered unlawful on their face:   (1) confidentiality rules that expressly limit disclosure of information regarding wages, benefits, or working conditions; and (2) rules restricting employees from joining outside organizations or voting on matters concerning the employer.

Rules Requiring Individualized Assessment:

The guidance identifies the following types of rules as ones that need to be assessed on a case-by-case basis to determine lawfulness:

  • Broad conflict-of-interest rules that do not specifically target fraud and self-enrichment (generally lawful), and do not restrict membership in, or voting for, a union (generally unlawful))
  • Confidentiality rules broadly encompassing “employer business” or “employee information” (as opposed to confidentiality rules regarding customer or proprietary information (generally lawful), or confidentiality rules more specifically directed at employee wages, terms of employment, or working conditions (generally unlawful))
  • Rules regarding disparagement or criticism of the employer (as opposed to civility rules regarding disparagement of employees (generally lawful))
  • Rules regulating use of the employer’s name (as opposed to rules regulating use of the employer’s logo/trademark (generally lawful))
  • Rules generally restricting speaking to the media or third parties (as opposed to rules restricting speaking to the media on the employer’s behalf (which are generally lawful))
  • Rules banning off-duty conduct that might harm the employer (as opposed to rules banning insubordinate or disruptive conduct at work (generally lawful), or rules specifically banning participation in outside organizations (generally unlawful))
  • Rules against making false or inaccurate statements (as opposed to rules against making defamatory statements (generally lawful))

Employers should review this recent guidance to assess whether their handbook policies need to be revised.