Will high court draw bright lines for employers?

The 9th U.S. Circuit Court of Appeals has asked the California Supreme Court to decide whether an employee’s time spent waiting for a security check constitutes “hours worked” even if the employee has clocked out. Frlekin v. Apple, Inc., 2017 DJDAR 7911 (Aug. 16).

In 2014, the U.S Supreme Court decided that such time is not compensable under the Fair Labor Standards Act. Integrity Staffing v. Busk, 135 S. Ct. 513 (2014). California law, however, may accord greater protections for workers, and the answer may be different under California’s Industrial Welfare Commission orders that apply to nonexempt employees.

Specifically, Wage Order No. 7, applicable to retail sales, defines “hours worked” as (1) time when the employee is subject to the control of the employer or (2) the employee is suffered or permitted to work, whether or not required to do so. The two definitional elements are analyzed separately.

The defendant in Frlekin, Apple Inc., requires all employees, including managers, be subject to a search of packages and bags before leaving one of its retail stores. Personal technology, such as cellphones, is required to be verified against a “personal technology card” during the search. The search is conducted after employees clock out, and the defendant does not pay for time spent waiting for or during the search. The policy is designed to ensure that small electronic devices and related equipment are not walking out the door. Such searches are common in both retail businesses and manufacturing facilities where items sold or produced are subject to employee theft.

After a class of employees was certified, the district court granted the defendant’s summary judgment motion. The court said the time waiting for and undergoing exit searches was not compensable as “hours worked” because such time was neither subject to control of the employer nor time during which class members were suffered or permitted to work. The court said the time was not compensable because employees could choose to not bring devices to work.

The plaintiffs appealed, noting that the defendant conceded that during the security checks employees were under the employer’s control because employees are confined to the store premises and restrained from leaving. They said the lower court erred in maintaining that the employees could avoid control by not bringing devices and equipment to work. The Wage Order, they said, only requires “control” — not that searches be employer-mandated or required activity. According to the plaintiffs, the use of “required” standards established by California courts in commuting time cases should be confined to their facts.

The defendant maintained that “control” of the employee during the search is insufficient to constitute “hours worked.” That is because the search must also be “required” — and since a search may be avoided by not bringing a package or bag to work, the search is not “required.”

Analyzing the very commuting time cases plaintiffs asked it to ignore, the court noted that the key California decision, Morillion v. Royal Packing Co., 22 Cal. 4th 575 (2000), asked “Whether an employer that requires its employees to travel to a work site on its buses must compensate the employees for time spent traveling on those buses.” In that case, employees were required to meet at a central location and ride on a company bus to work. Employees could not use personal cars; if they did so, they lost wages and received verbal warnings. The Morillion court found that Royal controlled these employees within the meaning of “hours worked” under the applicable wage order.

The 9th Circuit found that Morillion made clear that mandating the use of the bus was a dispositive factor, and had it not been required, the time would not have been compensable. While finding that the bag searches were, as defendant maintained, voluntary insofar as employees could choose not to bring a package or bag to work, less clear is whether the commuting time cases apply to such searches. While requiring employees to ride on a company-provided bus reflects an employer’s interest in the employees’ timely arrival to work, the employer’s interest in bag searches is preventing theft. Accordingly, in the 9th Circuit’s view, the “mandatory/voluntary distinction” in the commuting cases may be inapplicable.

In the instant case, the 9th Circuit noted a different distinction: One between a search policy that applied only to certain items brought to work that could not be concealed, such as a steamer trunk, and a search of items that almost all employees would bring, such as a jacket.

The court noted that facts involve only employees who voluntarily brought bags to work for personal convenience. But, as a practical matter, it noted that employees carry bags, purses and satchels to work for various reasons. While not “required” in the technical sense, employees have little choice and must be subjected to a search because the policy is always in effect. The court noted that existing case law offers insufficient guidance, while it identified 10 reported cases in federal and California courts in which the compensability of time spent during bag and package searches was the issue.

The 9th Circuit concluded that interpreting the Wage Order would have significant legal, economic and practical consequences. Accordingly, it ordered that the issue of compensability was best decided by the California Supreme Court.

A related question is whether the time spent waiting for and having packages and bags checked is compensable if it is also de minimus. In some circumstances, employers are not required to pay employees who are off the clock when only a few minutes of time is involved. Under federal law, a claim for lost wages must be for an amount that is not trivial. Lindow v. United States, 738 F.2d 1057 (9th Cir. 1984). While some California courts have followed the principle, others have not.

Pending before the California Supreme Court is another 9th Circuit question asking whether the de minimus rule is applicable under state wage law. Troester v. Starbucks Corp., S234969. And in Rodriguez. v. Nike Retail Services, Inc., 5:14-cv-01508 (N.D. Cal.), following certification of the class, the defendant recently sought summary judgment, arguing that end-of-sift searches only took a few seconds. Whether the decision in Starbucks will apply to bag checks of short duration if such checks are compensable at all remains open.

Companies that undertake unpaid security searches when employees are off the clock should consider the risks and difficulties they face until these issues are resolved. A short-term fix by paying for such time may be hard to undo if the forthcoming decisions find that the time involved is not compensable or, if it is compensable, only if the time is more than de minimus. Even more difficult to manage, perhaps, is how to pay, even voluntarily, for such time. The first employees to be searched may need to wait only a few seconds, while those at the end of the cue may find that their delay takes several minutes — and who’s on first will necessarily vary from day-to-day. If the time is compensable, some employees will choose to be last.

What also remains is whether the pending California Supreme Court decisions will draw bright lines for employers that will minimize these practical burdens or offer gray areas which invite a new generation of wage class actions.