No minimum for paid off-clock minutes, state high court rules

State law does not set a minimum for compensable, regularly occurring off-the-clock minutes worked, the California Supreme Court unanimously decided Thursday while leaving open the issue of seconds or irregular time.

The decision removes "the so-called federal 'de minimis' rule from the body of California law," said Stanley D. Saltzman of Marlin & Saltzman LLP, who argued for the plaintiff. "And we are heartened that employers are now being told, very clearly, that they cannot require their workers to regularly perform minutes per day of unpaid labor." Troester et al., v. Starbucks Corporation et al., 2018 DJDAR 7361.

Other observers said the decision's result will fuel more litigation, in addition to the expected appeal, but allows for the possibility of small increments of time being ruled untrackable in future cases.

The plaintiff, a former Starbucks manager, claimed that he regularly spent four to 10 minutes at the end of shifts closing down the shop after he clocked out, as required by the company's computer system. His attorneys argued that California's Labor Code plainly states all work must be compensated.

"As the Court so clearly noted at page 20 of the opinion, 'What Starbucks calls 'de minimis' is not de minimis at all to many ordinary people who work for hourly wages,'" said Saltzman.

Starbucks' attorneys argued that the minutes fall under the federal de minimis defense laid down in Anderson v. Mt. Clements Pottery Co., 328 U.S. 680 (1946). "Although Anderson has been the law for 70 years and has been incorporated into the Code of Federal Regulations for over 50 years, neither the Labor Code statutes nor any wage order has been amended to recognize a de minimis exception," wrote Justice Goodwin Liu in the unanimous decision.

Justices Mariano-Florentino Cuéllar and Leondra Kruger wrote concurring opinions.

Rex S. Heinke of Akin Gump Strauss Hauer & Feld LLP argued for Starbucks, and referred comment to the company.

"We are disappointed with the court's decision. We will await further disposition of the case before the 9th Circuit as the appeal process continues," a spokesperson said in an e-mailed statement.

In the opinion, Liu stated that California law requiring "all hours worked" must be compensated takes precedence over the de minimis doctrine, which is codified in the Fair Labor Standards Act.

Liu also said that the reasoning in Anderson, a 72-year-old decision, rests heavily on technological restrictions on time tracking that no longer exist.

"We are reluctant to adopt a rule purportedly grounded in 'the realities of the industrial world' [...] when those realities have been materially altered in subsequent decades," he wrote.

However, the opinion was careful to note that Thursday's decision only said there is no de minimis defense in California, and that the time in this case is compensable. They declined to set a precedent on whether a de minimis-type defense could apply under different factual circumstances.

"Our opinion today is both principled and practical: It protects workers from being denied compensation for minutes they regularly spend on work-related tasks, but does not consign employers or their workers to measure every last morsel of employees' time," Cuéllar wrote in his concurring opinion.

Noting the rapid advancement of technology and its application in the workplace, Cuéllar wrote that the narrow decision in Troester would avoid "building a rickety skyscraper on a muddy swamp."

Plaintiffs' attorney Bryan Lazarski, who was not involved in the case, commented, "I think it's well-reasoned, and it takes a practical approach but also ensures employees are getting paid for the time that they put in and doesn't allow employers to shave time off the work day when it's regular, predictable, and should be accounted for."

Margaret J. Grover of Wendel Rosen Black & Dean LLP, who represents employers, said that the decision is a practical one, but predictably tipped in favor of the employee.

She said that employers need to be careful with non-exempt employees in today's environment where constant connectivity is the norm.

"The thing that I think is going to be most important for lawyers is the smart device workforce, because I'm still seeing employers who allow non-exempt employees to put business email on their phones and that time is just not tracked," she said.

Eve H. Wagner of Sauer & Wagner LLP said that she did not view the time in the case as de minimis, and that the ruling's wholesale rejection of the federal doctrine in California law will drive an increase in litigation with the open questions left by the opinion.

"The takeaways are that this is going to result in more wage and hour claims, and that employers need to look at and implement better timekeeping processes, including software that can be accessed on smartphones and tablets," she said.

Charles O. Thompson of Polsinelli LLP said that the ruling places an onerous financial burden on small and medium businesses which could struggle to implement those processes, and that the court has lost touch with the reality of business in California.

"Of course we want to protect the worker, but if we drive the business out of the state there will be nowhere to work. There needs to be a rule of reason or business will flee this jurisdiction and we'll be making our coffee at home," he said.

Both Wagner and Lazarski said that the next wave of lawsuits will debate the definition of what off-clock time is "regular" and thus compensable under wage claims, and allows for tiny time increments to still be found essentially de minimis.

"The case does not mark a significant change for de minimis cases but rather marks a focus on regularity of the particular task, which was already part of the analysis, and a narrower view of the outside time limits," said Jennifer B. Zargarof of Sidley Austin LLP. "The court appears poised to embrace true de minimis circumstances -- just without the willingness to go as far as the federal 10 minutes standard."

One solution Grover suggested is surveying employees periodically for time spent off the clock, and compensating them for it. If they exceed that time, they can tell the employer and be compensated, she said.

"As long as they are able to provide a justification consistent with doing all they can to make sure all time is compensated, employers will be OK," she said.

The opinion also mentions time-rounding policies, such as to the nearest quarter-hour, as a possibility for dealing with small amounts of time. Such policies have been upheld so long as they are provably neutral between employer and employee. However, Wagner said such policies are risky, and walk a fine line.

"The opinion is not meant to be a club over the head of employers," said management-side attorney John K. Skousen of Fisher & Phillips LLP. "I think this opinion was good news in that the Supreme Court understands the realities that we're living in, and is open to situations where it's still absurd to track time.

"If this is viewed in the proper context, it's just going to say to be fair so there can be an equal exchange of value between employers and employees," he said.