Sky remains in place after high court wage ruling

After waiting a little over two years, California employers finally got an answer to the question of whether the Fair Labor Standards Act's de minimis doctrine applies to California wage and hour claims. The California Supreme Court took up the issue upon request from the 9th U.S. Circuit Court of Appeals. 2016 DJDAR 8568 (Aug. 16, 2016). The high court's answer to the 9th Circuit's question is a clear victory for the plaintiffs in that case. Troester v. Starbucks Corporation, 2018 DJDAR 7361 (July 26, 2018).

But hold on, employers: The sky is not falling. The decision does not determine whether the de minimis doctrine applies across the board to every unpaid wages claim and those minor amounts of unpaid time employees spend before and after recorded time. The court explicitly limited its holding to the specific facts of Troester, "where the employer required the employee to work 'off the clock' several minutes per shift."

De Minimis Time

"De minimis" time is described under federal regulations as "insubstantial and insignificant periods of time beyond the scheduled working hours, which cannot as a practical administrative matter be precisely recorded for payroll purposes." To determine whether time is de minimis under the FLSA, the 9th Circuit has used a three-factor test that evaluates: (1) the difficulty of recording the time; (2) the total amount of time at issue; and (3) how often the uncompensated work occurs. In Lindow v. U.S., 738 F.2d 1057 (9th Cir. 1984), the 9th Circuit cited to several federal court rulings that found daily periods of approximately 10 minutes or less to be de minimis.

The Case

Douglas Troester filed a class action claiming that Starbucks required designated supervisors to work short amounts of time off the clock. Starbucks' closing protocol required Troester, a shift supervisor, to clock out at the end of each business day, then, remaining on premises, to transmit on a company computer store data for the day to the corporate headquarters, and then to perform remaining "closing tasks." These closing tasks took Troester anywhere from four to 10 minutes per day and included activating the alarm, locking the store, walking co-workers to their cars per Starbucks's policy, and occasionally reopening the store for other employees who had forgotten personal items or to bring in stray patio furniture left outdoors.

The parties did not dispute at the trial court that the cumulative time plaintiff spent after clocking out totaled 12 hours and 50 minutes over the course of nearly one and a half years, time unpaid which equated to $102.67 at the minimum wage rate of $8 per hour in effect at that time. The district court concluded that the de minimis doctrine applied and granted Starbucks' motion for summary judgment.

Troester appealed to the 9th Circuit in 2016, which in turn certified to the California Supreme Court the undecided question of whether the de minimis doctrine adopted under the FLSA applies to claims for unpaid wages under the California Labor Code.

The California Supreme Court broke the question down into two parts. First, it analyzed whether California's wage and hour statutes have adopted the de minimis doctrine codified into federal regulations by the U.S. Labor Department in 1961. The court recognized that under the FLSA insubstantial or insignificant periods of time beyond scheduled working hours which cannot as a practical matter be precisely recorded may be disregarded. However, it cited several federal decisions holding that an employer may not disregard even small amounts of time that an employee is required to work, noting the three-factor test in Lindow. But the court found no existing basis in California statutes or regulations binding on the de minimis doctrine.

The Supreme Court then considered whether the de minimis principle is independently applicable to wage and hour claims. The plaintiff argued that the failure of the Industrial Welfare Commission to adopt the 1961 federal regulation reflects its intent to preclude its application in wage cases. But the court declined to decide whether a de minimis principle may ever apply to wage and hour claims in light of the several factual circumstances in which the issue arises. "Instead of prejudging these factual permutations, [the court decided] only whether the de minimis rule is applicable to the facts of the case as described by the Ninth Circuit." The court concluded "that the de minimis doctrine has no application under the circumstances presented here." Nonetheless, it found more generally that employers are better able to devise ways to track small amounts of regularly occurring work time, and that employees should not bear the entire burden of recording such time.

The fact that anchored the court's decision was that Starbucks required Troester to perform "off the clock" duties following every shift he worked. Because the court limited its holding to these facts and similar factual situations -- where an employer regularly requires an employee to clock-out and to continue performing work tasks every day -- California employers need not panic over this ruling. The court specifically left open the possibility that the de minimis doctrine could apply to work activities that are neither required nor frequent and take very minimal time to complete. Possible examples include: employees who irregularly take short-duration work-related phone calls while off-duty or read a text message directing where to report to work the following day or week; employees who occasionally stay for short periods to complete a task without the employer's knowledge; or an employee who takes a short phone call regarding a work schedule change while at home. The court left open the door to countless factual variations.

The Troester decision charges employers to consider how best to minimize time employees are required to spend working off the clock, and, where administratively practicable, to account for that time in order to avoid potential exposure to damages. These steps could include modifying timekeeping policies, re-educating employees on current procedures, stricter monitoring of unscheduled activities, restructuring work schedules, or implementing more advanced timekeeping technology to better track employee work time. How far California courts or the Legislature will go in requiring employers to credit or disregard insubstantial or insignificant amounts of time beyond scheduled work which cannot be precisely recorded for payroll purposes remains uncertain.