State high court says employers must pay for employee bag searches

In a closely watched labor decision, the state Supreme Court ruled Thursday employers must pay employees for time spent waiting for and undergoing required searches of bags, electronics and other personal belongings brought to the workplace.

The justices unanimously rejected Apple Inc.'s argument that employees shouldn't be compensated because the searches are required only for items brought voluntarily with Chief Justice Tani G. Cantil-Sakauye explaining the "irony and inconsistency" of the company's position.

"Its characterization of the iPhone as unnecessary for its own employees is directly at odds with its description of the iPhone as an 'integrated and integral' part of the lives of everyone else," according to the opinion.

The opinion reiterates what Cantil-Sakauye described as the "fundamental purpose" of the Industrial Welfare Commission wage order at issue: "protecting and benefiting employees." The order includes a so-called hours worked control clause Apple's attorneys at Gibson, Dunn & Crutcher LLP argued doesn't apply, but the justices determined it does, based on Apple's level of control during the searches.

"Interpreting the 'hours worked' control clause as Apple suggests to cover only unavoidably required activities would not comport with the wage order's plain language or its history," the opinion states. "Applying a strictly textual analysis, Apple employees are clearly under Apple's control while awaiting, and during, the exit searches."

Kimberly A. Kralowec, who represents a certified class of potentially more than 12,000 Apple employees, said the court "closely adhered to the text of the wage orders."

"I think it's a very good day for California employees," said Kralowec, of Kralowec Law, PC in San Francisco.

Gibson Dunn attorneys weren't available for comment Thursday. Partner Theodore J. Boutrous Jr. argued before the court Dec. 4 in San Francisco as did Kralowec.

The case is a referral from the 9th U.S. Circuit Court of Appeals, which in 2017 asked the court to determine if the searches were compensable under state law, saying the "extreme importance" of the issue in California suggests "the court of last resort in California, rather than our court, should have the opportunity to answer the question in the first instance."

The court is considering the plaintiffs' appeal of U.S. District Judge William H. Alsup's summary judgment, in which Alsup cited the voluntary nature of bringing items to work. It's one of several recent decisions regarding compensable employee activities, including a July 2018 ruling that Starbucks Inc. must pay for off-the-clock work, such as locking doors, and a July 2019 ruling that said unionized prison workers can't sue to be compensated for time spent walking to assignments, but non-union supervisors can.

"The court really interpreted the realities of the modern workplace," said Gregg M. Adam, a partner at Messing Adam & Jasmine LLP, who represented the unionized prison workers in the 2019 opinion. Adam authored an amicus brief for the California Correctional Peace Officers' Association that highlighted the dichotomy between Apple's marketing argument about the necessity of its product in modern life and its defense argument that employees didn't need to bring personal items to work. Of the eight amicus briefs submitted, it was the only one Cantil-Sakauye quoted in the opinion.

The underlying lawsuit against Apple initially included collective action claims under the federal Fair Labor Standards Act, but they were dismissed after the U.S. Supreme Court ruled in Integrity Staffing v. Busk in 2014 that post-shift searches aren't compensable under the federal law. California's labor laws generally are more lenient toward employees, and Thursday's opinion said the Industrial Wage Commission long ago eliminated its standard that only required activities are compensable.

Gibson Dunn lawyers argued the state claims are prohibited under the state Supreme Court's 2000 ruling in Morillion v. Royal Packing Co., which held employees were to be compensated for traveling when riding required, employer-provided buses. Justices disagreed, saying employers exert more control over employees during on-site searches. They also said Morillion and its progeny involved services that benefited employees. Gibson Dunn lawyers said the searches were part of a larger policy that benefits employees because it doesn't involve an outright ban on bringing bags to work, but justices didn't buy it.

"Under the circumstances of this case and the realities of ordinary, 21st century life, we find far-fetched and untenable Apple's claim that its bag-search policy can be justified as providing a benefit to its employees," Cantil-Sakauye wrote.

Adam said the court did "nothing radical" and makes it clear "that this case was relatively straight forward for it."

Still, "every employer is going to have to figure out, 'Where is the first point that I exert control over my employees, and where is the last point?'" Adam said.