A recent ruling by the California Supreme Court could have lasting consequences for timekeeping practices and the payment of wages for hourly employees. In the case of Troester v. Starbucks Corp., the court ruled on July 26, 2018 that Starbucks had to pay the plaintiff for time spent on regular, off-the-clock tasks. The court found that, at least in this particular case, plaintiff’s claims for unpaid wages were not exempt from payment under the FLSA de minimis rule and declined to apply the longstanding federal rule to California wage claims of the type raised by plaintiff. The court, however, did not entirely eliminate the possibility of the de minimis rule applying to state wage claims.

In Troester, the plaintiff routinely had to perform tasks related to closing the store after he had clocked out. These tasks included things like shutting down the computer system and locking the doors. Under the FLSA de minimis rule, infrequent and insignificant periods of work that occur outside work hours and cannot be precisely recorded need not be counted as work time. The court found that the routine, regular nature of the tasks performed by plaintiff was the crux of the issue: because employees are regularly doing these tasks, employees should be compensated for them and Starbucks’ argument that the time was de minimis was not accepted. Indeed, the court said: “The relevant statutes and wage order do not allow employers to require employees to routinely work for minutes off-the-clock without compensation.” (emphasis added).

Because this ruling applies to all hourly workers in California, the implications could be quite broad. Retailers will have to ensure that employees who open and/or close a shop have a consistent way to capture time spent doing the required tasks if those functions would normally not be recorded as hours worked. Employers will then need to go further and evaluate what sort of tasks are regularly expected from their hourly workers when they are off the clock, whether it’s opening/closing activities, bank deliveries, or other functions that may take place outside of work. Employers will need to determine whether these tasks are routine enough to devise a system to capture the time. For example, if an employer expects an hourly employee to routinely respond to emails or texts during off hours, there will need to be a way to capture this time and policies and procedures should be put in place to ensure that happens.

Currently, this ruling is limited to California, whose wage and hour laws do not make mention of a de minimis exception. However, this issue could potentially spread to other states with similarly drafted statutes regarding hours of work. Given the ubiquity of technology, and the increased pressure to stay connected to work via smartphones, VPNs, etc., it would be no surprise to see more and more plaintiffs attempt to use this ruling to work to capture what may have previously been considered de minimis time. Employers should be looking carefully at their policies and procedures for timekeeping and to help protect from any potential legal issues.

On Wednesday, May 23, from 3 – 4 pm ET, Troutman Sanders attorneys, Alan Wingfield, Wendy Sugg, and Meagan Mihalko will present a webinar discussing employment-purpose background screening laws. The federal Fair Credit Reporting Act imposes technical paperwork requirements on employers desiring to obtain background screenings, and many millions of dollars have been paid in individual and class actions based on alleged failures to comply. State analog laws to the FCRA impose their own procedural requirements. State and local “ban the box” laws regulate when and how an employer can request and use background reports on potential hires. The federal Equal Employment Opportunity Act has been used by regulators to attack employer screening policies that allegedly have a discriminatory effect against protected groups. Some states and localities regulate the type of background information, particularly criminal history, that can be collected and used. Meanwhile, tort law remains ready to impose large damages on an employer who is found, after the fact, to have not conducted an adequate background check on employees. Rather than digging deeply into a single legal aspect of background screening, this webinar is designed to give a holistic overview of the entire legal landscape affecting employment-purpose background screening. Companies and professionals who are charged with developing effective compliance strategies for their background screening activities need to have the entire legal context in mind, and our webinar is designed to survey that context and provide guidance for compliance.

One hour of CLE credit is pending.

To register, click here.

In a unanimous decision, the California Supreme Court embraced a standard that presumes workers in California are employees instead of independent contractors. The April 30, 2018 decision in Dynamex Operations West Inc. v. The Superior Court of Los Angeles County moves away from a more flexible classification test that had been in effect for nearly three decades, and it has the potential to upend businesses in the burgeoning gig economy and others whose business models rely on independent contractors.

In the Dynamex case, independent contractor delivery drivers filed a class action suit against their delivery company alleging that they were misclassified and should instead be considered employees, not independent contractors. As employers in California are aware, a finding of worker misclassification can result in awards of unpaid wages, as well as penalties, interest and attorneys’ fees – amounts that can be very significant depending on the number of individuals involved.

The California Supreme Court, in deciding what standard to use in determining whether the workers were employees or not, rejected the prior multi-part test that had been in use for nearly 30 years, but which had led to inconsistent outcomes. Instead, it adopted the “ABC” test used in a few other states, which presumes workers are employees instead of independent contractors for purposes of state wage orders — which govern items such as overtime and meal and rest breaks — and places the burden on employers to prove the workers aren’t employees.

The ABC test requires that for a worker to be considered an independent contractor, the business he or she works for must show that the worker:

(A) is free from its control and direction;

(B) performs work that is outside the usual course of the entity’s business; and

(C) is engaged in an independently established trade, occupation or business.

The alleged employer must prove each of these three elements as to the work for him or her to be considered an independent contractor for purposes of wage orders.

The Court provided an example of what it considered a qualifying independent contractor relationship: a plumber hired by a store to fix a bathroom leak. Conversely, it noted that a seamstress sewing at home using materials provided by a clothing manufacturer would probably be considered an employee, not an independent contractor.

This sea-change ruling raises questions about the potential viability in California of the business model for many gig economy companies that rely on workers to deliver goods or food, transport people, or handle to-do list tasks such as laundry or grocery shopping.  Previously, such companies have attempted to define themselves as “software companies” that only provide a platform for providers and customers to connect, or have argued that they do not exert sufficient “control” over the worker to be considered an employer; this new standard from the Dynamex case will make such arguments far more difficult.

Any California business that engages independent contractors in its core business functions or to accomplish tasks that are in the usual course of the company’s business should reassess those relationships under this ABC test and determine whether an employment relationship may be in effect. As these determinations can be tricky, and can have such a large impact on a business’s model and the financial risks associated with workers, in-house or outside legal counsel should be closely involved in these assessments.

The beginning of the new year often brings fresh resolve, brightened attitudes, and a renewed sense of hope for the coming year.  Savvy employers harness those emotions in their workforce and engage their employees to reach new goals and achievements.  But behind the scenes, employers also need to be aware of new laws and regulations that must be implemented to keep things on track.

One of the best ways to capture critical updates is to conduct an annual review of your company handbook and employment practices.  Many states and localities have adopted regulations that require certain procedures and information be included in a company handbook.  Employers should review those updates for each location where employees work, paying special attention to the following:

  • Minimum Wage: Alaska, Arizona, California, Colorado, Florida, Hawaii, Maine, Michigan, Minnesota, Missouri, Montana, New Jersey, New York, Ohio, Rhode Island, South Dakota, Vermont, and Washington have all implemented an increase of the minimum wage for 2018.
  • Ban the Box: California and other states have also prohibited questions regarding an applicant’s criminal history from being included on an application for employment.  While employers may still check an applicant’s or employee’s criminal background, these laws specify when it may be done and what may be considered.
  • Equal Pay and Salary History: Joining Massachusetts, Delaware, California and other states and some cities (Philadelphia, for one) have recently enacted various statutes to prohibit questions regarding an applicant’s salary history on an employment application.  While confirmation of prior salary may be done in certain circumstances, basing an employee’s salary on prior compensation is generally prohibited by these laws.  Recruiting managers and their teams need to be trained to avoid such inquiries unless and until the point in the process where they may lawfully ask about prior salary.
  • Anti-Harassment Policies and Training: Ensure that your non-harassment policy is compliant with applicable federal, state and local laws by including at least two methods to report complaints and checking to be sure that your policy covers all forms of potential harassment and discrimination against protected classes.  Employers should also check their training records to be sure that trainings are being conducted with appropriate frequency and that all required persons have timely completed them.
  • Update Labor Law Postings: Many of the new laws enacted for 2018 require updated labor law postings.  California and New York both have new poster requirements, as do cities including New York City and San Francisco.  Employers should consult with counsel regarding these new requirements and be sure that their postings are up to date.  A government agency conducting an on-site inspection of a workplace will look for updated posters, and out-of-date posters can lead to fines under some laws, or at least signal that an employer does not focus on compliant employment practices.
  • New Mileage Rate: As of January 1, 2018, the IRS mileage reimbursement rate for the use of a car for business travel has been raised to 54.5 cents per mile.

With up-to-date policies and practices in place, employers can focus on building great teams and achieving business success in the new year.

California companies with five or more employees are subject to new legislation that prohibits criminal background screenings prior to a conditional offer of employment.  This legislation also prohibits requesting information about criminal history on an application or at a preliminary point in the hiring process.  Affected employers should carefully review the law’s requirements as set out in this advisory from attorneys from Troutman Sanders’ Labor & Employment and Financial Services Litigation Sections.

Read “California’s Statewide “Ban-The-Box” Law To Go Into Effect January 2018” here.

Beginning on March 1, 2017, California employers and businesses will need to re-label any single-stall restroom facilities as available to users of either gender.  Such facilities are required to be identified as “all gender” and be universally accessible. Continue Reading Single-User Restrooms Must Be Made Available To All in California

Out with the old and in with the new?  Not so fast.  For California employers, it’s more like keep the old and add the new.  And, as so often happens, the new year brings new concerns.  While this list is not exhaustive, California employers should keep their sights on the following new state and local regulations or requirements for 2017: Continue Reading Catch the Wave: New California Employment Regulations and Requirements for 2017

As we near the end of this election season, employers should be ready for requests from employees for time off to vote. Polling places are expected to be crowded and employers in many states must accommodate their employees’ right to vote if an employee’s work schedule prevents that person from going to the polls.  (Even in states where it is not legally mandated, considering this election year, and the general feelings around fundamental right to vote, all employers should strongly consider a plan to enable employees to vote if at all possible.) Continue Reading California Employees Can Be Entitled To Paid Time Off For Voting

As discussed in Part I (posted earlier this week), a number of states and local municipalities have enacted paid sick leave legislation mandating paid time away from work for employees. While some of these laws are already in effect, others are coming soon.  Employers with operations in the following areas should revisit their policies and make adjustments as needed to plan for these upcoming changes: Continue Reading New Paid Sick Leave Laws Compel Employers to React — and Prepare (Part II)

A number of states and local municipalities have recently enacted paid sick leave legislation mandating paid time away from work for employees. Unfortunately for employers, many of these laws contain provisions that conflict with already-enacted paid sick legislation and require an adjustment of current policies, leading to confusion about requirements and entitlements.

Employers with operations in the following areas should revisit their policies and make adjustments as needed to remain current or to plan for upcoming changes: Continue Reading New Paid Sick Leave Laws Compel Employers to React — and Prepare (Part I)