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California wage ruling sets stage for increased litigation

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California wage ruling sets stage for increased litigation

A California Supreme Court ruling that holds an employee is entitled to pay for just 10 minutes of work off the clock will increase wage and hour lawsuits filed against California employers in an already active area of litigation, say experts.

“It’s absolutely going to increase litigation,” said Nisha S. Patel, an associate with Squire Patton Boggs in Palo Alto, California. Wage-and-hour lawsuits have “always been a fairly hot area” and this ruling “adds fuel to the fire,” she said.

The unanimous ruling July 26 by a three-judge panel in Douglas Troester v. Starbucks Corp., which included two concurring opinions, involved the “de minimis” doctrine.

“Federal courts have applied the doctrine in some circumstances to excuse the payment of wages for small amounts of otherwise compensable time upon showing that the bits of time are administratively difficult to record,” said the Supreme Court in its ruling.

Mr. Troester, who had been a shift supervisor for Seattle-based Starbucks Corp., contended in his putative class action suit, which was originally filed in Los Angeles County Superior Court, that he should have been paid for work he did after he clocked out, which included transmitting daily sales reports and locking the front door, among other duties.

The Supreme Court had been asked to consider the issue in the case by the 9th U.S. Circuit Court of Appeals in San Francisco.

The high court ruled in Mr. Troester’s favor. The court held the doctrine does not apply to the facts in this particular case, although “we do not decide whether there are circumstances where compensable time is so minute or irregular that it is unreasonable to expect the time to be recorded.”

The doctrine “has no application under the circumstances presented here,” said the ruling. “An employer that requires its employees to work minutes off the clock on a regular basis or as a regular feature of the job, may not evade the obligation to compensate the employee for that time by invoking the de minimis doctrine. As the facts here demonstrate, a few extra minutes of work each day can add up.”

The ruling cites the 9th Circuit as stating Mr. Troester is seeking payment for 12 hours and 50 minutes of compensable work over a 17-month period, or a total of $102.67 at a wage rate of $8 per hour.

“That is enough to pay a utility bill, buy a week of groceries, or cover a month of bus fares. What Starbucks calls ‘de minimis’ is not de minimis at all to many ordinary people who work for hourly wages,” said the ruling.

The ruling will lead to more litigation against California employers, say experts.

“This decision is grist for the mill for wage-and-hour class actions in California,” said Seth L. Neulight, a partner with Nixon Peabody L.L.P. in San Francisco.

“Off-the-clock unpaid wage claims are quite common, and it’s often the case that employees spend small amounts of time doing tasks that are incidental to their job duties that sometimes, for various practical reasons, do not get recorded, and those issues now are going to be front and center in litigation in California, more so than they have in the past, based on this decision.”

David E. Amaya, a partner with Fisher & Phillips L.L.P. in San Diego, said, “I was initially a little surprised that California would depart from a well-known, well-established rule in the wage-and-hour arena. However, the overall gist of the opinion made sense.”

John Ellis, an associate with Sheppard, Mullin, Richter & Hampton L.L.P. in San Francisco, said, however, “It’s a pretty narrow holding. The only thing they actually decided is what Starbucks is doing is not OK, and really didn’t decide anything other than that.”

One of the concurring opinions, for instance, states employers should not have to pay employees for the few seconds it may take to read an email after hours about a scheduling change, Mr. Ellis said.

Mr. Amaya said while the ruling applies only in California, “it may have a trickle effect under other state laws in the future.”

“The decision will certainly cause employees to be more vigilant in insuring that the time they work, even if it’s for a small amount of time, is recorded and paid for, and I think by the same token employers will have to become much more vigilant in their timekeeping policies and procedures,” said Mr. Neulight.

In responding to the ruling, California employers “need to closely evaluate the job duties and responsibilities of their employer to figure out the risk and likelihood of their having to engage in tasks off the clock,” he said. “And secondly, employers need to examine carefully their timekeeping policies and procedures to determine whether or not they are adequate to capture all time worked by employees.”

“It may be the case that employers need to modify or supplement their procedures that they use for certain positions or for certain groups of employees who, depending upon their duties, may likely engage in pre- or post-shift activities that are not currently being recorded,” he added.

Mr. Ellis said if employers have a situation like that of Starbucks, where employees are “still doing a little bit of work” after being clocked out, they should find a “reasonable way of determining how long” they work and pay them accordingly.

If they regularly work between four and 10 minutes off the clock, for instance, the employer could add seven minutes to their pay, he said.

Mr. Amaya noted Starbucks itself changed its procedures several ago so that employees no longer must clock out before engaging in duties including setting alarms.

“It may not take a lot just to fix the problem,” he said, it’s just an issue of recognizing it.

 

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