“The California Supreme Court has handed down yet another decision broadening the scope of what is considered compensable work time under California’s Wage Orders. In Frlekin v. Apple Inc., No. S243805, the state high court held that the time spent on an employer’s premises waiting for, and undergoing, mandatory exit searches of personal bags and devices voluntarily brought to work purely for personal convenience is compensable as “hours worked.” The court’s opinion on Feb. 13, 2020, authored by Chief Justice Tani Cantil-Sakauye, relied on and reaffirmed prior holdings that the level of an employer’s control over its employees, rather than whether the employee’s activity is required, is “determinative” regarding whether an activity is compensable. The court also explicitly applied its ruling retroactively.

Background

Plaintiffs allege that Apple failed to pay them minimum and overtime wages for time spent waiting for and undergoing required exit searches, which they contend violates California law. Specifically, pursuant to Apple’s policy, retail store employees are required to undergo mandatory exit searches of all personal packages, bags and Apple devices, before leaving the store for any reason. The employees are required to clock out before submitting to an exit search, which they estimate can take 5 to 20 minutes.

Plaintiffs had also asserted claims that such unpaid time violated federal law and the labor laws of other states, but these claims were dismissed after the U.S. Supreme Court held, in Integrity Staffing Solutions, Inc. v. Busk, 574 U.S. 27 (2014) (Integrity Staffing), that time spent undergoing mandatory security screenings was not compensable under federal law. The U.S. District Court granted Apple’s Motion for Summary Judgment, ruling that the time spent relating to the mandatory exit search was not compensable as “hours worked” under California law given that the workers were required to prove that the employer restrained their action during the activity in question and that the employee had no plausible way to avoid the activity. Plaintiffs appealed to the Ninth Circuit, which in turn asked the California Supreme Court to determine whether “time spent on the employer’s premises waiting for, and undergoing required exit searches of packages, bags, or personal technology devices voluntarily bought to work purely for personal convenience by employees [is] compensable as ‘hours worked’ within the meaning of [the applicable] Wage Order.”

California Supreme Court Decision

At issue in Frlekin is the California Industrial Welfare Commission’s wage order requirement that employers pay employees a minimum wage for all “hours worked.” This in turn is defined as “the time during which an employee is subject to the control of an employer, and includes all the time the employee is suffered or permitted to work, whether or not required to do so.” Ultimately, the court only addressed the issue of employer control, explaining that “an employee who is subject to the control of an employer does not have to be working during that time to be compensated under the applicable wage order.”

In its opinion, the court disagreed with the argument that an activity must be “required” and “unavoidable” in order to be compensable; an interpretation that it determined is at odds with the wage order’s purpose of protecting and benefiting employees, in addition to lacking support in the language and history of the wage order. The court also disagreed with the argument that bringing personal bags and devices, such as iPhones, to work is not “required,” highlighting the realities of modern-day life and Apple’s own “description of iPhones as an ‘integrated and integral’ part of the lives of everyone else.” The court also noted that the Supreme Court’s decision in Integrity Staffing is neither dispositive or persuasive because of the recognized principle that state law may provide employees with greater protection than federal law.

The court did not entirely discount the importance of whether an activity is required. Rather, it emphasized that such a requirement is probative to determine whether the employees is actually subject to an employer’s control. But further clarified that, in cases involving onsite employer-controlled activities, “courts may and should consider additional relevant factors—including, but not limited to, the location of the activity, the degree of the employer’s control, whether the activity primarily benefits the employee or employer, and whether the activity is enforced through disciplinary measures—when evaluating such employer-controlled conduct.”

As applied to Apple’s mandatory exit search policy, the court stated that “it is clear that plaintiffs are subject to Apple’s control while awaiting and during, Apple’s exit searches,” and, thus, plaintiffs must be paid for this time. According to the court, “Apple’s exit searches are required as a practical matter, occur at the workplace, involve a significant degree of control, are imposed primarily for Apple’s benefit, and are enforced through threat of discipline.” The court did note that Apple retains the ability to tailor its policy “as narrowly or broadly as it desires,” such as by limiting the size, shape or number of allowable bags or requiring that such items be stored offsite, such as in lockers or breakrooms, but it must nonetheless compensate those employees to whom its policy applies.

Conclusion and Takeaways

Ultimately, today’s decision provides further guidance on the compensability of work-related activities performed by employees located in California. Moreover, the decision reinforces that companies operating inside, as well as outside, California must ensure their policies address California-centric compensation rules that have departed from the federal standards. Additionally, because of the explicitly-stated retroactive application of the court’s decision, companies should immediately commence with reviewing their compensation policies and procedures applicable to California employees in close consultation with legal counsel.”