Labor & Employment Law Daily California Apple Store employees must be paid for exit inspections
Tuesday, February 18, 2020

California Apple Store employees must be paid for exit inspections

By Lisa Milam, J.D.

During the exit inspections the store employees are subject to the employer’s control—and this was controlling.

Apple Store employees are entitled to compensation for the time during which they wait on the store’s premises to have their bags and personal belongings inspected, and for the time it takes to actually undergo the exit inspections, a unanimous California Supreme Court ruled. Although the U.S. Supreme Court rejected the notion that such time was compensable under the FLSA, California Industrial Welfare Commission Wage Order 7-2001, and its “control clause,” specifically, compelled a different outcome in this class action wage suit brought by Apple retail employees in the state (Frlekin v. Apple, Inc., February 13, 2020, Cantil-Sakauye, T.).

It’s a question of increasing importance to employers and workers: Does the inspection of personal packages amount to compensable time? The U.S. Supreme Court, in its unanimous 2014 decision in Integrity Staffing Solutions, Inc v. Busk, answered with a resounding “no” when addressing the issue under the FLSA. (The Justices held that such time is not “hours worked” under the federal Portal-to-Portal Act but rather, amounts to noncompensable postliminary activities.) As a matter of more-protective California wage law, however, it was a live question, and one without controlling precedent.

Thus, after this case worked its way through the federal courts (a district court initially certified a class of nonexempt retail employees, but then granted summary judgment in Apple’s favor), the Ninth Circuit in 2017 certified the question to the state high court, which answered: “mandatory exit searches of bags, packages, or personal Apple technology devices, such as iPhones, voluntarily brought to work purely for personal convenience is compensable as ‘hours worked’ within the meaning of Wage Order 7.”

Exit searches. Under Apple’s “Employee Package and Bag Searches” policy, the tech giant’s retail employees who bring a bag or package to work may not leave the premises before undergoing a search. All personal packages and bags must be checked by a manager or security every day, and any time employees wish to leave the store. Also, personal technology must be verified against the employee’s “personal technology card” which lists the serial numbers of employees’ personal Apple devices.

Employees are confined to the store premises until they submit to the search, which involves locating a store manager or security guard and waiting for that individual to become available. During a search, employees are required to open their bags, unzip internal compartments, and remove their personal Apple devices and technology cards to prove ownership. Employees are required to clock out before waiting to undergo the bag search. The entire process, between waiting to be searched and the search itself, can take anywhere from five to 20 minutes. Failure to comply with the policy can lead to discipline or discharge.

Two avenues to “hours worked.” Wage Order 7, which is to be liberally construed as employee-protective, defines “hours worked” 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.” There are two disjunctive factors: hours worked includes time in which an employee is “subject to the control of an employer” or time during which the employee “is suffered or permitted to work.” Under either, the employee’s time is compensable, under the court’s 2000 holding in Morillion v. Royal Packing Co. While the employees also argued the “suffered or permitted to work” clause applies here too, the court did not need to address this contention, finding the bag check time was compensable under the “control” clause.

“Control” clause. There are several factors to consider in applying the “control” test: whether the employer exercises significant control; whether the activity in question is required, practically speaking; whether the activity occurs at the jobsite; whether the activity is primarily for the employer’s benefit; and whether the activity is enforced by the employer through the threat of employee discipline. All those factors applied here, the California Supreme Court found.

First, Apple exercises control over its employees in numerous ways while they wait for the inspection and during the inspection: employees must remain in the store premises while they wait, they must perform specific tasks supervised by the manager or security guard during the search (locating a manager who can do the inspection, opening bags, moving items around in the bags, removing their devices, etc.); and they must comply with the policy or face discipline.

“Required” is not required. As an initial matter, Morillion held that when it comes to determining whether an activity is compensable under the “hours worked” control clause, “[t]he level of the employer’s control over its employees, rather than the mere fact that the employer requires the employees’ activity, is determinative.” While Apple argued that an employee’s activity must be “required” and “unavoidable” in order to be compensable, “those words do not appear in the control clause,” the court noted, reaffirming its precedent.

“Redefining the control clause to cover only unavoidably required employer controlled activities would limit the scope of compensable activities, resulting in a narrow interpretation at odds with the wage order’s fundamental purpose of protecting and benefitting employees,” the court explained, adding that Apple’s argument is at odds with the statutory history of the provision—especially the fact that California deliberately parted ways with the FLSA with the 1947 passage of the Portal-to-Portal Act, by which Congress sharply narrowed the meaning of “hours worked” under federal wage law.

Still, the court undertook an analysis of whether the inspections were voluntary or indeed were required, and held this factor also strongly suggests that plaintiffs are under Apple’s control while waiting for, and undergoing, the exit searches.

Bag checks aren’t voluntary. Apple argued nonetheless that the exit searches weren’t compensable under Morillion because the store employees can simply avoid such searches altogether by choosing not to bring a bag, package, or personal Apple device to work. The state high court disagreed (as did the Ninth Circuit), finding this alternative to be illusory at best. To exercise this option, employees would have to forego carrying their iPhones to work, as well as a receptacle for a wallet, keys, water bottle, food, or eyeglasses. As the court observed, “many Apple employees feel they have little genuine choice as a practical matter concerning whether to bring a bag or other receptacle containing such items to work.”

Moreover, Apple requires store employees to wear Apple-branded apparel yet prohibits them from wearing the apparel outside the store. So it’s reasonable to assume they will carry their work clothes in a bag in order to comply with this compulsory policy. And, given the company’s public pronouncements that iPhones are “practical necessities of modern life” and “fundamental tools for participating in many forms of modern-day activity,” and Apple CEO Tim Cook’s statement that iPhones have become “so integrated and integral to our lives, you wouldn’t think about leaving home without it,” the court found the employer’s suggestion that employees could leave their devices at home largely meaningless. “Given the importance of smartphones in modern society, plaintiffs have little true choice in deciding whether to bring their own smartphones to work.”

Bag checks benefit the employer. Finally, the exit checks are conducted for the benefit of the employer, not the employee—and the court rejected Apple’s attempt to characterize them as providing a benefit to employees. Apple simply could have prohibited employees from bringing any personal belongings into the store altogether, it told the court, and employees who do so are simply availing themselves of an “optional benefit.” But of course, Apple hasn’t imposed such a “draconian” policy, the court pointed out, and it would be hard-pressed to do so—finding such a restriction “farfetched and untenable” given “the realities of ordinary, 21st century life.”

“Apple may tailor its bag-search policy as narrowly or broadly as it desires and may minimize the time required for exit searches by hiring sufficient security personnel or employing adequate security technology. But it must compensate those employees to whom the policy applies for the time spent waiting for and undergoing these searches.”

Interested in submitting an article?

Submit your information to us today!

Learn More

Labor & Employment Law Daily: Breaking legal news at your fingertips

Sign up today for your free trial to this daily reporting service created by attorneys, for attorneys. Stay up to date on labor and employment legal matters with same-day coverage of breaking news, court decisions, legislation, and regulatory activity with easy access through email or mobile app.