Employment Law Daily De minimis defense doesn’t (usually) apply to California state wage claims
Tuesday, July 31, 2018

De minimis defense doesn’t (usually) apply to California state wage claims

By Lisa Milam, J.D.

Under California law, employees’ off-the-clock time, no matter how minimal, must be compensated, a unanimous California Supreme Court ruled in a significant decision for California employers. Addressing a question from the Ninth Circuit in a wage suit brought by a Starbucks shift supervisor, the state high court rejected the FLSA’s de minimis defense, holding that it does not apply to claims for unpaid wages under the California Labor Code or state wage orders. Nor does the legal doctrine otherwise apply to wage-hour claims as a matter of state law—at least on the facts here. In this case, the $8-an-hour employee’s off-the-clock work, a few minutes per shift, added up to $102.67 of uncompensated time over a 17-month period. “That is enough to pay a utility bill, buy a week of groceries, or cover a month of bus fares,” the court wrote. “What Starbucks calls ‘de minimis’ is not de minimis at all to many ordinary people who work for hourly wages.” The matter is now in the Ninth Circuit’s hands, where the litigation is still pending (Troester v. Starbucks Corp., July 26, 2018, Liu, G.).

“Close store procedure.” The plaintiff alleged that Starbucks unlawfully failed to pay him for the time he spent closing up shop when he worked the last shift. The company’s previous software system required employees to clock out before initiating the “close store procedure” and performing the checklist of duties involved. First he had to transmit sales data to company headquarters using the store computer, a task that took one or two minutes. Next, he activated the store alarm by typing a numeric code on the alarm panel near the computer. Then he would exit and lock the front door. Starbucks safety guidelines also require shift supervisors to walk coworkers to their cars or stay outside with a coworker who is waiting for a ride. Also, every few months, he would have to bring the store’s patio furniture inside (again, after clocking out and exiting the store), and occasionally he had to reopen the store after clocking out if a coworker forgot a personal belonging inside. (Starbucks has since changed its timekeeping system to capture employees’ previously unpaid minutes.).

“Inevitable and incidental.” A federal district court granted summary judgment to Starbucks on his putative class action claim under the California Labor Code claim, finding the de minimis doctrine applies to California wage claims and noting that courts applying the doctrine have generally found that periods of 10 minutes are de minimis. It was undisputed the “close store procedure” at issue here took just 4 to 10 minutes, so the defense applied. “The brief moments that Plaintiff spent in and around the store after clocking out are an inevitable and incidental part of closing up any store at the end of business hours,” the district court reasoned. That was true even if the duties at hand were otherwise compensable, which the court assumed to be the case.

Impractical, too. The court also reasoned it would be impracticable to record the brief amount of time spent on these tasks after clocking out, given that the software system required employees to clock out on the register before initiating the store-closing protocol. “There will always be some unaccounted-for seconds spent on setting an alarm, physically leaving the store, locking the door, and walking out at the end of a closing shift,” the court said. “But not every second can be or need be recorded and compensated.”

Certified questions. On appeal, the Ninth Circuit noted that the California Supreme Court had never addressed whether the de minimis doctrine—a key feature of FLSA jurisprudence—also applied to California wage claims. That California law is often interpreted to be more protective of employee rights left more room for uncertainty. Therefore, it certified these questions to the California Supreme Court: (1) Have California’s wage and hour statutes or regulations adopted the de minimis doctrine found in the federal Fair Labor Standards Act (FLSA)?; and (2) Does the de minimis principle, which has operated in California in various contexts, apply to wage and hour claims?

“We hold that the relevant wage order and statutes do not permit application of the de minimis rule on the facts given to us by the Ninth Circuit,” the state high court answered. “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.”

Statutory provisions. As an initial matter, the court reiterated that the Labor Code and wage orders are to be construed in a manner that best effectuates their purpose. The court has characterized that purpose “time and again” as being “the protection of employees” and has regularly construed the state wage provisions as more protective than the FLSA. Here, the relevant wage order 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.” The Labor Code provides that employees will be compensated “for all work performed,” and the applicable case law has clarified that compensable time is that in which an employee “is suffered or permitted to work” and “encompasses the time during which the employer knew or should have known that the employee was working on its behalf.”

All of this suggests that neither the state legislature nor the Industrial Welfare Commission (which promulgated the wage orders) intended to incorporate the federal de minimis standard, and Starbucks offered no evidence to the contrary. Although the doctrine appears in the state Division of Labor Standards Enforcement manual, it appears to be no more than a verbatim replication of the relevant federal regulation (rather than a deliberate adoption) and, unlike wage orders, the guidance is not binding on state courts anyway.

“Small things.” Starbucks argued that even if the doctrine does not explicitly apply to these wage provisions, the de minimis rule is embodied in California law generally—”part of the ‘established background of legal principles’”—and so should be recognized nonetheless as part of the state’s wage and hour law (just as the U.S. Supreme Court, in Anderson v. Mt. Clemens Pottery Co., found the doctrine applicable to the FLSA despite the absence of an express statutory foundation). Whether the de minimis rule applies to a particular California statute has always turned on the question whether its application would conform to statutory purpose. The doctrine is not applied when “the law under which this action is prosecuted does care for small things,” the court explained.

The state wage-hour scheme is indeed concerned with “small things,” the court found, citing as a clear example the state’s vigorous enforcement of its 10-minute rest break requirements. Here, the court’s 2016 decision in Augustus v. ABM Security is instructive, if not directly on point, in that it forbids any intrusion into workers’ 10-minute rest periods and recognizes that a law prohibiting such an intrusion in this brief respite “is difficult to reconcile with a rule that would regard a few minutes of compensable time per day as a trifle not requiring compensation if too inconvenient to record.”

Federal reasoning rejected. Further validating this conclusion: Within a year of the federal Portal-to-Portal Act’s enactment, which excluded from compensable time employees’ “preliminary and postliminary activities,” California amended its wage order to expressly include these activities within “hours worked,” broadening the definition to include “the time during which an employee is subject to the control of an employer,” and marking a clear departure from the FLSA’s new exclusions.

Moreover, the U.S. Supreme Court’s reasoning in Anderson, with its reference to de minimis time as “split-second absurdities,” left this court cold. It refused to equate “split seconds” with “minutes of work beyond the scheduled working hours.” As a practical matter, the rationale was that such trivialities of time were hard to track for payroll purposes, but the court saw no reason why “the employee alone should bear the burden of that difficulty,” especially when employers are in a better position to adopt timekeeping alternatives (as Starbucks aptly demonstrated by switching out its own system), restructuring the work so it would not fall outside the clock, or rounding time in an equitable manner (notably, both parties tried to claim See’s Candy, Inc. v. Superior Court, a rounding case, in support of their respective positions).

The timekeeping difficulties lamented in Anderson seven decades ago have been largely cured by technology, which now allows far more precise (and convenient, i.e. smart-phone) tracking of small measures of time. “We are reluctant to adopt a rule purportedly grounded in ‘the realities of the industrial world’ when those realities have been materially altered in subsequent decades,” the court said, refusing to condone a standard “that would require the employee to bear the entire burden of any difficulty in recording regularly occurring work time.”

The court leaves an opening. However, the court did indicate it was willing to entertain the notion that some work activities may be “so irregular or brief in duration that it would not be reasonable to require employers to compensate employees for the time spent on them,” which Justice Cuellar emphasized in a concurring opinion, stressing the court’s decision “does not consign employers or their workers to measure every last morsel of employees’ time.”

Given “the wide range of scenarios in which this issue arises,” the court stopped short of holding the de minimis defense would never apply to wage-hour claims. “Instead of prejudging these factual permutations, we decide only whether the de minimis rule is applicable to the facts of this case as described by the Ninth Circuit.”

In a separate concurrence, Justice Kruger was hesitant to rule out altogether the possibility that the de minimis doctrine would never have a rightful place in the state’s labor laws. Several scenarios might warrant invocation of the defense, she noted: logging onto a computer pre-shift, reading an email about a schedule change while off-duty, or a retail worker staying a minute or two past her shift to continue assisting a customer. She agreed, however, that the facts before the court in this case did not afford an opportunity for a “detailed delineation of the rule’s proper scope.”

Class actions undermine de minimis. One final point worth noting: In reaching its conclusion, the court further reasoned that “the modern availability of class action lawsuits undermines to some extent the rationale behind a de minimis rule with respect to wage and hour actions.” As the court explained, “the very premise of such suits is that small individual recoveries worthy of neither the plaintiff’s nor the court’s time can be aggregated to vindicate an important public policy. Class litigation reduces the value of the de minimis maxim—a point observed by a state appeals court with respect to consumer class actions, but one that rings true for employment class actions as well.”

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