Employment Law Daily Federal de minimis doctrine does not apply to California Labor Code claims; Nike exit-inspection claims revived
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Wednesday, July 3, 2019

Federal de minimis doctrine does not apply to California Labor Code claims; Nike exit-inspection claims revived

By Ronald Miller, J.D.

The Ninth Circuit reversed a district court’s grant of summary judgment to Nike, holding that after the California Supreme Court’s ruling in Troester, the federal de minimis doctrine does not apply to wage and hour claims brought under the California Labor Code.

Nonexempt retail employees of Nike can no longer be required to undergo “off the clock” exit inspections without compensation for such time, ruled the Ninth Circuit, in reversing and remanding a contrary ruling by a district court. The appeals court concluded that the 10-minute threshold for a de minimis finding under federal law is inconsistent with California labor laws. Further, employees cannot be required to bear the entire burden of any difficulty in recording regularly occurring work time. After Troester v. Starbucks Corp., 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 (Rodriguez v. Nike Retail Services, Inc., June 28, 2019, Rakoff, J.).

Nike requires its nonexempt retail employees to undergo off-the-clock exit inspections every time they leave the store. Seeking compensation for the time spent on these inspections, an employee brought a class action complaint in state court. Nike removed the case to federal court. The employee filed an amended complaint bringing claims under the California Labor Code for failure to pay minimum wages and failure to pay overtime wages, as well as unfair business practices. On August 19, 2016, the district court certified a class action.

On January 31, 2017, Nike moved for summary judgment. It argued that the employee’s claims were barred by the federal de minimis doctrine, which precludes recovery for otherwise compensable amounts of time that are small, irregular, or administratively difficult to record.

De minimis standard. On September 12, 2017, the district court granted Nike’s motion and dismissed the case. The district court held that the de minimis doctrine is a valid defense to wage claims brought under the California Labor Code. It then applied the factors set forth in Lindow v. United States when evaluating whether amounts of time are de minimis: (1) the practical administrative difficulty of recording the additional time; (2) the aggregate amount of compensable time; and (3) the regularity of the additional work. Even assuming that the inspections took several minutes, the district court held that this time was de minimis under Lindow.

Nike positions timeclocks in the backs of its retail stores, and it presented evidence there were practical reasons for doing so. The district court credited Nike’s evidence that moving the clocks would be administratively impractical. Next, the district court concluded that even if exit inspections occasionally lasted as long as a few minutes, the “daily” amount of compensable time at issue did not exceed the 10-minute threshold, and so was within the amount of time courts have found to be de minimis. Finally, the district court concluded that the employee failed to rebut Nike’s study finding that exit inspections often took zero seconds, and inspections lasting several minutes were irregular.

Troester decision. Meanwhile, on July 26, 2018, the California Supreme Court issued its decision in Troester v. Starbucks Corp. Troester involved a challenge to Starbuck’s practice of requiring employees to perform store-closing tasks after clocking out. These tasks took four to 10 minutes per day. Because these amounts were less than the 10-minute threshold and because it was not administratively feasible for employees to clock out after performing store-closing tasks, the district court granted summary judgment to Starbucks based on its de minimis defense.

On appeal, the Ninth Circuit certified to the California Supreme Court the question whether the federal FLSA’s de minimis doctrine applies to claims for unpaid wages under California Labor Code Sections 510, 1194, and 1197. The California Supreme Court held in Troester that the federal de minimis doctrine does not apply to California’s wage and hour statutes and regulations. However, it left open the question “whether a California de minimis principle may ever apply.”

At any rate, the California high court found that Starbucks’ de minimis defense failed. The court explained that “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.”

Federal de minimis doctrine. Turning to the instant case, the Ninth Circuit had to determine whether the district court erred in granting summary judgment to Nike based on the federal de minimis doctrine. After Troester, the appeals court found that it was clear that the federal de minimis doctrine does not apply to wage and hour claims brought under the California Labor Code. By applying the doctrine to the employee’s claims, the district court failed to “apply the relevant substantive law.”

Ten-minute threshold. Moreover, the district court’s analysis rested on several premises that Troester explicitly rejected. The lower court had repeatedly invoked the federal doctrine’s 10-minute daily threshold for determining whether the amounts of uncompensated time are de minimis. However, Troester made clear that the 10-minute threshold is inconsistent with California labor laws, under which employees must be paid for “‘all hours worked’ or ‘any work’ beyond eight hours a day.”

After Troester, 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 invoke the de minimis doctrine to evade its obligation to compensate employees for that time.

Administrative difficulty. Likewise, in its discussion of the practical administrative difficulty of recording exit-inspection time, the district court assumed that Nike was required to prove only that it would be administratively difficult to record inspection time given its timekeeping system. But Troester expressly declined to adopt a rule that would require employees to bear the entire burden of any difficulty in recording regularly occurring work time.

The Ninth Circuit regarded the Troester rule as mandating compensation where employees are regularly required to work off the clock for more than a “minute” or “brief” periods of time. Thus, where employees are required to work for more than trifling amounts of time “on a regular basis or as a regular feature of the job,” Troester precludes an employer from raising a de minimis defense under California law.

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