California Employment Law Update

What the Frlekin?! California Supreme Court Says Bag Checks Are Compensable

Today, in Frlekin v. Apple, Inc., the California Supreme Court held that time spent by non-exempt employees undergoing mandatory bag or other security checks is compensable work time under California law.  The decision stands in stark contrast to the U.S. Supreme Court’s 2014 holding in Integrity Staffing Solutions, Inc. v. Busk, as well as prior California cases.  Undoubtedly, it will significantly impact retail employers—as well as employers in a variety of other industries.

Frlekin is a putative class action lawsuit challenging Apple’s policy requiring employees to undergo security searches of their bags and any personal effects (e.g., iPhones, etc.) whenever they leave the store for any reason (e.g., rest breaks, meal periods, end of shift).  Putative class member employees estimated the searches took between five and 20 minutes regularly, and up to 45 minutes when stores were busy.  Nonetheless, the district court granted Apple’s motion for summary judgment, holding that the time spent waiting and undergoing a bag or security check was not compensable, reasoning that, for time to be “hours worked,” it must be time in which the employer restrains the employee’s action and the employee has no plausible way to avoid the activity.  Because employees could avoid security checks by not bringing bags or personal effects into work, the trial court determined the activity was primarily for the benefit of the employees.  Following an appeal, the Ninth Circuit certified the following question to the California Supreme Court: “Is time spent on the employer’s premises waiting for, and undergoing, required exit searches of packages, bags, or personal technology devices voluntarily brought to work purely for personal convenience by employees compensable as ‘hours worked’ within the meaning of Wage Order 7?”

The Supreme Court noted California’s unique definition of “hours worked,” is comprised of two independent factors: (1) whether the employee is subject to the control of the employer; and (2) whether the employee is suffered or permitted to work.  Here, the Court focused on control.  The Supreme Court determined that time spent during bag or security checks was time subject to the employer’s control because: (1) Apple made employees find and flag down a security guard to conduct the search and confined employees to the premises during the search; and (2) although the bag search was not “required” because employees could choose not bring a bag, the search was required as a practical matter because employees routinely bring personal belongings to work including their iPhones.  The Court referenced Apple’s CEO Tim Cook, who called the iPhone “so integrated and integral to our lives.”  The Court also noted that Apple’s employees were subject to discipline if they did not comply with the bag-checking requirement and therefore that the waiting time is compensable.

Because “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 held that the plaintiffs “must be paid” for that time.

As a result, employers that conduct bag or similar security checks should review their policies to comply with this high court decision.

Federal Court Strikes Down California’s “Request Arbitration, Go to Jail” Law

On January 31, 2020, Chief United States District Judge Kimberly J. Mueller enjoined California from enforcing AB 51. This new legislation prohibits employers from requiring their employees to sign arbitration agreements.  Last week, the court issued its detailed written opinion explaining the basis for its decision.

As we predicted, the Court found that AB 51 is preempted by the Federal Arbitration Act (FAA) because it “singles out arbitration by placing uncommon barriers on employers who require contractual waivers of dispute resolution options that bear the defining features of arbitration.”  In short, AB 51 places arbitration agreements on “unequal footing” as compared to other contracts because AB 51’s prohibition on California employers’ use of “right, forum, or procedure” waivers as a condition of employment illegally disfavors arbitration agreements.

Plaintiffs (employer trade groups, including the Chamber of Commerce and the National Retail Federation) also demonstrated that they would face irreparable harm if the injunction were not granted because California businesses would either: (1) suffer criminal and civil penalties if they continued to rely on mandatory arbitration; or (2) be deterred from relying on mandatory arbitration, which is a right guaranteed them under the FAA.

Whether the state will appeal the district court’s ruling to the Ninth Circuit remains unclear.  In the meantime, employers in California may once again rest easy that they won’t be doing time in the county jail just for asking employees to sign an arbitration agreement.

Join Us for a Webinar on Coronavirus and the Workplace

Coronovirus

As concerns about the newly identified Coronavirus spread in the United States, and elsewhere around the world, employers should consider the steps they can take to prepare for potential impact to their workplace and employees.

On February 5, 2020, at 9:00 AM PST, please join Proskauer’s Labor & Employment department for a webinar as we discuss potential legal risks and best practices for managing workplace concerns relating to Coronavirus and other infectious diseases.

For more information on the employment implications of the Coronavirus we encourage you to visit our blog post here.

Register for the webinar here.

Federal Court Blocks “Request Arbitration, Go to Jail” Law in California

As we reported previously [here], Assembly Bill 51, which would impose criminal penalties upon employers seeking to have their employees sign arbitration agreements, has been challenged in federal court.  Today, Chief United States District Judge Kimberly J. Mueller enjoined the state from enforcing AB 51 indefinitely.  So, employers in California may request that employees and applicants sign arbitration agreements without fear of doing time in the county jail!  Chief Judge Mueller has only issued a brief minute order so far, but she indicated that “in the coming days the court will explain its reasoning in a detailed, written order.”

We will provide further updates as soon as they become available.

 

January 2020 California Employment Law Notes

We invite you to review our newly-posted January 2020 California Employment Law Notes, a comprehensive review of the latest and most significant developments in California employment law. The highlights include:

View PDF

Ninth Circuit Affirms $54.6 Million Verdict In Favor of Wal-Mart Truckers

Ridgeway v. Walmart Inc., 2020 WL 55073 (9th Cir. 2020)

In this class action, truckers for Wal-Mart alleged they should have been but were not paid for layovers, rest breaks and inspections. The district court determined and the Ninth Circuit affirmed that the time drivers spent on layovers is compensable if Wal-Mart exercised control over the drivers during those breaks – “Wal-Mart’s layover policy imposed constraints on employee movement such that employees could not travel freely and avail themselves of the full privileges of a break.” As for the amounts awarded for rest breaks and inspections, the Court held that “Wal-Mart’s pay structure impermissibly averaged a trucker’s pay within a single hour, when it should have provided separate compensation for rest periods.” The Court further held that the district court did not err in certifying a class and allowing representative evidence as proof of classwide damages – including testimony from plaintiffs’ expert witness. Finally, the Court held that the district court properly denied liquidated damages to plaintiffs because Wal-Mart had acted reasonably and in good faith. See also Murphy v. SFBSC Mgmt., LLC, 2019 WL 6721190 (9th Cir. 2019) (approval of class action settlement involving misclassification of exotic dancers is reversed because notice was “sent only once by mail” and because of “subtle signs of implicit collusion” involving a disproportionate cash distribution to attorneys’ fees, etc.).

Employer’s Wage Statement Failed To Provide Legal Name Of Employer

Noori v. Countrywide Payroll & HR Solutions, Inc., 2019 WL 7183403 (Cal. Ct. App. 2019)

Mohammed Noori sued his former employer for violation of Cal. Lab. Code § 226(a) (setting forth certain very specific statutory requirements for itemized wage statements) based on the fact that the wage statements identified “CSSG” as the “name of the legal entity that is the employer” even though CSSG is not listed with the California Secretary of State, but is a fictitious business name for Countrywide Payroll & HR Solutions, Inc. Noori also alleged that Countrywide failed to provide payroll records to him that indicated the employer’s name and address. Finally, Noori alleged violations of the Private Attorneys General Act (“PAGA”). The trial court sustained Countrywide’s demurrer to the complaint and dismissed the lawsuit, but the Court of Appeal reversed in part, holding “CSSG is not Countrywide’s registered name, nor is it a minor truncation. CSSG is a construct… which may or may not have meaning to Countrywide employees.” As for the “failure to maintain wage statement records” claim, the Court held the claim failed for lack of any alleged injury to Noori. Finally, the Court held that Noori had provided adequate notice to the employer under PAGA.

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