January 23, 2015
Posted by Cal Labor Law in Union-Management Relations
On December 12, the NLRB adopted its final rule amending its representation election procedures to provide for shortened election periods (aka “quickie elections”) and other changes to the election process. These changes will make it more difficult for employers to effectively campaign and challenge the election process before the voting takes place. A summary of these changes is available at the NLRB website by clicking here. In addition, our December 18 blog entry about these new rules can be accessed by clicking here.
In the last few weeks, two separate lawsuits have been filed challenging the quickie election rules. On January 5, the United States Chamber of Commerce, SHRM and several other employer groups filed a complaint in the Federal District Court for the District of Columbia claiming that the NLRB exceeded its constitutional authority and violated the Administrative Procedures Act in enacting these quickie election rules. The lawsuit seeks an injunction invalidating the new election rules. A copy of the complaint is available here.
The following week, on January 13, the National Federation of Independent Businesses and Associated Builders and Contractors filed a second lawsuit in the Federal District Court for the Western District of Texas. This second lawsuit did not allege a constitutional violation but instead is seeking an injunction that declares the quickie election rules as being invalid because (a) they conflict with the Administrative Procedures Act (b) they conflict with the statutory language of Section 9 of the National Labor Relations Act, which requires that the NLRB “assure to employees the fullest freedom in exercising the rights guaranteed by [the] Act” and (c) they violate the privacy rights of employees by requiring personal information such as phone numbers and email addresses to be turned over to the union. A copy of this complaint is available here.
At this stage, it is very difficult to predict how these lawsuits will be resolved. Recently, the NLRB has had tremendous difficulty in the federal courts. Many of their recent rules and practices have been invalidated by the courts, including their attempt to require employers to post a poster about section 7 rights and their attempts to invalidate class action waiver provisions in mandatory arbitration agreements. However, in passing the modified election procedure rules, the NLRB was aware that a court challenge was inevitable and therefore acted very carefully and narrowly.
Given that the new rules go into effect in April, we expect that most unions will move slowly with their current organizing drives during the first quarter of 2015 and then really kick into gear once the quickie election rules are effective in mid-April.
We will continue to keep you informed on how these lawsuits (and any others that are filed) are progressing.
Today, the United States Supreme Court issued an order denying review of the California Supreme Court’s decision in Iskanian v. CLS Transportation. CLS Transportation had petitioned for review of the California Supreme Court’s recent ruling that a PAGA representative action waiver in an employment arbitration agreement is unenforceable. Although most legal commentators seem to agree that the California Supreme Court’s ruling runs afoul of the Federal Arbitration Act and is inconsistent with United States Supreme Court precedent in AT&T Mobility v. Concepcion, the high Court has chosen not to review the case. As a result, the California Supreme Court’s decision remains good law and is binding on all California state courts.
What This Means for California Employers
California employers using employment arbitration agreements need to ensure that their agreements are carefully drafted in order to withstand a legal challenge to enforceability. Because arbitration agreements remain an important tool for preventing class action employment litigation, it remains worthwhile to include language in the agreement stating that any arbitration will be on an individual basis only and that the arbitrator shall not have any authority to preside over or to resolve claims on a “class” or collective basis. What about on a “representative” basis (i.e. a PAGA claim)? In light of the denial of review of Iskanian, any waiver of the right to bring a representative PAGA claim in any forum (arbitration or court) is going to be deemed unenforceable by a California state court. On the other hand, federal district courts in California generally have refused to follow the California Supreme Court’s Iskanian ruling (federal courts are not bound by the California state court ruling) and have instead held that PAGA representative action waivers are enforceable just like class action waivers are enforceable. See, e.g., Lucero v. Sears Holding Mgmnt. Corp. (S.D. Cal. 2014); Mill v. Kmart Corp. (N.D. Cal. 2014); Ortiz v. Hobby Lobby (E.D. Cal. 2014); Chico v. Hilton Worldwide (C.D. Cal. 2014); Langston v. 20/20 Companies (C.D. Cal.); Fardig v. Hobby Lobby (C.D. Cal. 2014). This means that the enforceability of a PAGA representative action waiver largely will depend on whether a federal or state court (or arbitrator) is deciding the issue. This divide in enforceability promotes forum shopping, with federal court being the preferable forum for employers and state court being the preferable forum for employees.
What Should Employers Do Now?
Because PAGA representative action waivers are not categorically unenforceable (federal courts generally enforce the waivers), this counsels against removing PAGA representative action waiver language from employment arbitration agreements. However, because employers must be mindful that a California state court will find such language unenforceable, employers need to ensure that their agreements contain severability clauses providing that if any portion of the agreement (including but not limited to the class/representative action waiver) is deemed unenforceable, the remainder of the agreement shall still be enforced to the full extent permitted by law. Employers should also include provision for what happens in the event some claims are found to be arbitrable and others are not (e.g. the employee has individual wage and hour claims that will be arbitrated but a representative PAGA claim that is exempt from arbitration). Generally, employers will want to provide that arbitrable claims will be resolved first and any non-arbitrable claims will be stayed pending resolution of the arbitrable claims. Finally, employers may also want to include specific language in the agreement providing for who decides gateway issues pertaining to the enforceability of the agreement – a court or an arbitrator? There are arguments in both directions, but employers are cautioned that there is very limited judicial review of an arbitrator’s interpretations and rulings and, as a result, if you get an arbitrator who decides not only that the representative action waiver is unenforceable but also that the PAGA representative action can proceed in arbitration (as opposed to court), that could be a very undesirable result. If a court adversely decides the issue, there is at least some avenue for independent judicial review.
Today the California Supreme Court issued its decision in Mendiola v. CPS Security Solutions, Inc., addressing the issue of whether security guards working 24-hour shifts have to be paid for all 24 hours or whether 8 hours of sleeping time (during which the security guards are simply on-call) may be uncompensated. The Court held that the entire 24-hour shift was compensable hours worked.
CPS Security Solutions employed security guards to provide services at various construction sites. The guards were designated as “trailer guards” who effectively lived on site in CPS-provided residential trailers. The trailers were equipped to live in, with heating and air-conditioning, kitchens and bathrooms, furniture, etc. The trailer guards were permitted to keep their personal belongings in the trailers and the trailers were equipped with locks. During the week, the security guards were scheduled for 16 hour shifts, 8 hours of which was considered an active patrol shift and the other 8 hours was “on-call” time. On the weekends, the security guards were scheduled for 24 hour shifts, 16 hours of which was active patrol and 8 hours of which (from 9:00 p.m. to 5:00 a.m.) was on-call time. Pursuant to the employer’s on-call agreement signed by the security guards, the security guards were not paid for on-call hours unless they were actually required to perform work during those hours, in which case the security guards were paid for the actual work time. However, if during their on-call hours the security guards did not get at least five hours of uninterrupted (sleep) time, they would be paid for the entire 8-hour on-call shift.
CPS placed certain restrictions on the security guards’ activities during on-call hours. Specifically, the security guards were not permitted to have children, pets, and alcohol were not permitted on the premises, and adult visitors were allowed only with the permission of the CPS client. Additionally, if the guard wanted to leave the job site, he or she could do so only by first notifying dispatch and providing information on where the guard would be and for how long and then was required to wait for a reliever to arrive before actually leaving the job site. Then, the guard had to remain within a 30-minute radius of the job site and be available via pager or radio telephone to respond to any calls and return to the job site as needed. While on the job site during on-call hours, the trailer guards were permitted to use their on-call time to read, watch television, eat, sleep, talk on the phone, and/or engage in myriad other personal activities.
Some of the security guards filed a class action against CPS, alleging CPS violated California law by not paying them for their full on-call hours. CPS defended their pay practice as compliant with California law, arguing that California law does not require payment for on-call time in these circumstances.
The trial court certified a class action and ultimately ruled that the class was entitled to pay for all on-call hours, both during weekdays and on weekends.
Court of Appeal Decision
CPS appealed the trial court’s ruling to the court of appeal. That court agreed with the trial court that the weekday on-call hours were compensable hours worked, but held that the on-call hours on the weekends were properly excluded from compensable hours worked. In holding that the weekday on-call hours had to be compensated, the court applied established California caselaw holding that on-call hours must be compensated if the employee is substantially restricted in the ability to use the time for personal pursuits. In this case, the court held that the trailer guards’ personal activities were substantially restricted because the guards generally were required to remain on-site, were not allowed to have children, pets, or alcohol on the premises, and were also limited in their ability to have adult visitors. Additionally, the guards could not leave the premises unless they were able to secure a relief worker and even then, they had to wait for the relief worked to arrive. Once off premises, the guards had to remain within a 30-minute radius of the job site and carry a pager or telephone and remain available to respond and return to the job site immediately in the event of a page. For all of these reasons, the court held that the on-call time was primarily used for the benefit of the employer and not for the guards. As such, the on-call time had to be compensated.
Although the same restrictions on on-call time that applied to the weekday shifts also applied to the weekend on-call hours, the court reached a different conclusion about whether the weekend on-call time was compensable. This is because the court applied a federal regulation, 29 CFR 785.22, which permits employees who are required to be on duty for 24-hours to enter into agreements to exclude up eight hours of regularly scheduled sleep time from hours worked. This regulation was previously followed and applied by a California Court of Appeal in Seymore v. Metson Marine, 194 Cal.App.4th 361 (2011), where that court held that ship crewmembers lawfully agreed that 8 hours of sleep time during their 24-hour shifts would not be compensated. Based on these authorities, the CPS court held that CPS’ on-call policy of excluding 8 hours of sleep time on the 24-hour weekend shifts was lawful.
California Supreme Court Reversal
Today the California Supreme Court reversed the Court of Appeal’s decision and held that CPS’ policy of not compensating security guards for on-call time on the weekends was unlawful and that there is no “sleeping time” exclusion under the applicable wage order. The Court expressly “disapproved” the Seymore case for its contrary holding (though that holding has been good law for the past 3 years). The Court also rejected the applicability of the federal regulation allowing sleep time to be excluded from compensable hours worked. The Court held that there was no reason to import that federal regulation into the applicable wage order (Wage Order 4) and emphasized that California law has a more expansive definition of “hours worked” than under federal law. California law, unlike federal law, focuses on the extent of employer control over an employee to determine whether the employee’s time must be compensated. As such, the Court held that under Wage Order 4 and California law, the on-call time on the weekends had to be analyzed the same as the on-call time during the weekdays, producing the same result – i.e. because the trailer guards are substantially restricted in their use of the on-call time for personal pursuits, they are under sufficient employer control to make all of the time compensable as hours worked. The fact that the trailer guards were working a 24-hour shift and could sleep part of the time was basically irrelevant.
The Court acknowledged that different wage orders, such as the wage order applicable to ambulance drivers and attendants (Wage Order 9), contain different language than Wage Order 4, and allow for employers to exclude 8 hours of sleep time from compensable hours worked in a 24-hour shift in certain circumstances. However, the Court held that Wage Order 4 contains no such exception and that Wage Order 4 controlled in this case.
Notably, prior to this lawsuit being filed against CPS, CPS actually sought and obtained the California Labor Commissioner’s guidance on the legality of their on-call policy and pay practice, and the Labor Commissioner endorsed the policy as lawful in 1999. A couple of years later, a newly appointed Labor Commissioner reversed the prior Labor Commissioner’s endorsement and opined that CPS’ policy was not lawful. The reversal prompted CPS to file an action in court for declaratory relief to have its policy deemed lawful. Prior to trial, the Labor Commissioner and CPS settled and entered into a Memorandum of Understanding effectively agreeing (again) that CPS’ policy was lawful. In these circumstances, it is obviously outrageous for CPS to retroactively be held liable for back pay. This is particularly true given that prior to today’s “disapproval” of the Seymore case, California courts endorsed the federal regulation allowing sleep time during a 24-hour shift to be excluded from compensable hours. However, the California Supreme Court didn’t see it this way and refused to limit its holding to apply prospectively only. The Court held that the Labor Commissioner’s view was not entitled to deference [of course, other employee-friendly Labor Commissioner interpretations conveniently were somehow entitled to deference] and suggested that the confusion in this area may have stemmed from unclear wording of Wage Orders, defunding of the Industrial Welfare Commission, and inadequate funding of DLSE enforcement. The Court stated that these problems are the province of the Legislature to fix, not the courts. [Apparently, it’s okay for California employers to pay the price for legislative and agency shortcomings in the meantime.]
Employers that have employees working 24-hour shifts should carefully review their pay practices in light of the CPS decision, paying particular attention to the Wage Order specifically applicable to their industry to determine whether there is any lawful basis for excluding sleep time from compensable hours worked. Employers that have employees who are on-call (regardless of whether or not a 24-hour shift contemplating sleep time) should similarly review their pay practices and the level of restrictions placed on employees during on-call time to ensure that employees are being paid properly for on-call time, where necessary.
The NLRB has been debating implementation of so-called “quickie election” rules on and off since 2011. Earlier this week, by a 3-2 vote, the NLRB finalized, and published in the Federal Register, its new election rules, which will become effective in April. In announcing the adoption of the new election rules the NLRB stated: “The National Labor Relations Board has adopted a final rule amending its representation-case procedures to modernize and streamline the process for resolving representation disputes.” The NLRB Chairman Mark Gaston Pearce stated: “I am heartened that the Board has chosen to enact amendments that will modernize the representation process and fulfill the promise of the National Labor Relations Act.”
While the NLRB attempts to discuss the overall benefits of these new rules, what these amended rules do in reality is make it easier for unions to win elections by, among other things: (a) shortening the timeline between the election petition and the actual election, (b) making it easier for unions to communicate with employee voters, and (c) eliminating a number of methods employers had to challenge election issues before the election takes place.
New Procedures – Some Details
The NLRB has provided a very detailed “NLRB Representation Case-Procedures Fact Sheet” on its website. This document describes the new procedures in detail and even provides a table that compares the current election procedures with the new procedures that will be effective on April 15. To review this Fact Sheet, click here.
Some of the key changes to the election procedures include the following:
Electronic Filing/Communications – Parties may file documents, such as petitions, electronically, rather than by fax or mail.
Election Voter List/Expanded Excelsior List – The employer must include available personal email addresses and phone numbers of voters on the voter list (aka Excelsior list) in order to permit non-employer parties to communicate with prospective voters about the upcoming election using modern forms of communication. Under current procedures, only a home address was required. The timing for providing the list was also materially shortened. Under the current rules, this list had to be provided to the NLRB seven days after the election agreement was approved or the regional director directed an election. Under the new rules, this list will have to be provided within two business days of the same events. In addition, employers should note that email addresses are now requested on the new I-9 form and thus employers will likely be required to review this form and other employee personnel records to determine if it has an email address for each employee in the bargaining unit before finalizing the Excelsior list.
Pre-Election Hearing -- Pre-election hearings will now be set 8 days after the hearing notice is served in almost all cases.
Early Identification of Disputed Issues – The employer will no longer be able to wait until the pre-election hearing to raise issues. Under the new rules, the employer will be required to respond to the petition by filing a written Statement of Position. In this submission, it must state its position on key issues before the pre-election hearing opens, and generally within 7 days of the pre-election hearing notice being served. Issues not raised at that time by the employer will be barred from being raised at the hearing. However, the union will be able to wait and can respond to the issues raised by the non-petitioning parties at the opening of the hearing. In addition, as part of its Statement of Position, the employer must provide a list of prospective voters with their job classifications, shifts and work locations, to the NLRB’s regional office and the other parties. This is a new requirement.
Litigation of Eligibility and Inclusion Issues – Generally, only issues necessary to determine whether an election should be conducted will be litigated in a pre-election hearing. All other issues will now have to be deferred must be litigated post-election and then only if not moot.
Earlier and more complete information to employees – Under the new rules, the employer will be required to post a Notice of Petition for Election containing more detailed information on the filing of the petition and employee rights within two business days of the region’s service of the petition for election. This Notice of Election will provide prospective voters with more detailed information about the election and the voting process.
The NLRB shares significant information about these new election rules on its website. For more information and background, you can click the following documents: NLRB Press Release; NLRB Fact Sheet; NLRB Comparison Table (new and old rules).
What Should Employers Do
These new election rules will have a major impact on how employers can respond to union organizing activity and an election petition. Employers will need to be more prepared in advance if they wish to effectively communicate their message in a timely manner in the event of union organizing. Employers concerned about unionization should meet with their labor counsel to discuss their options and methods for combatting these new procedures. However, below are some very basic tips that will likely be applicable to most employers with any concerns about union organizing and these new procedures:
- Employers should make sure that their views on unionization are made known to both management and non-management employees. Employers should use labor relations experts/attorneys in this effort to make sure they do not say anything improper.
- Employers should make sure that their supervisors are trained to recognize the signs of union activity and who to notify if they suspect union activity, so that the employer can effectively recognize and deal with any campaign before it is too late to effectively do anything about it.
- Employers may want hire labor relations experts to audit their workforce to determine vulnerability. This should only be done by a trained expert because the NLRA has very strict guidelines on what can be done to obtain certain information from employees.
- Employers should consider interviewing and identifying attorneys and consultants in advance that it can use to help them in a union campaign, because under the new rules, there will be little time for employers to locate and hire these experts if it does not learn about the campaign until the time of the election petition.
As California employers know, California recently enacted a statewide paid sick leave mandate for California employers. Although employers need not start providing paid sick leave benefits until July 1, 2015, the law’s posting and notice requirements take effect January 1, 2015, according to guidance published this month by the California Labor Commissioner’s office. This means that beginning January 1, 2015, California employers must display a poster in the workplace informing employees of their paid sick leave rights under the new law. The Labor Commissioner’s office has published a template poster that employers may use to satisfy the posting requirement. The template poster is available here. Note that in many instances, an employer’s paid sick leave policy (or a combined paid time off policy) may provide for more generous benefits than required under the new paid sick leave law. In such circumstances, the employer may want to revise the template poster to accurately reflect the specific paid sick leave benefits the employer provides. Alternatively, employers may consider posting the Labor Commissioner poster along with their own specific policy.
In addition to the posting requirement, employers must also begin complying with the law’s notice requirement effective January 1, 2015. Under the law, employers are required to provide non-exempt employees with information, upon hire, on their paid sick leave benefits as part of the Wage Theft Prevention Act Notice (Labor Code section 2810.5). Post-hire, a revised notice is required to be provided within 7 days of any changes to the paid sick leave policy (this will also apply to employees hired prior to January 1, 2015 where the employer is adopting or modifying paid sick leave policy). Although this notice is only required to be provided to non-exempt employees, employers certainly are permitted to provide the notice to exempt hires as well. The Labor Commissioner’s office has published a template notice that employers may use. The template notice is available here.
Displaying the paid sick leave poster and providing notice of paid sick leave benefits beginning in January is likely to cause some confusion for employees whose leave entitlements will not begin until July 2015. Where applicable, employers can modify the text of the Wage Theft Prevention Act notice to make clear that paid sick leave benefits do not begin accruing until July 1, 2015.
The Labor Commissioner’s office has also posted on its website some frequently asked questions and answers relating to the paid sick leave law. California employers are encouraged to review this guidance here to ensure their paid sick leave policies and practices are in compliance with the new law, as interpreted by the Labor Commissioner.
Continuing its trend of enacting burdensome ordinances requiring employers with employees in San Francisco to comply with specialized wage and hour requirements, the San Francisco Board of Supervisors has now passed two ordinances aimed at providing wage and hour protections for employees of “formula retail establishments.” These ordinances are collectively referred to as the Retail Workers’ Bill of Rights. These ordinances are effective January 4, 2015 but do not become operative until July 3, 2015.
The Retail Workers’ Bill of Rights applies to employers operating a Formula Retail Establishment with 20 or more employees in the city of San Francisco, including corporate officers and executives. A “formula retail establishment” means a business located in San Francisco that falls under the San Francisco Planning Code’s definition of “formula retail use” (section 703.3) except that the business must have at least 20 retail sales establishments located worldwide. Formula retail establishments are commonly referred to as “chain stores” and include, among other things, retail stores, chain restaurants, fast food restaurants, and bars. Professional service establishments such as medical offices and/or salons/gyms are not considered formula retail establishments.
The Retail Workers’ Bill of Rights imposes five main requirements on employers:
- Advance Notice of Work Schedules and Changes: Prior to the start of employment, an employer shall provide a new employee with a good faith written estimate of the employee’s expected minimum number of scheduled shifts per month, and the days and hours of those shifts (not including on-call shifts). The employee may request a modification in the proposed schedule, which the employer is required to consider (but not required to accept) and respond to prior to the employee’s start of employment. Post-hire, an employer is required to provide employees with at least two weeks’ notice of their work schedules, by doing one of the following at least every 14 days: (1) posting the work schedule in a readily accessible location in the workplace; or (2) electronically transmitting the work schedule to employees. The work schedule must include any on-call shifts. If the employer thereafter changes an employee’s schedule, the employer must give the employee notice of the change, along with “predictability pay” of one hour of pay at the employee’s regular rate for a change with more than 24 hours’ notice but less than 7 days’ notice. If the employer makes a change with less than 24 hours’ notice, the employer must pay the employee 2 hours of pay for each changed shift of four hours or less, and 4 hours of pay for each changed shift that is more than four hours. Predictability pay does not apply to on-call shifts, which are separately addressed below. Predictability pay is not required if the change is necessitated by certain acts beyond the employer’s control (electric outage, etc.) or if (a) another employee previously scheduled to work the shift is unable to work due to illness or use of PTO and did not give the employer at least 7 days’ notice of the absence; (b) another employee previously scheduled to work the shift fails to report to work and/or is fired or sent home as a disciplinary action; (c) the change results only from an employer request to an employee to work overtime; or (d) the employee requests and/or causes the change to his or her own schedule.
- Pay for On-Call Shifts: For each on-call shift that an employee is required to be available but is not called in to work (with less than 24 hours’ notice that the shift has been cancelled or moved to another date or time), the employee must be paid 2 hours of pay (regular hourly rate) for each on-call shift of 4 hours or less, and 4 hours of pay for each on-call shift of more than 4 hours. The same exceptions to the predictability pay requirements also apply to the on-call pay requirements.
- Equal Treatment for Part-Time Employees: Employers are required to provide part-time employees (those working fewer than 35 hours per week) with the same starting hourly wage as that provided to full-time employees (those working 35 or more hours per week) holding comparable positions. However, pay differentials are permissible if based on considerations other than the part-time status of the employee. Employers are also required to provide part-time employees with the same access to paid and unpaid time off offered to full-time employees of the same job classification. However, a part-time employee’s eligibility for paid or unpaid time off may be pro-rated based on the number of hours that the employee works. Employers must also provide part-time employees with the same eligibility for promotions as full-time employees of the same job classification, though the employer may condition promotion on the employee’s availability for full-time work and/or on reasons other than the part-time status of the employee. Finally, the new ordinances require that if an employer has a need for additional workers, before hiring new employees or using contractors or a temporary staffing agency to perform work, the employer must first offer the additional work to existing part-time employees if the existing employees are qualified to do the work and the work is the same or similar type of work the employee already performs. The employer is only required to offer the part-time employee the number of hours required to give the employee 35 hours of work per week.
- Sale of Business: If a covered retail establishment is sold, the successor is required to retain the seller’s non-managerial incumbent employees who have been employed for at least 90 days prior to the sale. The successor employer must retain these incumbent employees for at least 90 days and under the same terms of employment already in place (rate of pay, job classification, and number of work hours). If the successor employer determines that it needs fewer employees than were employed by the prior owner, the successor employer must retain incumbent employees based on seniority and/or the terms of any applicable collective bargaining agreement. During the 90-day retention period, the successor employer may not discharge a retained employee without cause.
- Notice and Recordkeeping: Covered employers will be required to post a notice of employees’ rights under these new ordinances. The San Francisco Office of Labor Standards Enforcement (“OLSE”) will prepare and publish the required posters for employer use. Employers are required to retain pertinent personnel records for three years and these records are subject to inspection by the OLSE.
The Retail Workers’ Bill of Rights provides for administrative investigation and enforcement by the OLSE. Additionally, the City Attorney’s office may file civil actions against non-compliant employers. Retail employers covered by these new ordinances should review them promptly and take action to ensure compliance before the operative date of the ordinances, which is July 3, 2015. The text of the ordinances is available here and here.
Earlier this week, the IRS issued the 2015 optional standard mileage rates used to calculate the costs of operating a vehicle for business, charitable, medical or moving purposes. Beginning on January 1, 2015, the standard mileage rates are as follows:
- 57.5 cents per mile for business miles driven, up from 56 cents in 2014;
- 23 cents per mile driven for medical or moving purposes, down half a cent from 2014; and
- 14 cents per mile driven in service of charitable organizations.
Under California Labor Code section 2802, California employers are required to reimburse employees for reasonable expenses necessarily incurred in the performance of their job duties. This includes expenses associated with the use of their personal vehicles for business purposes. Most employers use the standard mileage rate to satisfy their obligation to reimburse employees for expenses associated with using their personal vehicles for business travel. Although employers are not required to use the IRS optional standard mileage rate, and can instead try to calculate an employee's "actual" expense associated with personal vehicle use (which includes more than just the cost of gas, but also the cost of wear and tear, etc.), the latter method carries risk of being challenged for not providing adequate reimbursement.
December 12, 2014
Posted by Cal Labor Law in Union-Management Relations
Yesterday, the NLRB issued a controversial 3-2 decision (divided on partisan lines) in Purple Communications, holding that employees are entitled to use an employer's email system for activities covered by Section 7 of the National Labor Relations Act (NLRA). Section 7 protects employees' right to engage in concerted activity for mutual aid and protection (including, but not limited to, union organizing activity). The NLRB reasoned that in the modern workplace, electronic communications are the functional equivalent of yesterday's "water cooler" conversations. The NLRB held that employees "presumptively" have a right (during nonworking time) to use the employer's email system to communicate about Section 7-covered topics if the employer gives them access to the email system for business purposes.
Can this ruling be circumvented by imposing a total ban on nonwork-related use of email (whether for Section 7 purposes or other personal, nonwork-related purposes)? One would think so, but the NLRB addressed this and basically said no. According to the NLRB, an employer may only impose a total ban on nonwork use of email (or some lesser restriction on nonwork use of email) if special circumstances make the ban necessary to maintain production or discipline (whatever that means, conveniently undefined).
As noted above, the Purple Communications decision was decided on a partisan basis with three Democrats on the NLRB issuing the decision. Two Republican members filed dissents, reasoning, among other things, that the majority's holding was an unwarranted intrusion on employers' property rights and interests. Notably, the partisan decision overrules an earlier 2007 decision, Register Guard, that had been decided by a Republican majority and held that an employer does not have to allow its email system to be used by employees for Section 7 activities.
Stay tuned for likely appeals in this case. In the meantime, employers should exercise caution in issuing any discipline and/or corrective restrictions based on employee use of email for Section 7-covered communications. The Purple Communications decision is available here.
Today the U.S. Supreme Court issued its decision in Busk v. Integrity Staffing Solutions, Inc., unanimously holding that time warehouse employees spent waiting to go through security checks and undergoing those checks at the end of their shift was not compensable time. The decision overrules a contrary conclusion that the Ninth Circuit Court of Appeals reached earlier in the case.
The employees at issue in Busk were hourly warehouse employees whose job was to retrieve products off shelves and package them for Amazon customers. Their employer required them to undergo an anti-theft security check at the end of their shifts before allowing them to leave for the day. During this process, employees had to remove items such as belts, keys, and phones from their persons and go through a metal detector. The employees were not compensated for the time they spent waiting in line for the security checks and undergoing the checks, which they alleged took up to 25 minutes each day. The employees filed a class action lawsuit seeking to recover unpaid wages for this time. The trial court dismissed the employees’ claim, holding that the security check time was not compensable time under the Fair Labor Standards Act. The employees appealed to the Ninth Circuit, which reversed the district court’s ruling and held that the employees could proceed with their claim because the security checks were required by the employer and if they actually took as much as 25 minutes per day, that time would not be de minimis but instead would be compensable under the FLSA. The U.S. Supreme Court granted Integrity Staffing Solutions’ petition for review.
In reversing the Ninth Circuit’s decision and holding that the security check time was not compensable, the U.S. Supreme Court held that the claim was governed by the standards set forth in the Portal to Portal Act and the reasons that the Act was initially enacted. The Portal to Portal Act was enacted after several court decisions came out interpreting the FLSA to broadly require payment for preliminary and postliminary activities (including a plaintiffs’ counsel fave – Anderson v. Mt. Clemens Pottery), which in turn resulted in a flood of litigation by employees seeking pay for such activities. In response to these decisions expansively interpreting the FLSA, Congress enacted the Portal to Portal Act to define “work” that is compensable and activities that are not compensable under the FLSA. The Portal to Portal Act thus expressly excludes the following activities from compensable time:
- Time spent walking, riding or traveling to and from the actual place of performance of the principal activity or activities which such employee is employed to perform; and
- Activities which are preliminary to or postliminary to said principal activity or activities which occur either prior to the time on any particular workday at which such employee commences, or subsequent to the time on any particular workday at which he ceases, such principal activity or activities.
The term “principal activity or activities” means activities that are an “integral and indispensable” part of the principal activities the employee is hired to perform. Based on these definitions, the Court held that time Integrity Staffing’s employees spent undergoing security checks was non-compensable postliminary work. The Court reasoned that end of shift security checks were not the employees’ principal activity because the employees were not employed to undergo security checks; rather, they were employed to retrieve products in the warehouse and package them for customers. Furthermore, the security checks were not an “integral” or “indispensable” part of the employees’ packaging activities. The security checks were not necessary in order for the employees to perform their packaging duties, and the mere fact that the employer required the screenings does not change the nature of the screenings as being separate from the employees’ principal activities. Indeed, the employer hypothetically could eliminate the security check requirement and this would have no impact on the employees' ability to perform their principal activities, thus demonstrating that the security checks were not an integral or indispensable part of the employees' duties. The Court contrasted this type of activity from different types of preliminary or postliminary activity that would be compensable under the FLSA, such as time an employee spent donning required protective gear needed to perform job duties or removing contaminated clothing at the end of a shift in order to safely leave the worksite. Finally, the Court held that the Ninth Circuit erred in focusing on whether the time was de minimis or not in assessing whether it was compensable under the FLSA. The Court held that the Portal to Portal Act definitions focus on the nature of the activity and its relation to the employees’ principal activities – not on how much time the activity takes the employee to complete.
The Busk v. Integrity Staffing Solutions decision is a great one for employers fighting wage and hour lawsuits based on unpaid preliminary and postliminary activities brought under the FLSA. California employers are cautioned, however, that the Busk decision is based solely on the FLSA/Portal to Portal Act and is not an interpretation of California law. California courts interpreting California’s Labor Code and Wage Orders have applied a much broader definition of compensable work time to include all time that an employee is subject to the control of the employer. Thus, even though an employer may be able to defeat a claim for compensation for preliminary/postliminary work under the FLSA, the result may not be the same under California law. Employers seeking guidance on whether preliminary or postliminary activities performed by California employees are compensable should consult California employment law counsel.
The Busk decision is available in full here.
The action continues on the minimum wage front in December. Earlier today, State Senator Mark Leno introduced a bill to accelerate the proposed increase to California’s statewide minimum wage. Leno has been a strong proponent of an increased statewide minimum wage.
Today was the first day of the California legislative session so it is very difficult to tell what will happen with this bill. However, the bill, as introduced, would raise California’s minimum wage to $11 in 2016 (instead of $10 under current legislation passed in 2013) and $13 in 2017. After 2017, the bill calls for regular minimum wage increases indexed to inflation.
Senator Leno introduced a similar bill last year, but it died in committee. Given the current climate on minimum wage, this year’s version likely has a better chance of ultimate success. We will continue to keep you posted on the progress of this and other employment-related bills as they are introduced and move forward during the legislative session.