Labor and Employment

The October 13, 2019 deadline for Governor Newsom to take his final actions in the 2019 legislative season has come and gone and as expected, he signed into law a number of employment-related bills. Below is a summary of just a few of those bills that will have a significant impact on employment litigation in California.

A.                Assembly Bill 51.

AB 51 was introduced by Assemblymember Lorena Gonzales and will severely restrict the use of mandatory arbitration agreements in employment. The Bill adds section 12953 to the California Government Code (“FEHA”) and states that it is an unlawful employment practice for an employer to violate section 432.6 of the California Labor Code. In part, the newly enacted section 432.6 provides that:

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On September 12, 2019, the California Supreme Court issued its decision in ZB, N.A., and Zions Bancorporation v. Superior Court [Lawson, real party in interest] (“Lawson”).  In analyzing whether the Plaintiff’s lawsuit could be compelled to binding arbitration under the arbitration agreement she entered into with her employer, the Supreme Court clarified that under Labor Code section 558, employees are not entitled to recover underpaid wages in a Private Attorneys General Act (“PAGA”) claim.

Before the enactment of the PAGA, section 558 gave the Labor Commissioner authority to issue overtime violation citations for a civil penalty as follows:

(1)        For any initial violation, fifty dollars ($50) for each underpaid employee for each pay period for which the employee was underpaid in addition to an amount sufficient to recover underpaid wages.

(2)        For each subsequent violation, one hundred dollars ($100) for each underpaid employee for each pay period for which the employee was underpaid in addition to an amount sufficient to recover underpaid wages.

(Labor Code §558, italics added.)

The Lawson case concerned a PAGA action seeking civil penalties under Labor Code section 558.  Lawson brought the representative action against her employer, ZB, N.A. — with whom she agreed to arbitrate all employment claims and forego class arbitration — and its parent company, Zions Bancorporation (collectively, “ZB”).  ZB filed a motion compelling that Lawson individually arbitrate her “unpaid wages” claim under section 558 because it was not a PAGA civil penalty claim.

The trial court generally agreed, bifurcating Lawson’s action and granting ZB’s motion to compel arbitration of the “unpaid wages” issue.  However, it ordered the issue to arbitration “as a representative action” for the unpaid wages of all aggrieved ZB employees.  ZB responded by filing both an appeal and petition for writ of mandate with the Court of Appeal.  After consolidating the two, the appellate court dismissed the appeal, holding that Code of Civil Procedure section 1294 only gave it appellate jurisdiction over an order dismissing, not granting, a motion to compel arbitration.  However, ZB persuaded the Court of Appeal to issue the writ of mandate, but the court did so on a different ground from the one ZB asserted.  The appellate court concluded that Lawson’s request for “unpaid wages” under section 558 in fact could not be arbitrated at all.  Relying on Thurman v. Bayshore Transit Management (Thurman), the Court of Appeal interpreted section 558 to expressly include “underpaid wages” within the scope of its “civil penalty” provision.  In the appellate court’s view, an employee could pursue the entire, indivisible civil penalty through the PAGA action, and that pursuant to Iskanian v. CLS Transportation Los Angeles, LLC, her employer could not compel the PAGA claim to arbitration.

The Supreme Court granted review of the Lawson case to decide whether the Iskanian case controlled the facts and whether or not the Federal Arbitration Act (FAA) (9 U.S.C. § 1 et. seq.) had preemptive force where an aggrieved employee seeks to recover an amount sufficient to recover underpaid wages in a PAGA action.  In its prior Iskanian case, the Supreme Court held that a court may not enforce an employee’s alleged pre-dispute waiver of the right to bring a PAGA claim in any forum.  The Court found that where such a waiver appears in an employee’s arbitration agreement, the FAA does not preempt state law.

However, the Supreme Court determined that to resolve the Lawson case it was required to ask an even more fundamental question: Can a plaintiff seek “an amount sufficient to recover underpaid wages” [as stated in Section 558] in a PAGA action at all?  The Court of Appeal thought so and concluded that section 558’s civil penalty encompassed the amount for unpaid wages [into the “civil penalty”], and therefore Lawson’s claim for unpaid wages could not be compelled to arbitration under Iskanian.

The Supreme Court concluded differently.  It held that the civil penalties a plaintiff may seek under section 558 through a PAGA action do not include the “amount sufficient to recover underpaid wages.” The Court reasoned that, although section 558 authorizes the Labor Commissioner to recover such an amount, “… this amount –– understood in context –– is not a civil penalty that a private citizen has authority to collect through the PAGA.”

The Court found that its conclusion — that unpaid wages under section 558 must be distinguished from the civil penalty aggrieved employees may recover under the PAGA — is not inconsistent with the Labor Code’s broader remedial purpose or “the protection of employees.”   It also rejected Lawson’s contention that unpaid wages recovered under section 558 meet the definition of “civil penalty” because prior to the PAGA, only the state could bring an action under section 558 because there is no private right of action under that section.  (Iskanian, supra, 59 Cal.4th at p. 381.)  However, as the Court explained, while section 558 gave the state exclusive power to collect unpaid wages through its citation procedure, section 558 achieves the same result with respect to unpaid wages as a private right of action for unpaid wages under Labor Code section 1194 does.  Therefore, only the fixed amount stated in section 558 qualifies as a “civil penalty” for purposes of a PAGA claim.

As for the question of arbitration in this case, the motion to compel the “unpaid wages” part of the section 558 claim to arbitration really became a moot point.  There is no private right of action to recover such “unpaid wages” under section 558.  As such, the Court affirmed the order denying ZB’s motion to compel arbitration and remanded the case to the trial court who can decide whether or not to grant her leave to amend her complaint to pursue the “unpaid wages” claim under section 1194 instead of section 558.

Beth West and the other employment attorneys at Weintraub Tobin are available to assist you in your wage and hour compliance and are happy to discuss the Lawson case further.  Feel free to contact any one of them.

Last year, new California legislation effective January 1, 2019 expanded the mandatory sexual harassment prevention training requirements for California employees.  That law required that, by January 1, 2020, employers with 5 or more employees must provide their supervisory employees with two hours of classroom or other effective interactive training and education AND must provide their non-supervisory employees with one hour of classroom or other effective interactive training and education.  This training must be provided within 6 months of hire, within 6 months of assumption of a supervisory role, and every two years going forward.  In addition, even if these employees had already been trained in 2018, the Department of Fair Housing and Employment (DFEH) announced that the new law requires these employees to be retrained during calendar year 2019.

California employers raised concerns about these requirements – and the legislature responded. On August 30, 2019, Governor Gavin Newsom signed emergency legislation (SB 778) which is effective immediately.  SB 778 extends the training deadline for training supervisory and non-supervisory employees from January 1, 2020, to January 1, 2021.

The bill also specifies that an employee who has received this training and education in 2019 is not required to be retrained again until two years from the date of their last training.

This means that employers who trained their regular* employees in 2018 do not need to provide refresher training again until 2020.  Employers who retrained or trained their regular employees in 2019 do not need to provide refresher training until 2021.

*Note: the emergency legislation does not change the law regarding seasonal and temporary workers. Beginning January 1, 2020, seasonal and temporary employees who are hired to work for less than six months, must be trained within 30 calendar days after their hire date or within 100 hours worked, whichever occurs first.

The Training Division of the Labor & Employment Department offers the training and education required by this law.  Please feel free to contact any member of our Labor and Employment team, or our department assistant, Ramona Carrillo to discuss and schedule a training program that meets the specific needs of your workplace.

The United States Court of Appeals for the Ninth Circuit recently confirmed in Tauscher v. Phoenix Board of Realtors, Inc. that while employers must engage in an “interactive process” with disabled employees to explore possible accommodations, there is no interactive process requirement for public accommodations and services.  By the same token, businesses and entities providing public accommodations cannot discharge the duties they owe to disabled patrons because of a failure to engage in the interactive process.

Title III of the ADA provides that no individual shall be discriminated against on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation by any person who owns, leases (or leases to), or operates a place of public accommodation.  (42 U.S.C. § 12182(a).)  A public accommodation must furnish “appropriate auxiliary aids and services where necessary to ensure effective communication with individuals with disabilities.”  (28 C.F.R. § 36.303(c)(1).)  While “[a] public accommodation should consult with individuals with disabilities whenever possible to determine what type of auxiliary aid is needed to ensure effective communication,” the regulations make clear that “the ultimate decision as to what measures to take rests with the public accommodation, provided that the method chosen results in effective communication.”  (Id. § 36.303(c)(1)(ii).)

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If you’re like me – and thousands of other attorneys, business owners, and individuals in California – you’ve probably been following the progress of Assembly Bill (“AB”) 5 and holding your breath and wondering with anticipation if Governor Newsom will sign the Bill if it makes it to his desk.  As a reminder, AB 5 is the proposed Bill to codify the decision in Dynamex v. Superior Court so that the very strict “ABC Test” would apply in order to determine the status of a worker as an employee or independent contractor for all provisions of the Labor Code and the Unemployment Insurance Code, except in certain industries and professions.

The Governor has indicated in interviews with the San Francisco Chronicle and the “All Political Podcast” that he supports ideas to expand opportunities for workers without extinguishing innovation or flexibility, but he has not really indicated one way or the other what his position is on AB 5.

Well, some new developments at the State Legislature in the last few weeks have raised the question of whether AB 5 will even make it to the Governor’s desk.   After a hearing on AB 5 was held before the Senate Appropriations Committee on August 12, 2019, the Committee referred the Bill to what is referred to as the “Suspense File.”

What Does this Mean?

Apparently at the August 12, 2019 hearing, a representative from the State Finance Department reported to the Appropriations Committee that, if passed, AB 5 would have a significant fiscal impact on the State, including costs associated with the State having to administer increased unemployment claims with the Employment Development Department, and increased wage and hour claims with the Department of Industrial Relations.

Pursuant to Joint Rule 10.5 all bills with a fiscal impact, as determined by Legislative Counsel, are referred to the Senate Appropriations Committee after they have been heard in their respective policy committees. This can include bills that appropriate money, result in substantial expenditure of state money, or result in a substantial loss of revenue to the state.

The Suspense File process has been a part of the Appropriations Committee Rules since the mid-1980s as a way to consider the fiscal impacts to the state of legislation as a whole.  The committee analysis indicates whether a bill’s fiscal impacts meet the criteria for referral to the Suspense File.  Generally, if the cost of a bill is determined to be $50,000 or more to the General Fund or $150,000 or more to a special fund, the bill meets the criteria for referral to the Suspense File. The fiscal thresholds for suspense apply to the impact on any fund in any fiscal year.  Bills that meet the Committee’s Suspense threshold will be placed on the Suspense File after testimony is taken at a regular-order hearing.

What’s Next?

The final decision regarding bills that are coming off or staying on the Suspense File are generally determined by the Chair of the Appropriations Committee, and the Senate leadership team. Usually in these situations, policy committee staff provides input, and the author of the legislation lobbies for the bill. Leadership staff and fiscal staff prepare a fiscal analysis and discuss it with the Committee Chair and other members of the leadership team and a decision is made by the Committee Chair regarding placing the bill back on the Committee floor for a vote.  According to the California Legislature’s website AB 5 apparently has been taken off the Suspense File because a Committee hearing is set for August 30, 2019.

However, time is running out.  Even if AB 5 is passed out of the Senate Appropriations Committee, it must undergo a second reading by the Senate, be further analyzed, and then assigned to yet a Third reading by the Senate before it is even voted upon by the Senate. Also, any amendments to the Bill made by the Senate must be returned to the Assembly floor and the Assembly must vote to either concur or reject the amendments.  Complicated I know … but also very time consuming!

The Legislative Session ends on September 13, 2019 which means any bills that are going to be passed and submitted to the Governor must be passed by that date.  Whether AB 5 will make it through the legislative life cycle and onto the Governor’s desk by September 13th is anyone’s guess.  However, if it does, the more uncertain question is, will the Governor sign it?  We will have to wait for the answer to that one – he’ll have until October 13, 2019 to do so.

Stay tuned.

By Shauna Correia and Nicholas Ma

Many employers routinely conduct background checks of potential and current employees.  It comes as no surprise that in the current digital age, employers can obtain extensive background information on applicants and employees quicker than ever from third-party reporting companies.  However, employers must remain vigilant to avoid receiving information prohibited under federal, state, and local laws, and to follow the proper procedures.  This blog post provides a brief overview.

 Reporting Laws

The Federal Fair Credit Reporting Act of 1970 (FCRA)[1] governs employment-related background checks conducted by outside reporting agencies.  The FCRA regulates “consumer reports,” which pertain to creditworthiness, credit capacity, character, reputation, and mode of living.  The FCRA also governs “investigative consumer reports,” which contain information about a person’s character, reputation, and mode of living obtained through personal interviews with friends and other people familiar with the consumer.

Two California statutes, the Consumer Credit Reporting Agencies Act (CCRAA)[2] and the Investigative Consumer Reporting Agencies Act (ICRAA)[3] address credit and character background checks respectively.  The ICRAA covers employers who do their own background checks, in addition to third-party screeners.  The CCRAA bars employers from running credit reports on applicants unless the applicant is applying for a specific position, including, but not limited to, a managerial position, a position involving regular access to financial information, social security numbers, and birthdates for individuals, and a position involving access to an employer’s bank account, credit, or cash totaling $10,000 or more.

In addition, cities such as San Francisco and Los Angeles, have begun enacting their own, more stringent, background check (“ban the box”) requirements, barring employers from collecting and acting on additional background information.

Other California laws also limit the types of information employers can collect, and rely on, in making personnel decisions (hiring, promoting, terminating, etc.) including, most recently, a prohibition from asking applicants to disclose salary history.[4]  Employers need to be mindful when working with outside investigative or reporting agencies to do reference and background checks to make sure that they are not seeking prohibited information, or reporting it back to the employer.

 Notice Requirements

A California employer must provide specific written notice to applicants and employees regarding each background check requested for employment purposes.  This notice should be a standalone document that includes a box for the applicant or employee to check off to receive a copy of the report.  Notice and opportunity to see the public records retrieved are required if the employer is conducting the investigation in-house, and consent is required if the employer is using a third-party agency.  Employers need not receive permission or give notice if a background check is being conducted on an existing employee suspected of wrongdoing or misconduct, but this carve-out should not be abused.

Consent Requirements

Depending on the type of background information an employer is seeking, the employer may need the applicant or employee’s advance written consent.

• Financial/Credit Background: Under both the FCRA and CCRAA, an employer does not need advance written consent to obtain a report solely pertaining to the financial/credit background of the applicant or employee. However, the credit reporting agency conducting the check must obtain the employee’s consent to release the report to the employer.
• Character/Personal Information: The FCRA and ICRAA both require that a California employer obtain the applicant or employee’s advance written consent to obtain a report on his or her character and personal information.
• Financial & Character Background: If a background check seeks information touching on both creditworthiness and character background, a California employer must obtain the applicant or employee’s advance written consent.[5]

Criminal Records

California employers may not ask applicants to disclose information concerning arrests that did not result in convictions.  Employers may still ask about convictions and arrests for which applicants are out on bail or on their own recognizance pending trial.  Under California’s “ban the box” law, which went into effect on January 1, 2018, employers with five or more employees may not consider an applicant’s criminal history until the employer makes a conditional offer of employment.  Accordingly, employment applications cannot request disclosure of an applicant’s conviction history.

 Adverse Actions Based on Criminal History

With some exceptions (such as for positions involving firearms, operators of residential care facilities for the elderly and the facility’s employees[6], some health care facilities, and some occupations that require a state license), California employers cannot use most non-felony criminal records and related information when making hiring, promotion, training, discipline, lay-off, termination, and other employment decisions.  Employers generally may not seek or consider the following criminal information:

• An arrest or detention that did not result in a conviction (except for pending arrests);
• Felonies more than seven years old;
• Information about a referral or participation in a criminal diversion program;
• A conviction that is judicially expunged, sealed, or dismissed;
• Any information while the applicant or employee was subject to the jurisdiction of a juvenile court[7]; and,
• A non-felony conviction for possession of marijuana that is two or more years old

In addition, the cities of San Francisco and Los Angeles prohibit employers from considering information about convictions that have been sealed, dismissed, expunged, or otherwise nullified.  San Francisco also bars employers from considering convictions for crimes that have since been decriminalized.

Employers may not consider an employee’s criminal history in employment decisions if doing so will result in an adverse impact on individuals within a protected class (i.e., gender, race, and national origin).

If an applicant or employee decides to claim adverse impact discrimination based upon a policy of refusing to hire or terminating employees if they have a criminal conviction, he or she will have to show an adverse impact on a protected class.  The employer will need to be prepared to establish that the conviction policy is nonetheless justifiable because it is job-related and consistent with business necessity.

The criminal conviction consideration policy or practice needs to bear a demonstrable relationship to successful performance on the job and in the workplace and measure the person’s fitness for the specific job, not merely to evaluate the person in the abstract.  In order to establish job-relatedness and business necessity, the employer must demonstrate that the policy or practice is appropriately tailored to the particular job.

If the employer’s policy or practice is challenged, adversely impacted applicants or employees may still prevail if they can demonstrate that there is a less discriminatory policy or practice that would have served the employer’s goals as effectively as the challenged policy or practice.  Employers, therefore, should consider whether conducting a broad background check is really necessary, or whether there is another method available, such as a more narrowly targeted background check (for example, seeking only certain types of convictions related to the job duties) or another form of inquiry that evaluates job qualification or risk as accurately.

 Takeaway for Employers

Employers who use background checks as a part of their qualification process for applicants or employees should ensure that they provide the proper written notice.  Employers should also carefully evaluate what type of information they reasonably need to obtain, and communicate this limitation clearly to the person or third party agency creating the report, in order to ensure that they obtain only the information they are allowed to consider.

Employers who consider criminal conviction history in their employment decisions should be aware of the restrictions on the types of criminal history that they can lawfully obtain under California law, and should make sure that they are aware of any local ordinances that may apply.  Before an employer takes any adverse action against an applicant or employee based on his or her criminal conviction history, the employer needs to carefully analyze the particular job at issue and its connection to the criminal conviction information sought, and be sure to confirm whether an applicable ordinance or law requires the employee or applicant to be given notice and an opportunity to explain any mitigating factors or contest the validity of the information.  Employers who have questions about navigating these overlapping rules and ordinances should consult their preferred Weintraub employment attorney.

[1] 15 U.S.C. § 1681, et seq.

[2] Cal. Civ. Code, § 1785.1, et seq.

[3] Cal. Civ. Code, § 1786, et seq.

[4] Labor Code §§ 432.3 and 1197.5

[5] See Connor v. First Student, Inc. (2018) 5 Cal.5th 1026, 1038.

[6] Cal. Health and Safety Code, § 1569.17.

[7] Cal. Labor Code, § 432.7.

Background

Mandatory arbitration agreements are a source of contention in employment law. However, since 2000, they are generally permissible in California. In response, the California Legislature has made repeated efforts to ban such agreements over the years. In the past, many such bills have passed both the state assembly and the state senate and have ended up on the Governor’s desk. However, none of the bills have been enacted into law. Nevertheless, Assemblywoman Lorena Gonzalez from San Diego has introduced Assembly Bill 51 (AB 51) in the current legislative session. This bill is nearly identical to the previously vetoed measures to make mandatory arbitration agreements illegal.

Current Status of AB 51

As of April 10, 2019, AB 51 has been referred to the California Assembly Appropriations Committee and has been placed on the suspense file. If the file is in suspense, it means the bill will be held in appropriations for further review (i.e., to determine whether the bill is worth the cost). Then, appropriations will have a hearing at some point to determine whether it comes off suspense, goes out of appropriations, and onto the assembly floor for a vote.

Likelihood of Passage

Much like the predecessor bills, AB 51 may end up on Governor Gavin Newsom’s desk. However, it is too soon to tell whether or not Governor Newsom will conform to his predecessors on this issue. Stay tuned.

California employers covered by the California Family Rights Act (“CFRA”) and/or the California New Parent Leave Act (“NPLA”) should take note that California’s Department of Fair Employment and Housing (“DFEH”) has issued two new documents that are relevant to the administration of an employee’s leave under these laws.

1. Family Care and Medical Leave and Pregnancy Disability Leave Notice.

The DFEH’s new Notice provides notice to employees that under the CFRA they can take up to 12 workweeks within a 12 month period for the birth, adoption, or foster care placement of their child or for their own serious health condition, or that of their child, parent, or spouse, if they meet the eligibility requirements for leave under the statute – which are: more than 12 months of service; 1,250 hours in the 12-month period before the date leave begins; and are employed at a worksite where the employer has 50 or more employees at that worksite or within a 75 mile radius.  So far, nothing new right?

The Notice then goes on to advise employees that if the employer employs less than 50 employees, but at least 20 employees, at the worksite or within a 75 mile radius, the employee may have a right to take leave for the birth, adoption, or foster care placement of a child under the NPLA. Unfortunately, the Notice is a little vague in that it does not expressly notify employees that the NPLA also requires that they meet the other two eligibility requirements (more than 12 months of service with the employer and 1,250 hours of work in the 12 months prior to the date the leave is to begin). Instead, the Notice only refers to the CFRA when outlining those two eligibility requirements.  Nevertheless, that NPLA is clear that such eligibility requirements must be met before an employee can take protected leave under the NPLA.

A copy of the DFEH Notice can be obtained here: https://www.dfeh.ca.gov/wp-content/uploads/sites/32/2017/06/CFRA_PregnancyLeave_English.pdf

2. Certification of Health Care Provider [for California Family Rights Act (CFRA) or Family and Medical Leave Act (FMLA)]

The DFEH’s Health Care Provider Certification is straight forward and can be used for the serious health condition of the employee or if the employee needs CFRA/FMLA leave for the serious health care of his/her family member.  IMPORTANT:  California employers should use the DFEH’s Certification form (or another similar form) instead of the federal DOL FMLA-Medical Certification form because, unlike under the FMLA, employers are not entitled to obtain information about an employee’s (or their family members’) medical diagnosis under CFRA.

A copy of the DFEH Certification can be obtained here: https://www.dfeh.ca.gov/wp-content/uploads/sites/32/2017/12/CFRA-Certification-Health-Care-Provider_ENG.pdf

The Employment attorneys at Weintraub Tobin have years of experience assisting employers in preparing compliant and effective leave of absence policies and administration practices.  Feel free to reach out to one of them today if we can be of assistance.

Scheduling employees is becoming more difficult for employers, and the State seems to be hurtling toward predictive scheduling laws.

Last month, my partner Lukas Clary blogged about the recent California Supreme Court case, Ward v. Tilly’s, Inc., in which the Court ruled that “reporting time” pay is owed whenever an employee is required to “report” to work, even if that “report” is by phone, instead of physically showing up for work. In Tilly’s, the employer required employees to call in two hours before their shift to find out whether they were needed, or not.  If needed, the employees would come to work; if not, Tilly’s did not pay the employees any compensation.  The Court ruled that this was a violation of the applicable Wage Order, finding that Tilly’s requirement that employees phone in, triggered the obligation to pay the employee a “reporting time” premium (between one and four hours of pay).

Tilly’s “on call” practice was one of several ways that many employers, especially in the retail and hospitality industry, try to adjust schedules based upon unpredictable workforce needs.  The Court’s decision in Tilly’s did not find that “on call” scheduling is unlawful – only that this practice does not avoid an employer’s reporting time pay obligations.  The take away from this ruling for conservative employers is that any other affirmative “call in” required – such as sending a text, or requiring employees to log on to a scheduling app or portal – would probably be viewed the same way as the telephone report.  But, Tilly’s left open a question – how far in advance, if at all, can an employer ask employees to confirm their schedule, without owing a premium?  And, if any advance call-in triggers a reporting time obligation, what’s the alternative?

One possible alternative that has been proposed by some clever employers could be to schedule employees for “split shifts”.  This means scheduling employees for two separate, shorter shifts during the workday – i.e., a morning shift, followed by a gap that is longer than a meal period, followed by another shift later in the day.  This would, in theory, allow an employer to tell the employee during their first shift that the employee’s second shift is canceled.  The employee would not technically “call in” or “report” for the second shift – that shift would simply have been canceled before the end of the employee’s early shift.  Employees, especially in a tipped workplace, might even find this option preferable to an on-call arrangement, since they’d have more certainty of at least some work, and would potentially earn more money by comparison to receiving just the reporting time premium if they are called off for the whole shift.

This method is not without its own drawbacks. First, if the employee does work that second shift, then the employer would owe a ‘split shift’ premium. But, since split-shift premiums are paid at minimum wage, and are fixed at one hour (as opposed to being one to four hours), this may be less costly than reporting time pay. Also, because the premium can be offset, for employees who earn more than minimum wage, a split shift premium may cost the employer less than the reporting time premium for the same cancelled shift.  (A “split shift” occurs only when an employee’s scheduled working hours are interrupted by one or more unpaid, nonworking periods established by the employer – other than bona fide rest or meal periods.)  Second, a word of caution: employers must ensure that employees are truly “off duty” and relieved of all duties between shifts, or else they are entitled to minimum wage for the time the employee is waiting to work.

The California Court of Appeal addressed split shifts in a 2011 case involving workers who worked graveyard shifts in Securitas Security Services USA, Inc. v. Superior Court.  That decision was employer-friendly, in that merely starting work on one day (i.e. Tuesday at 10:00 p.m.) and working continuously into the next day (i.e., Wednesday at 5:00 a.m.) does not trigger a split shift premium. But, here too, the court left open a fundamental question: how many hours must there be between two scheduled shifts, to avoid it being a “split” or being considered “on call” and on duty?  There is no hard rule covered by federal or state law or the Wage Orders for most employees (except for certain positions, like airline pilots or truckers).  This is a particular concern in a 24-hour facility, or a restaurant/bar open from morning to 2 a.m., where employees may be scheduled for “clopenings” – working until closing one day, and come back several hours later and open.  This option, too, may also be going the way of the dinosaur.

The trend among cities like San Francisco, New York, and Seattle and the state of Oregon, is to regulate employee scheduling that leaves little flexibility or predictability for employees, putting the burden of unpredictable staffing needs fully on the employers.  In 2017, for example, the city of Seattle outright banned “clopening” shifts, unless the employee consented, and was paid at 150% of their regular rate if shifts are separated by less than 10 hours.

Another alternative is to simply overschedule employees, and then cancel shifts before they “report” to work, or using “just in time” scheduling software to generate schedules with very little advance notice. Currently, California law does not prohibit these practices, and employers are permitted to cancel any employee’s shift without penalty as long as they have not reported to work (by phone or in person).

But, again, the trend is shifting toward regulating how much notice an employer can give an employee. The City of San Francisco – the first California city to enact predictive scheduling rules – passed the San Francisco “Predictable Scheduling and Fair Treatment for Formula Retail Employees Ordinance”.  This ordinance applies to “Formula Retail Establishments” (including their janitorial and custodial staff) in the city with 20 or more employees in San Francisco and 40 employees worldwide. It requires covered employers to (among other things) provide “predictability pay” for both on-call work and schedule changes.  Covered employers must provide employees with their schedules two weeks in advance, and if the schedule is changed within 7 days, to pay compensation of 1 to 4 hours depending on the amount of notice and length of the shift.  On-call shifts – defined as a shift where the employee confirms their shift less than 24 hours in advance of the shift – are allowed, but the employer must provide 2 to 4 hours of pay if the employee is not called into work (with some exceptions). Further, on-call shifts must be written into the schedules.

As our clients often lament, the options available to employers are few and most are not without a cost – and lobbyists have been pushing since 2015 for state-wide predictive scheduling rules, bans or limitations on the use of on-call shifts, and requirements for advance notice of scheduling changes. It remains to be seen what the next legislative session will bring. Until then, employers using on-call, split shifts and other flexible scheduling devices are should work with legal counsel to ensure current practices are lawful and to keep themselves apprised of changes in the law, statewide and in cities and counties.

Figuring out how many employees to schedule each day can be an inexact science. Unexpected surges or lulls in customers, employee absences due to illness or emergencies, and various other circumstances can impact personnel needs.  Employers sometimes choose to navigate these situations by overscheduling and then cutting loose employees who are not ultimately needed.  That approach, however, triggers “reporting time” obligations, under which those employees are entitled to a minimum amount of pay for reporting for work. But what does it mean to “report for work”?  What if an employer allows employees to call in a few hours before a scheduled shift to determine whether they are needed? Are employees required to physically show up to trigger reporting time obligations, or do these phone calls constitute “reporting for work” for this purpose? The answer is the latter according to a recent California appellate court in Ward v. Tilly’s, Inc.

The Case

Tilly’s employed the plaintiff, Skylar Ward, as a sales clerk in one of its California stores.  Tilly’s often scheduled Ward and other employees on “call-in” shifts. Under these shifts, employees had a designated beginning and end time, but were required to call the store two hours beforehand to determine whether they were in fact needed. If the employees were needed, they would show up and work the shift. If they were not needed at the time of the call, they would not have to show up.

Ward alleged that the call-in shifts violated the “reporting time” requirements found in Industrial Welfare Commission Wage Order Number 7, which regulates the retail industry. She sued on behalf of herself and all other Tilly’s employees who worked call-in shifts.

The case turned on what it means to “report for work” under the Wage Orders.  In this case, Wage Order Number 7 provides that for each workday “an employee is required to report for work and does report, but is not put to work or is furnished less than half said employee’s usual or scheduled day’s work, the employee shall be paid for half the usual or scheduled day’s work, but in no event for less than two hours nor more than four hours.”  Boiled down, that means if an employee “reports for work” and is not needed, or is cut loose less than halfway through their shift, there is a legal minimum amount the employee must be paid.  Similar language can be found in almost all of the Wage Orders, which are broken down by industry and occupation.

Under Ward’s argument, she and other employees had “reported for work” each time they called in to see if they were needed. Therefore, for any shift that they called in and did not have to physically show up, Ward argued that the employees were entitled to reporting time pay.  Tilly’s countered that to “report for work” under the Wage Order requires that the employees physically show up at the job location at the beginning of the shift.

The court agreed with Ward, holding that if an employee is required to phone into work in advance of a shift, that call constitutes reporting for work under Wage Order 7. Specifically, the court held that to “report for work” within the meaning of the Wage Orders is best understood as “presenting oneself as ordered,” whether by physically showing up, calling in, or otherwise.

In reaching its decision, the court noted that call-in shifts provide a huge benefit to employers by allowing them to “create a large pool of contingent workers whom the employer can call on if a store’s traffic warrants it, or can tell not to come in if it does not, without any financial consequences to the employer.”  By contrast, the court held that such shifts “impose tremendous costs on employees,” who cannot commit to other responsibilities—such as working other jobs, scheduling classes, tending to childcare needs, and scheduling social activities—while on call. According to the court, these employer benefits and employee burdens are no different when an employee is required to physically show up or just call into the store in advance. Because the Wage Orders’ reporting pay obligations were intended to incentivize businesses to competently anticipate scheduling needs and not shift the burden of scheduling uncertainty to employees, the court held that the obligations are equally triggered by call-in requirements.

Next Steps for Employers

Employers who already utilize call-in shifts are going to need to immediately assess that practice. Unless the California Supreme Court decides to review or de-publish the Ward v. Tilly’s, Inc. opinion (which remains possible), then call-in scheduling without providing reporting time pay exposes employers to claims for unpaid wages and associated penalties. For medium and large-sized employers, a company-wide call-in policy could result in a class action lawsuit.

To avoid these risks, employers should consider eliminating call-in policies or committing to providing reporting time pay to employees who call in and are not needed. Alternatively, employers may consider ensuring that, even on slower shifts where some on-call employees are not needed, the employees report and work at least half of their scheduled shift before being let go. One other possible option would be for employers to predetermine a select group of employees who are available to work on short notice, and then contact those employees when it appears extra help is going to be needed. While none of these options present an ideal replacement for the convenience of call-in scheduling, the risk of liability associated with that practice mandates employers find the next best option.