8.8.18

California wage and hour law has long been a trap for employers—especially those with compliance or human resources operations located outside the state—who assume that compliance with the federal Fair Labor Standards Act is sufficient under California law.  Recently, in Troester v. Starbucks Corp., the California Supreme Court continued that tradition by holding that state wage laws are not subject to the FLSA’s de minimis doctrine, raising a question as to whether rounding employee time punches is lawful. Every employer with California operations should immediately review their timekeeping practices in the state to assess whether they are vulnerable to suit.

The de minimis doctrine normally comes into play in one of two scenarios: First, where there are fixed preliminary or postliminary job duties that are not easy to record; and, second, where timekeeping systems “round” employee punch times to a convenient interval (such as the nearest 5-15 minutes). Troester involved postliminary job duties, and there is a great deal of uncertainty over how it would apply to rounding cases.

History of the de minimis doctrine

The federal de minimis doctrine goes back nearly 75 years, to the U.S. Supreme Court’s decision in Anderson v. Mt. Clemens Pottery Co.  In Anderson, following the equitable maxim de minimis non curat lex (the law is not concerned with trifles), the Court held that the FLSA does not impose liability for preliminary and postliminary duties (such as walking to a workstation) whose “time is such as to be negligible.” This rule was expressly adopted by the U.S. Department of Labor in its regulations in 1961. In 1984, in Lindow v. United States, the U.S. Court of Appeals for the Ninth Circuit established the controlling test for applying the doctrine:  a court must consider (1) the practical administrative difficulty of recording the additional time; (2) the aggregate amount of compensable time; and (3) the regularity of additional work. “No rigid rule can be applied with mathematical certainty,” but “[m]ost courts have found daily periods of approximately 10 minutes de minimis even though otherwise compensable.” The Lindow test was adopted by U.S. Courts of Appeal in the Second, Third, Sixth, Seventh and Tenth circuits.

The Troester case

Douglas Troester was an hourly “shift supervisor” at Starbucks. He sued Starbucks, on behalf of himself and fellow employees, under California state law for its failure to pay wages for small amounts of time spent performing certain tasks after clocking out at the end of each shift. These tasks included activating the store alarm, locking the door, walking co-workers to their cars, and on some occasions letting co-workers back inside or bringing in patio furniture inadvertently left outside the store. A federal judge in California found that the off-clock work took 4-10 minutes a day, and was difficult to track and compensate. Accordingly, the court said, the activities were de minimis time for which Starbucks was not required to pay wages. The court applied Lindow, assuming it would apply under state as well as federal law. However, Mr. Troester appealed, and the Ninth Circuit asked the California Supreme Court to weigh in.

Weigh in it did. The California Supreme Court held that California law does not incorporate the de minimis doctrine. The Court examined the text and history of California wage and hour statutes and regulations (for example, the wage orders of the Industrial Welfare Commission), and found no indication that the legislature or the Commission intended to adopt the de minimis doctrine. The Court held that because the de minimis doctrine was less protective than California’s rule that an employer must pay for “all hours worked,” it did not apply to state wage and hour claims.

Starbucks argued that even if the relevant California statutes and regulations had not explicitly adopted the federal de minimis rule, it is part of the “established background of legal principles” against which the statutes and regulations have been enacted. The Court declined to address the broader question of “whether a de minimis principle may ever apply to wage and hour claims given the wide range of scenarios in which this issue arises” (emphasis in original), confining its ruling to the specific facts before it.

The Court refused to adopt the de minimis doctrine for several reasons. First, the Court noted that California’s wage and hour regulatory scheme is “indeed concerned with ‘small things.’” For example, California law ensures that most non-exempt employees receive two daily 10-minute rest breaks, and an employer’s failure to provide a rest break triggers a penalty of one hour’s additional pay. Second, the Court’s analysis of California legislative history revealed evidence of an intent to broadly define “hours worked” to include preliminary and postliminary activities, which are excluded under the federal FLSA. Third, the modern class action undermines the rationale behind the de minimis doctrine because individual recoveries which are too small to be worth the individual’s or the court’s time can be aggregated to “vindicate an important public policy.” And fourth, difficulties in recordkeeping that existed approximately 70 years ago “may be cured or ameliorated by technological advances.”

Ultimately, the Court chose to place the burden on employers who “are in a better position than employees to devise alternatives that would permit the tracking of small amounts of regularly occurring work time” and declined to adopt a rule that would “require the employee to bear the entire burden of any difficulty in recording regularly occurring work time.”

The Court did, however, leave a key issue undecided—“whether there are wage claims involving employee activities that are so irregular or brief in duration that it would not be reasonable to require employers to compensate employees for the time spent.” Separate concurring opinions indicate how the Court may rule on this issue in the future. Justice Cuellar noted that “there is room for a rule of reason to avoid a situation forcing employers to monitor every fraction of every second of employee time.” Similarly, Justice Kruger asserted that “a properly limited rule of reason does have a place in California labor law.” However, the “nontrivial, regularly occurring periods of work” at issue in this case were not subject to the de minimis rule.

Implications for employers

The implications of Troester are clear when it comes to fixed preliminary or postliminary job duties. If the duties are foreseeable on some kind of regular schedule, then employers need to capture the time and compensate their California employees for it, no matter how small the amount of time involved. On the other hand, when such duties are sporadic and unforeseeable, Troester leaves open the possibility of a defense akin to the de minimis doctrine.

Troester’s implications are less clear when it comes to rounding. It discusses with approval, and at length, See’s Candy Shops, Inc. v. Superior Court, the leading California case approving rounding policies that are “fair and neutral on [their] face” and that do not “over a period of time [result] in failure to compensate employees for all the time they have actually worked.” The Troester court’s discussion of See’s Candy emphasizes that the rounding rule does not depend entirely on the de minimis doctrine. To this extent, Troester does not signal any willingness to part with federal law on rounding.

However, it is not clear whether Troester means that the effects of rounding practices must now be examined on a “per-employee” basis to determine that they do not “over a period of time [result] in failure to compensate employees for all the time they have actually worked.” Previously, California rounding decisions – including Corbin v. Time-Warner Entertainment/Newhouse Partnership and AHMC Healthcare Inc. v. Superior Court of Los Angeles County – looked at net gain or loss for the workforce as a whole. Troester’s strong approval of the See’s Candy decision suggests that, on the rounding issue, Troester should be confined to its facts. That said, there is doubtless some enterprising plaintiff’s lawyer who is willing to test the point.

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