Calif. High Court: Starbucks Must Pay Workers to Close Store

Employers should review pre- and post-shift activities that may be compensable

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The California Supreme Court ruled that Starbucks and other employers must pay workers for routine off-the-clock activities, such as setting the alarm and closing the store at the end of the day—even if the amount of time is minimal.

Under the federal "de minimis" rule, businesses can require employees to work a trivial amount of time (up to 10 minutes) each day without compensation if the time is administratively difficult to track. But this is not necessarily the case in California.

In a ­­unanimous opinion on July 26, the state high court said that the de minimis rule has not been adopted under California wage and hour statutes and regulations. And, at least in the case before the court, the rule doesn't otherwise apply under state law.

"We hold that the relevant wage order and statutes do not permit application of the de minimis rule on the facts given to us … where the employer required the employee to work 'off the clock' several minutes per shift," wrote Justice Goodwin Liu for the court. 

But the ruling is limited. "We do not decide whether there are circumstances where compensable time is so minute or irregular that it is unreasonable to expect the time to be recorded."

Employers in California need to be prepared for the end of the de minimis rule as a defense to wage and hour class actions, said Grant Alexander, an attorney with Alston & Bird in Los Angeles. Employers will need to determine how to compensate employees for the time that has previously been treated as off-the-clock work, either by adjusting shifts to avoid such work or by identifying and compensating those individuals who routinely open and close retail locations, he added.

Employers should conduct an analysis of what workers are actually doing at the start and end of their shifts, said Bryan Lazarski, an attorney with Lazarski Law in Los Angeles. He said employers should look for patterns. Is the work capturable? Perhaps employees have to start their computers each morning before logging in. If that activity regularly takes up to five minutes, employers may want to add five minutes to workers' timesheets each day.

Employers need to look at their timekeeping systems and do what they can to capture all of the time that employees work, said Eve Wagner, an attorney with Sauer & Wagner in Los Angeles. For example, employees may be able to use tablets or smartphone apps to record time. She noted that it is better to capture all time rather than debate whether uncaptured time was regular or minute.

"Employers also need to update their handbooks and make sure that they say in as many places as possible that no off-the-clock work is permissible," Wagner added.

Tracking Time

In this case, which is currently pending before the 9th U.S. Circuit Court of Appeals, a former Starbucks shift supervisor claimed that he and other workers who performed store closing tasks are due wages for time spent working off the clock each shift.

The supervisor said closers were required to clock out on the company's computer system before submitting sales and inventory data to headquarters, activating the alarm and locking up for the night. Under a Starbucks safety policy, the plaintiff also walked his co-workers to their cars, according to the complaint.

Assuming all this time was compensable, it added four to 10 minutes of off-the-clock work to each shift. This added up to about 12 hours and 50 minutes over a 17-month period, or nearly $103 at the applicable $8.00-an-hour minimum wage at the time. A federal district court found that the time was de minimis and granted summary judgment for Starbucks. The plaintiff appealed the decision to the 9th Circuit, arguing that the de-minimis rule didn't apply under the California Labor Code.

[SHRM members-only toolkit: Complying with California Wage Payment and Hours of Work Laws]

The 9th Circuit certified a question to the state high court to determine under California law: Does the federal Fair Labor Standards Act's de-minimis doctrine apply to claims for unpaid wages under the California Labor Code?

The Ruling

The California Supreme Court said that the state's laws generally afford more employee protections than federal law. Federal rules allow employers to require workers to perform a few minutes of work each day without pay, but California law states that workers must be paid for all hours worked.

"Nothing in the language of the wage orders or [California] Labor Code shows an intent to incorporate the federal de minimis rule," the court said.

But the court did not decide whether the federal principle could ever apply to wage and hour claims "given the wide range of scenarios in which this issue arises."

Would an employee need to be paid for reading an e-mail notification about a shift change? The court declined to answer this question.

Wagner said that employers should review when employees are checking their e-mails. If managers are regularly sending e-mails after hours and nonexempt employees are reading them when they are off the clock, it's possible that the time is compensable.  

There are two types of litigation that may stem from the court's decision, Lazarski noted. First, there may be cases asserting that workers were performing a regular and predictable amount of off-the-clock work in violation of state law. Second, there may be challenges that test the limits of this ruling to see just how small of an increment must be captured and compensated. "Employers should be prepared for both," he said.

The case is Troester v. Starbucks, Cal. No. S234969 (July 26, 2018).

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