A drop in the bucket? California Supreme Court to decide fate of de minimis defense to wage claims under state law

May 01, 2018

Employment Law Alert

Author(s): Seth L. Neulight, Hillary Baca

Today, the California Supreme Court heard oral arguments in Troester v. Starbucks Corporation—a case that could potentially increase employers’ exposure to claims by hourly paid workers for small pre-shift and post-shift tasks that are now treated as insignificant and not compensable. This alert discusses what businesses need to know.

Today, the California Supreme Court heard much anticipated oral arguments in Troester v. Starbucks Corporation. The Court was asked by the federal Ninth Circuit Court of Appeals to resolve an unsettled question under California law, namely, whether the de minimis defense applies to claims for unpaid minimum and overtime wages under the California Labor Code. The ruling could increase employers’ exposure to claims by hourly paid workers for small pre-shift and post-shift tasks that are now treated as insignificant and not compensable.

The de minimis rule

Federal and California laws generally require that employers track and record all hours worked by non-exempt employees, and pay them wages for that time. The de minimis rule is an established defense under the federal Fair Labor Standards Act (FLSA) to claims for unpaid wages for small amounts of time that employees spend “off the clock” on tasks that are difficult or impractical to track. See Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 692 (1946). Federal courts analyze several factors to decide whether employers may disregard such time as “de minimis”—(1) the practical difficulty the employer would encounter in recording the additional time, (2) the total amount of compensable time and (3) the regularity of the additional work. Lindow v. United States, 738 F.2d 1057, 1063 (9th Cir. 1984). Federal courts in California have held that employers need not pay wages for minutes that employees spend outside of their scheduled shifts that are not susceptible to precise recording, such as logging in to a computer or donning and doffing safety equipment.

The Troester case

Douglas Troester was a non-exempt supervisor at a Starbucks store. He sued Starbucks for violations of the California Labor Code alleging that it failed to pay him wages for time he spent doing certain tasks after he was required to clock out at the end of his shift. Such tasks included activating the store alarm, locking the front door and walking co-workers to their cars. The federal district court granted summary judgment in Starbucks’ favor. The court held that while the employee’s closing activities occurred regularly, they typically took him only between four and ten minutes per day, and were administratively difficult to track and compensate. Thus, the court concluded that these activities were de minimis time for which Starbucks was not required to pay wages.  The employee appealed this decision to the Ninth Circuit Court of Appeals. The Ninth Circuit certified for decision by the California Supreme Court the question whether the de minimis rule is available as a defense to wage claims brought under the California Labor Code.

At today’s oral argument, the justices questioned whether a decision recognizing the de minimis defense would be an improper usurpation of legislative authority. The justices noted that while the defense is recognized in the FLSA regulations, no corresponding reference to it exists in the California Labor Code or Wage Orders. On the other hand, the justices seemed concerned that striking down the defense would cause an increase in the filing of costly lawsuits over very small amounts of alleged unpaid time worked. It remains unclear which way the Court will rule on this issue, but a decision is expected within 90 days.

What should employers do now?

Pending a decision in Troester, employers should consult with counsel to review their timekeeping policies and procedures. Employers also should evaluate the job duties and expectations of their non-exempt employees to determine if, and to what extent, they may be expected to perform any tasks “off the clock” before or after their scheduled shifts. If the Supreme Court in Troester decides that the de minimis defense does not apply under California law, wage issues that many employers may have discounted as a “drop in the bucket” could soon turn into a waterfall of exposure to claims for alleged unpaid wages and penalties under multiple provisions of the Labor Code.

The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.

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