California Rules Hourly Employees Who Perform Tasks 'Off the Clock' Must Be Compensated California employers face an impending storm after the Supreme Court's Troester v. Starbucks decision.

By Grant Alexander

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On July 26, the California Supreme Court issued its much-anticipated decision in Troester v. Starbucks. In its ruling, the court declined to apply the established "de minimis" rule, which had a longstanding history of application under federal law, to claims made under the California Labor Code. That rule states that the law does not concern itself with trivial issues -- here, small amounts of time worked by an employee that may not be captured by a time clock.

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With this decision, the California Supreme Court removed one of the few defenses left to California employers when defending certain wage-and-hour class action lawsuits and opened the flood gates to additional class actions like those brought against Starbucks.

What is the Troester case about?

Douglas Troester is a former Starbucks shift supervisor who sued Starbucks, claiming that he was required to spend several minutes each shift doing work "off the clock." Troester claimed that after clocking out of the store's computer, he spent approximately 10 minutes shutting down the store, turning off lights and locking the building. Because Troester had to clock out on a company computer before he could perform his closing responsibilities, those minutes were never captured and never compensated.

Troester sued in California state court, arguing that under the California Labor Code, he was entitled to compensation for all time he worked. Starbucks moved the case to federal court and won on the argument that the de minimis rule, long applied to wage-and-hour claims brought under federal law, prevented Troester's claims from moving forward.

Troester appealed the decision to the Ninth Circuit Court of Appeals -- the federal appellate district that covers California. The court of appeals, tasked with applying California law, asked the California Supreme Court to weigh in on whether the de minimis rule, a creature of federal law, likewise applies to claims made under the California Labor Code, a state law. On July 26, the court issued its decision.

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How did the California Supreme Court rule?

The California Supreme Court declined to apply the de minimis rule to the Troester case. The court found that the California Labor Code had not adopted the de minimis rule. The court also concluded that the Labor Code makes clear that employees in California must be paid for "all hours worked." The court also concluded that the time spent off the clock must be captured and compensated and that the responsibility lies with the employer to accurately track and capture that time.

In concurring opinions, two of the justices of the California Supreme Court agreed with the court's ruling but also offered additional viewpoints on whether the de minimis rule could ever be used in a wage-and-hour class action brought under California law. In one, Justice Mariano-Florentino Cuéllar wrote that "there may be occasional activities involving far less time than was at issue here, peripheral to the employee's core job function, and undertaken for reasons other than service to the employer." In such cases, Cuéllar suggested, the de minimis rule might apply.

In another concurring opinion, Justice Leondra Kruger provided specific examples of when the de minimis rule might be properly applied to wage-and-hour claims, citing instances when an employee takes a few moments to turn on the computer and log in to the company network, an employee who has to check email to review the upcoming week's work schedule distributed by the manager, and employees who are waiting for transportation inside a retail store after their shifts have ended and are asked to assist customers with questions. Kruger wrote that in such instances, the requirement that an employer account for every minute worked might be viewed as "impractical and unreasonable."

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What happens next and how do employers protect themselves?

The Troester decision puts all employers doing business in California on notice -- if you are sued in a class action for failure to compensate employees for all time worked, the de minimis rule will not be a defense. Employers now have the affirmative burden of tracking all time actually worked by employees. It is likely that with this ruling from the California Supreme Court, we will see an increase in the number of wage-and-hour class actions that focus squarely on individuals who spend unrecorded time engaging in activities directly related to their jobs.

Employers need to take certain steps to avoid these potential lawsuits. First, employers must reevaluate and identify any employees who may be working off the clock in order to open or close a retail store or office, or who might be engaging in off-the-clock work to prepare for a shift at a corporate location. Identifying the employee population that is affected by this ruling will help employers understand the scope of policy modifications to ensure that time is being accurately recorded and compensated.

Second, employers need to review their policies and procedures on how employee time is tracked and what tasks employees may be engaging in off the clock to determine if, as a preliminary step, the off-the-clock work can be reduced or eliminated to ensure that employees are being compensated for all time worked.

Third, employers should evaluate their timekeeping software to determine whether additional technological modifications, or use of smartphone apps, can assist in accurately capturing the time of those employees who have to clock or log out before completing their job responsibilities.

Fourth, depending on the size and scope of the employee population, employers should consider whether compensating those employees identified as working for specific amounts of time doing specific tasks off the clock with an additional quarter-hour of wages is appropriate to ensure that all time is properly compensated.

There is no perfect solution for any employer in the wake of the Troester decision. Employers should consult with human resources professionals and outside employment counsel to address off-the-clock work so that a creative solution can be crafted and implemented to avoid liability down the road. As Benjamin Franklin once said, an ounce of prevention is worth a pound of cure.

Wavy Line
Grant Alexander

Partner at Alston & Bird, LLP

Grant Alexander is a partner in Alston & Bird’s litigation and trial practice Group. He is based in Los Angeles and focuses his practice on employment, class action litigation and misappropriation of trade secret matters.

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