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Two California Courts Clarify Limits to Employer Timekeeping Policies

Decisions: The California Supreme Court recently concluded that employers must compensate employees for small amounts of work time that are regularly performed, even if they are administratively difficult to measure. In Troester v. Starbucks, the plaintiff employee alleged that he was routinely required to "clock out" from work before performing various job duties, including closing the store and helping fellow employees to their vehicles. The plaintiff alleged that he lost $102 in wages over the course of his 17-month employment as a result of this policy. The defendant moved to dismiss, citing the federal Fair Labor Standards Act's ("FLSA") "de minimis" doctrine, which "excuse[s] the payment of wages for small amounts of otherwise compensable time upon a showing that the bits of time are administratively difficult to record." The California Supreme Court rejected this argument, holding that California's wage and hour statutes and regulations had not adopted the FLSA's de minimis doctrine and pointing to technological advances and alternative timekeeping arrangements that could ensure that employees are fully compensated. The court left open the possibility that the de minimis doctrine might apply under a different fact pattern—e.g., "where compensable time is so minute or irregular that it is unreasonable to expect the time to be recorded."

In another recent decision, a California Court of Appeal clarified that the practice of rounding employees' time to the nearest quarter-hour is permissible under California law so long as it is facially neutral and results in a net benefit to all employees. In AHMC Healthcare, Inc. v. Superior Court, the defendant hospital group had a practice of rounding its employees' time clock swipes up or down to the nearest quarter-hour. At one hospital facility, this practice resulted in 52 percent of employees losing compensable time. However, on the whole, the rounding resulted in a net increase to employees' compensable time. The court held that the defendant's policy was lawful. Drawing on federal cases upholding similar time-rounding policies, the court held that an employer's rounding policy does not systematically undercompensate employees where it "[is] neutral on its face" and "results in a net surplus of compensated hours and a net economic benefit to employees viewed as a whole." Although the bare majority of employees at one of the defendant's facilities had lost compensable time, the system as a whole had benefited the defendant's employees. The court suggested that the outcome could be different, however, if plaintiffs provide evidence that the rounding system has bias that "unfairly singles out certain employees."

Impact: Troester makes clear that California employers must fully compensate their employees for any time that they are regularly required to work, even if doing so is administratively difficult, or face a substantial risk that they will be unable to rely on the de minimis doctrine in the event of litigation. On the other hand, AHMC Healthcare teaches that employers may round their employees' compensable time to the nearest quarter or tenth of an hour, provided the rounding system results in a net overcompensation of its employees as a whole, even if it results in undercompensation of some employees. Taken together, these cases underscore that California courts are skeptical of administrative policies that systematically undercompensate employees to their employers' benefit—and that employers should be cautious about implementing timekeeping policies that could lead to that result.

NLRB Rules That Employers May Not Terminate Employees for Posting Safety-Related Comments on Facebook

Decision: On July 19, 2018, a unanimous panel of the National Labor Relations Board ("NLRB") held in North West Rural Electric Cooperative, 366 NLRB No. 132, that North West Rural Electric Cooperative ("North West") violated Section 8(a)(1) of the National Labor Relations Act ("NLRA") by terminating an employee for complaining on Facebook about the company's safety policies and practices. The employee, who worked as a lineman for North West, posted several safety-related comments on the "Linejunk" Facebook page, which caters to individuals who work as linemen in the electrical industry. Specifically, the employee posted that North West's safety practices did not "jive together," that his coworkers failed to monitor each other when they worked on utility lines and that he believed some of North West's policies were unsafe. North West terminated the employee after some of his coworkers who felt slighted by the posts brought them to management's attention. The employee filed a charge with the NLRB, alleging unlawful termination, and the NLRB concluded that his termination violated the NLRA because the Facebook comments raised safety concerns regarding the terms and conditions of his employment in a public forum that included the employee's coworkers.

Impact: Although the NLRB under President Trump has been active in rolling back some of the Obama-era decisions that had expanded the scope of the NLRA, employers should not assume that the NLRB will ignore its precedent and simply allow employers to terminate employees for making unfavorable comments in a public forum, regardless of the subject matter. Accordingly, employers should remain diligent in ensuring that their employment policies and decision-making processes do not infringe on their employees' protected right to engage in concerted activity, such as discussing the terms and conditions of their employment.

California's New National Origin Discrimination Regulations Take Effect

Regulatory Development: On July 1, 2018, new regulations by the California Fair Employment and Housing Council ("FEHC") governing national origin discrimination took effect. Although the FEHC describes the new regulations as clarifying the existing regulations interpreting the California Fair Employment and Housing Act ("FEHA"), the changes are extensive. The FEHC regulations expand the definition of "national origin" to include an individual's "actual or perceived" membership in, or association with, an organization identified with the interests of a national origin group or an organization that is typically associated with persons of a national origin group. The regulations also codify that:

  • English-only workplace rules limiting or prohibiting the use of another language in the workplace are presumptively illegal unless the employer can meet a stringent three-part test that requires an "overriding legitimate business purpose." English-only rules are never lawful during an employee's non-work time.
  • Discrimination based on an employee's accent is illegal unless the employer can demonstrate that the accent materially interferes with the ability to perform the job in question, and discrimination based on English proficiency is also prohibited unless the employer can demonstrate that the employee does not meet the level of proficiency necessary to effectively fulfill the job duties.
  • Employer inquiries into an employee's immigration status are prohibited unless the employer can show by "clear and convincing evidence" that the inquiry is necessary to comply with federal immigration law; and
  • Employer height and weight restrictions may constitute unlawful national origin discrimination if an employee can demonstrate that such restrictions have a disparate impact on members of national origin groups that share certain physical characteristics. The employer must be able to demonstrate that the requirements are job-related, justified by business necessity, and that the purpose of the requirements cannot be achieved as effectively through less discriminatory means.

Impact: Given the breadth of the FEHC's new regulations, employers with operations in California should review their equal employment opportunity policies to ensure that they broadly prohibit all forms of national origin discrimination. Employers should also review their workplace language restrictions and policies regarding immigrant status inquiries to ensure that they do not run afoul of the new regulations. Employers should also take active steps to train their employees on the regulations to ensure a broad workplace understanding that national origin discrimination need not be explicit but can be based on the mere perception of an employee's national origin or on an employee's involvement with an organization that is merely associated with a particular national origin.

DOL Formally Rescinds the Obama-Era "Persuader Rule"

Regulatory Development: On July 17, 2018, the US Department of Labor ("DOL") officially rescinded its "Persuader Rule," which required employers and labor relations consultants to publicly report their engagements in connection with union organizing activities and the amounts paid for such services even if there was no direct contact between the consultants and employees. The Obama-era rule, which was initially issued in March 2016, had reinterpreted the Labor Management Reporting and Disclosure Act ("LMRDA") by, inter alia, broadening the scope of disclosures that employers and labor relations consultants were required to make to include any agreement in which the labor relations consultant would perform work (even indirectly) that had the "object" of dissuading employees from unionizing. Prior to the revision, the LMRDA had required the reporting of such information only if the consultants had direct communications with employees and had exempted from disclosure communications that were solely between the employers and labor relations consultants.

In June 2016, before the revised rule went into effect, the US District Court for the Northern District of Texas issued a nationwide injunction barring its implementation. The fate of the rule has since been in limbo, as the Obama administration appealed the ruling and the Trump administration subsequently indicated that it intended to rescind the rule.

Impact: The DOL's decision to withdraw the Persuader Rule marks a significant victory for employers across the country. In the wake of the withdrawal, employers and labor relations consultants must report their union-related engagements only if the labor relations consultants have direct communications with employees.

Ninth Circuit Upholds Taco Bell's Policy Requiring Employees to Remain On-Site While Eating Discounted Meals During Meal Periods

Decision: In Rodriguez v. Taco Bell Corporation, a Taco Bell employee alleged that Taco Bell violated California's meal period laws by offering employees discounted meals from the restaurant on the condition that they consume such food in the restaurant. The employee contended that requiring employees to eat the discounted meal in the restaurant constituted compensable work time because the requirement subjected them to the employer's control. The Ninth Circuit sided with Taco Bell, holding that its policy does not violate the law because "Taco Bell does not require the employee[s] to purchase a discounted meal. The purchase of the meal is entirely voluntary," and there was no evidence that Taco Bell pressured employees to purchase the discounted meals. The Ninth Circuit stressed that Taco Bell "relieved their employees of all duties during the meal break period and exercised no control over their activities within the meaning of California law." Moreover, employees were free to leave Taco Bell's premises or to purchase meals at full price and eat them wherever the employees wished. The court also concluded that there was no evidence that employees were asked to conduct work activities while on premises during the meal periods, emphasizing that "Taco Bell's policy indeed appeared to prohibit this" by requiring employees to take meal and rest periods away from the food production area and the cash register service areas. The Ninth Circuit also rejected the employee's claim that the discount value of the meals should have been added to her regular rate of pay for overtime purposes.

Impact: The Ninth Circuit's decision underscores the importance of having written meal and rest period policies that comply with California law. The Ninth Circuit relied heavily on Taco Bell's written meal period policies, emphasizing at the very beginning of its opinion that they "were fully complaint with California's requirements" and quoting from them repeatedly to demonstrate how and why they complied. The case also serves as a reminder to employers to consider any unintended consequences under applicable wage-and-hour laws, such as overtime requirements, when offering employees benefits.