California Rejects Federal Wage and Hour ‘De Minimis’ Doctrine Causing Havoc for Employers

Hospitality   |   Labor & Employment   |   Wage and Hour   |   July 27, 2018
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Creating havoc for employers in California, the California Supreme Court yesterday rejected the federal "de minimis" doctrine for wage and hour regulations. California now has a different standard than federal law for deciding whether small amounts of work "off the clock" must be paid. In reaching the decision at the request of the Ninth Circuit in Troester v. Starbucks Corporation, Ninth Circuit Case No. 14-55530, California Supreme Court Case No. S-234969, the California Supreme Court overruled adoption of the de minimis doctrine by both lower California courts and even the traditionally pro-employee California Department of Labor Standards.

For over 70 years under the Federal Fair Labor Standard Act (FLSA), courts have held that small amounts of time – usually 10 minutes or under of work – does not have to be compensated because it is de minimis. The California Supreme Court's new decision, however, creates enormous risks for all employers, especially those in the hospitality and retail industries, that rely on the de minimis doctrine to determine pay periods for employees. It also will result in a feeding frenzy by the plaintiffs' bar with even more wage and hour lawsuits.

The facts of Troester show the dangerous impact of this case.

The plaintiff employee, a Starbucks manager, complained that he had to perform several tasks each day after clocking out, including 1-2 minutes spent initiating a computer-run "store closing procedure" and setting the alarm, 30 seconds walking to the store exit, and "15 seconds to 'a couple minutes'" locking the door. Occasionally, he would escort a fellow employee to their car, or let a co-worker back into the store to retrieve a forgotten item. All told, the employee spent about 4-10 minutes per day on these unrecorded and uncompensated "tasks." Over a 17-month period, this added up to just $102.67 of allegedly unpaid wages.

The Federal District Court had applied the de minimis doctrine in granting summary judgment against Troester on his claim for unpaid wages, relying on federal law, including the Ninth Circuit decision in Lindow v. U.S., 738 F.2d 1057 (Ninth Cir. 1984), which said that "otherwise compensable" work beyond the eight-hour day which was 10 minutes or less was de minimis and need not be paid. Both the lower California Court of Appeal and the state's Department of Labor Standards Enforcement (DLSE) adopted the Lindow decision "virtually verbatim." But the California Supreme Court rejected Lindow, holding that California has a stricter standard than the FLSA.

While the California Supreme Court left open "whether a de minimis principle may ever apply to wage and hour claims," it rejected it in the Starbucks case.

The California Supreme Court justified this departure of longstanding federal and California law by saying that "problems in recording employee work time" have been cured by technical advances which supposedly enable employers to track and register work time via smartphones, tablets, or other devices. The California Supreme Court went on to warn,

"An employer that requires its employees to work minutes off the clock on a regular basis or as a regular feature of the job may not evade the obligation to compensate the employee for that time by invoking the de minimis doctrine. As the facts here demonstrate, a few minutes of work each day can add up."

Two concurring Justices joined in the opinion but expressed their concern over the abandonment of the de minimis standard, with one of them warning that the majority opinion is "building a rickety skyscraper on a muddy swamp," and adding that a "rule of reason" should apply. The rule of reason approach was echoed by the other Justice, who wrote:

"To say that the de minimis doctrine cannot excuse failing to compensate employees under these circumstances is not to say that the de minimis doctrine has no role to play under any circumstance; a properly limited rule of reason does have a place in California labor law." [Emphasis in original.]

What does this mean for employers in California?

  • Every employer needs to carefully review any off-the-clock work required of its employees, no matter how small, or "de minimis."
  • Every employer needs to look at new ways to track work time individually, including by iPhones or tablets, rather than the traditional time clock.
  • This new case creates even more uncertainty for small amounts of "work" beyond the eight-hour day. This will affect not only end of the day tasks such as in Starbucks, but lunch time and breaks. Employers will have to carefully examine when work stops and starts in calculating work hours. Failure to do so will result in overtime and wage penalties.

While a supposed "rule of reason" still may apply, employers in California are now at the mercy of a judge or jury second guessing their decisions. For what is reasonable to one person can be unreasonable to another.

If you have questions about how the Troester decision applies to your workplace, or how to ensure that your business is accurately tracking employee time, please contact our California employment attorneys, Mark Neubauer or Meredith Moss.

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