1. “Call-In” Shifts Trigger Reporting Time Wages
On February 4, 2019, a divided panel of the California Court of Appeal, in Ward v. Tilly’s Inc., held that certain on call scheduling triggered the Wage Order’s reporting time pay requirements, effectively putting an end to a common scheduling practice in California.
In this case, employees of Tilly’s, Inc. were required to call in two hours before the start of their shift to confirm whether they should actually come in to work. If they are told to come in, they are paid for their shift; if not, they do not receive any compensation for having been “on call.” Tilly’s, Inc. maintained a policy and practice of disciplining employees if they failed to call in, called in late, or refused to work on call shifts.
The Court analyzed Industrial Welfare Commission, Wage Order No. 7-2001, which requires employers to pay employees “reporting time pay” for each workday “an employee is required to report for work and does report, but is not put to work or is furnished less than half said employee’s usual or scheduled day’s work.” Other industries are governed by different wage orders depending on the industry, but many of those wage orders contain similar provisions.
In holding that on call scheduling in this case triggered the Wage Order No. 7’s reporting time pay requirement, the Court found that “report for work” does not have the single meaning of physically reporting to work, but instead is defined by the party who directs the manner in which the employee is to present himself or herself for work. Thus, if the employer directs the employees to present themselves for work by physically appearing at a worksite, logging on to a computer remotely, appearing at a client’s job site or by calling in, then the employee “reports for work by doing those things. The Court reasoned that being “on call” is a burden to employees, who cannot freely live their lives during the on call time, but who nonetheless, receive no compensation from their employer unless they ultimately are called in to work.
While this case is sure to be appealed to the California Supreme Court, for the time being a policy requiring employees to remain available for “call in” shifts, will trigger an employer’s obligation to pay reporting time wages to employees who call in and are told they do not need to report for work.
Questions remain as to whether the time taken by an employee to “call in” is compensable time worked and whether an employer would be required to pay a “split shift” premium where an employee calls in and is told to come into work two hours later.
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2. Employees Are Barred from Suing Payroll Companies for Wage Violations
The California Supreme Court, in Goonewardene v. ADP LLC, recently addressed the question whether an employee may bring a civil action against a payroll company who was hired by the employer to take over payroll tasks that would otherwise be performed by an internal payroll department.
Consistent with prior case law, the Court again reaffirmed that a payroll company cannot properly be considered an employer of the hiring business’s employees. However, the Plaintiff also alleged that the payroll company could be held liable for (1) breach of the payroll company’s contract with the employer under the third party beneficiary doctrine, (2) negligence, and (3) negligent misrepresentation.
The Court concluded that the cause of action for breach of contract under the third party beneficiary doctrine cannot be maintained because the motivating purpose behind the contracting parties was to provide a benefit to the employer, mainly by alleviating the employer’s administrative burden of calculating the wages, issuing paychecks, and maintaining certain payroll records. The contract was not entered into for the primary purpose of benefiting the employees. Thus, the employees are not third party beneficiaries to the contract and no cause of action for a breach of contract could be maintained by the employees.
Further, the Court found that it was neither necessary nor appropriate to impose upon a payroll company a tort duty of care with regard to the obligations owed to an employee under the applicable labor statutes and wage orders, consequently the negligence and negligent misrepresentation causes of action lacked merit. The Court opined that employees are already fully protected and can seek adequate remedies from their employers if the payroll company was derelict in its duties.
The Court also recognized that the imposition of a tort duty of care on a payroll company is likely to add an unnecessary and potentially burdensome complication to California’s increasing volume of wage and hour litigation.
Essentially the Court took the view that payroll companies simply agree to assist employers with the calculation of the amount of wages, issuing paychecks, delivering the required pay information and maintaining certain payroll records, and therefore should not be subject to wage and hour claims brought by employees of their clients.
It is important to note that when it comes to staffing companies, they do more than simply provide payroll services, so the Court’s ruling should not be construed to protect staffing companies from liability under the wage and hour laws. We continue to believe that as long as the staffing company is supplying the temporary labor, the courts will continue to view them as co-employers and hold them accountable for complying with the state’s wage and hour laws.
The experienced employment law attorneys at Roxborough, Pomerance, Nye & Adreani, LLP are available to answer your questions about these laws and their potential effect on your business, and we will continue to be at the forefront of advocating for the best interests of California employers.
