Employees Snooze, Employers Lose: California Supreme Court Delivers Wake Up Call to Employers of On-Call Security Workers

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In Mendiola v. CPS Security Solutions, Inc., issued on January 8, 2015, the California Supreme Court ruled that security guards are entitled to compensation for all on-call hours spent at their assigned worksites, even when they are engaged in certain personal activities or sleep.

Plaintiffs were security guards hired to protect construction sites overnight on weekdays and around the clock on weekends.  The guards were required to periodically patrol and respond to disturbances by remaining on call throughout their shifts.  While on call, guards were required to reside in trailers on-site where they could engage in certain personal activities. The guards were permitted to leave the premises only if a relief guard was available and the assigned guard traveled no more than 30 minutes from the job site.  Pursuant to a memorandum of understanding with California’s Division of Labor Standards Enforcement (“DLSE”), employer CPS Security Solutions, Inc. (“CPS”) paid the guards for time spent patrolling, responding to disturbances, or waiting for requested relief, but not for other “on-call” time.

Plaintiffs alleged that this compensation policy violated the minimum wage and overtime requirements of Industrial Welfare Commission (“IWC”) Wage Order No. 4, which governs “professional, technical, clerical, mechanical, and similar occupations.”  That order requires employers to pay employees for all “hours worked,” defined as “the time during which an employee is subject to the control of an employer … includ[ing] all the time the employee is suffered or permitted to work, whether or not required to do so.”

The Court found that, based on the level of control CPS exercised over the plaintiffs’ on-call activities and the fact that the plaintiffs’ “mere presence was integral to CPS’s business,” on-call time constituted “hours worked.”  The Court rejected CPS’s reliance on a federal regulation, 29 C.F.R. § 785.23, which provides that workers who reside on an employer’s premises are only counted as “working” during “time spent carrying out assigned duties,” finding that the  IWC had not expressed any clear intent to incorporate the federal understanding into the wage order at issue.

The Court further held that CPS could not exclude any period of “sleep time” from the guards’ 24-hour weekend shifts.  The Court again eschewed reliance on a federal regulation, 29 C.F.R. § 785.22, which provides that employers and employees may agree that sleep time is not compensable.  The Court distinguished cases and wage orders supporting a sleep time exception for workers in other industries (e.g, ambulance drivers, in-home child care providers), and held that Wage Order No. 4 contained no such exception.  In so holding, the Court declined to defer to the DLSE’s finding that CPS’s policy complied with all applicable wage orders, emphasizing that the DLSE had changed its position over time and that the promulgating agency (the IWC) had not expressly incorporated any sleep time exception into the relevant wage order.  The Court noted, however, that its holding was limited to the circumstances and particular wage order before it.

The Mendiola decision should serve as a reminder to employers that California’s labor laws may not be interpreted consistent with federal analogues or the opinion of state enforcement agencies, and that standards applicable to one industry or vocation may not govern another.  Cautious employers should seek the advice of counsel in understanding the nuances of, and navigating through, California’s complicated compensation landscape.