Money for Nothing? On-Call Checks For Free: California Court Says Employers Must Pay Employees For Certain On-Call Scheduling Requirements, Even If Employees Are Not Called Into Work

A California Court of Appeal recently issued an order in Ward v. Tilly’s, Inc. finding that certain on-call scheduling practices trigger “reporting time pay” requirements even when the employee does not actually come into the work site.

Under the Industrial Welfare Commission (“IWC”) Wage Order No. 7-2001 (“Wage Order 7”), which regulates wages and hours in the mercantile industry, employers must pay “reporting time pay” any time an employee is required to (and does) report for work but is not put to work or works less than half of the employee’s usual or scheduled day’s work. In such a scenario, the employee must receive at least 2 hours of reporting time pay at his or her regular rate of pay.  See Cal. Code Regs. Tit. 8, § 11070.

The Wage Order doesn’t specify what it means to “report for work,” but courts traditionally have applied reporting time pay where employees physically show up to the worksite but, for whatever reason, are not needed or are needed for less than half of their full shift.

In Ward, retail employees were required to call in two hours before their scheduled “on-call” shift to find out if they were needed. If they were told to come in, they would physically report to work and be paid for their actual time worked; if they were told they were not needed, the employees would not come in and would not receive any compensation for having been “on-call.” The plaintiff’s class action lawsuit alleged that the on-call scheduling violated the Wage Order because requiring employees to call in prior to their on-call shifts effectively required them to “report for work,” but didn’t provide any pay when they weren’t needed.

Recognizing that the Wage Order does not define what it means to “report for work” for purposes of reporting time pay, the court analyzed whether the company’s on-call scheduling practice mirrored the type of practices that led to the creation of reporting time pay in the first place. As with traditional reporting time pay scenarios where an employee reports to work for a scheduled shift but isn’t needed or is needed for less than half the shift, the court noted that the employees in Ward could not take other jobs, go to school, or make social plans during times when they were scheduled to be on-call. As a result, the court determined that the on-call system at issue triggered California’s reporting time pay requirement because by calling in, the employees were “reporting” for work.

The court pointed to the 2016 California Supreme Court case, Augustus v. ABM Securities, which found that the employer’s practice of requiring security employees to carry radios and remain on-call during rest breaks was inconsistent with California’s requirement that employees be relieved of all work duties and employer control during rest breaks. As with on-call rest breaks where employees are under employer control and must be compensated under Augustus, the court in Ward found the same to be true for on-call scheduling where employees are required to call in prior to a shift.

Ward seems to suggest that when an employee is “ordered” or “required” to appear for work, be it via telephone for only seconds, logging into a computer, or physically appearing at a job site, that employee has “reported to work” and is entitled to reporting time pay, even if they are simply checking in to see if they are needed. However, the case may be a candidate for further review by the California Supreme Court, as it was narrowly decided 2-1, with a well-reasoned dissent by Justice Egerton. The dissent understood retailers have a legitimate reason to attempt to staff stores with flexibility given the many variables that can affect the number of customers on a given day (such as weather, traffic, inventory gluts and shortages, and marketing responses). Balancing the employer’s interest in flexible staffing against the potential inconvenience to employees, Justice Egerton stated that interpretation of whether “report for work” encompasses more than physically showing up should be up to the Legislature, rather than the courts.

Next steps:

In an era of increasing digitization and utilization of alternative sources to communicate with employees (including the use of remote worksites and internet-based collaborative technologies) Ward presents potential hurdles for employers seeking to adapt to a modernizing workforce. On one hand, being able to easily, economically, and quickly communicate with employees to schedule shifts and manage workload provides a major cost-savings benefit to employers and flexibility to employees. However, on the other hand, employers must now closely consider how they communicate with employees to schedule shifts – particularly if they wish to rely on a nimble staffing arrangement such as on-call scheduling.  Given this significant expansion of reporting time pay to on-call scheduling, employers should review their on-call or call-in scheduling practices and examine whether those practices trigger reporting time pay.

Orrick will continue monitoring this line of cases to see how precedent develops and will continue to develop strategies to best fit your needs and the needs of your workforce, consistent with the changing landscape of California wage and hour laws.