A recent California Court of Appeals decision is certain to have a big impact on employers in the mercantile industry that schedule their employees for on-call shifts. Earlier this month, the California Court of Appeal in Ward v. Tilly’s decided that an employer who requires its employees to call in prior to the start of a shift to determine whether they are needed to work has to pay those employees for at least two hours of work in even if they are told not to come in to work that day.
Tilly’s Facts
In the Tilly’s case, the plaintiff-employee alleged that her employer, Tilly’s, a large retail chain store, failed to pay her and other employees “reporting time pay” in violation of California’s Mercantile Industry Wage Order 7. Plaintiff claimed that Tilly’s on-call scheduling policy assigned employees to on-call shifts immediately following a regular shift, immediately preceding a regular shift, or on a day when no regular shift was scheduled. Employees already at work were told during their regular shift whether they were needed for the on-call shift that followed. Otherwise, employees scheduled for on-call shifts were required to call their stores two hours before or the night before the start of the on-call shift to find out whether they were needed. Employees who called in but were not required to work did not receive any compensation for having been “on call.”
Wage Order 7 Reporting Time Pay Requirement
Tilly’s employees are covered by Industrial Wage Commission (“IWC”) Wage Order 7, which regulates wage, hours, and working conditions in the mercantile industry. Wage Order 7’s reporting time pay provision requires employers (a) to pay at least two, but no more than four, hours’ worth of reporting time pay at an employee’s regular rate of pay if the employee is required to report for work and does report, but is not put to work or is furnished less than half of the employee’s usual or scheduled day’s work, or (b) to pay for at least two hours of work, at the employee’s regular rate of pay, if the employee is required to report for work a second time in any workday and is furnished less than two hours of work on the second reporting. Cal. Code Regs., tit. 8, § 11070, subd. (5).
Policy Analysis Dictates On-Call Pay
At issue in the case was whether merely calling in, without physically reporting to the worksite, meant “reporting for work” for which employees must be paid “reporting time pay.” The plaintiff contended that when employees contact the store two hours before an on-call shift, they are reporting for work within the meaning of the Wage Order. Tilly’s did not consider calling in reporting for work for which reporting time pay was required. Tilly’s took the position that reporting for work requires the employee’s physical presence at the work site at the start of the shift.
Because the meaning of “report for work” was not evident from the text of the regulation itself, the Court was required to “adopt the construction that best gives effect to the purpose of the Legislature and the IWC —that is, the protection of employees.” This required the Court to examine the IWC’s purpose in adopting the reporting time pay requirement and deciding whether, had the IWC anticipated the advent of cell phones and on-call policies, it would have intended telephonic reporting to trigger the reporting time pay requirement.
The Court observed that the IWC had two goals in adopting the reporting time pay requirement – to compensate employees and encourage proper notice and scheduling. The Court explained that because reporting time pay requires employers to internalize some of the costs of overscheduling, employers are encouraged to accurately project their labor needs and schedule accordingly. Reporting time pay also partially compensates employees for the time and expense associated with making themselves available to call in and to work on-call shifts, including forgoing other employment, making childcare and elder care arrangements, and traveling to a worksite.
The Court reasoned that Tilly’s on-call system created the same problems the IWC intended to address, particularly the imposition on employees’ off-duty time. Tilly’s on-call system prevented employees from committing to other jobs, scheduling classes or making social plans. It required employees to make contingent childcare and elder care arrangements. It could require an employee to make several hours available for an on-call shift only to be told they were not needed without any financial consequence to their employer. The Court also noted that on-call scheduling disincentivizes employers to competently anticipate labor needs. These reasons led the Court conclude that the IWC would have intended reporting time pay to apply when an employee reports for an on-call shift by calling the employer two hours prior to the start of a shift. As a practical matter, the Court opined that reporting for work for purposes of reporting time pay is defined by the manner that an employer directs its employees to present themselves for work, whether in person, via computer, en route or telephonically.
The Future of the Tilly’s Decision
Although nearly every California Wage Order has an identical reporting time pay requirement, ultimately the Tilly’s Court limited its holding to employees covered by Wage Order 7 who are required by their employers to call in two hours prior to the start of the shift to determine whether they are needed. Given the broader implications of the Tilly’s opinion, the case is ideal for review by the California Supreme Court. Conceivably the reporting time pay requirement could be extended to other industries, other conditional scheduling arrangements and other ways an employer might direct its employees to report for work. Until then, Tilly’s is good law and should be followed by employers covered by Wage Order 7 with similar on-call systems.
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