California Supreme Court to Decide Whether Employees Should be Paid for Time Spent During Employee Exit Searches

Employee security searchFrlekin v. Apple, Inc. is one of several California Wage Order interpretation cases that merit watching this year. The California Supreme Court has agreed to decide whether retail employees should be compensated for the time spent while their personal belongings are searched by store management prior to exiting the premises. The question turns on the Court’s interpretation of Wage Order 7 which requires employees to be compensated for “hours worked.” Right now, there is no clear answer under state law.

Facts of the Case

Apple’s hourly-paid retail store employees are subject to a written policy requiring their personal bags and Apple devices – including their iPhones, iPads and Apple-branded laptops – to be checked every time they exit the store. The company’s search policy requires employees to locate a manager or store security personnel to conduct the search and then open their bags and compartments for a visual inspection of their belongings and verification of their personal Apple devices’ serial numbers. These searches are compulsory. Failure to comply with the policy could lead to disciplinary action, up to and including termination. Exiting employees expect to wait up to 20 minutes or more to be searched. Apple does not pay employees for time spent awaiting and during the search.

 

Wage Order 7

Apple’s retail store employees are covered by California Industrial Wage Commission (“IWC”) Wage Order 7, which regulates wages, hours, and working conditions in the mercantile industry. Wage Order 7 requires an employer to pay its employees for all “hours worked.” “‘Hours worked’ means:

[1] the time during which an employee is subject to the control of an employer, and includes

[2] all the time the employee is suffered or permitted to work, whether or not required to do so.”

Each part of the definition is a separate and independent test for compensability.

 

Case History

The case was originally filed in a federal district court which confined the issue to the compensability of employees’ time during searches of bags that were “voluntarily” brought to work “purely for personal convenience.” After hearing both parties’ arguments, the district court ruled that employees’ time spent during exit searches is not compensable “hours worked” under either theory of the Wage Order.

The case was appealed to the Ninth Circuit which, in turn, certified the case to the California Supreme Court, framing the issue: “Is time spent on the employer’s premises waiting for, and undergoing, required exit searches of packages or bags voluntarily brought to work purely for personal convenience by employees compensable as ‘hours worked’ within the meaning of California Industrial Welfare Commission Wage Order No. 7?”

 

Supreme Court Briefs

In briefing the Supreme Court case, both parties tackled Wage Order 7’s “control” theory of liability first. From a strictly textual standpoint, establishing that employees were “subject to the control of an employer” during exit searches was a straightforward exercise. Employees were required to follow search procedures, under threat of discipline, while confined to the premises. Under this analysis, the Ninth Circuit reasoned that Plaintiffs were entitled to compensation.

Apple challenged this analysis. The company argued that the “controlled” activity must be both “restrictive and required” to constitute “hours worked.” Apple’s interpretation finds support in Morillion v. Royal Packing Co. and like cases holding that employees must be compensated for travel time when their employer requires them to travel to work using employer-provided transportation. If an employee is free to choose – rather than required – to take their employer’s ride, their travel time is not compensable “hours worked.” Apple reasoned that because its employees can choose to avoid a search by not bringing bags to work, the search is not “required.”

Both parties also made an argument that the Wage Order’s history favored their position. Prior to 1947, compensable time was expressed in terms of being “required.” That year, the IWC abandoned the “required” terminology for the current “control” language. However, the parties disagreed as to whether the new definition expanded or narrowed the scope of “hours worked.”

The parties also disagreed as to whether the search was time during which employees were “suffered or permitted to work.” Plaintiffs cited employee participation and furtherance of the employer’s business interest in loss prevention as evidence of work-relatedness. Indeed, searches were conducted pursuant to a written “work” policy. Apple countered that searches were not “work” because they were not related to the job the employees were hired to perform.

 

Summary

Although the Supreme Court will evaluate each parties’ contentions, it remains to be seen whether the Morillion’s mandatory/voluntary distinction is dispositive of the issues raised in Apple. The Supreme Court’s forthcoming decision is highly anticipated given the prevalence of employee exit searches in the retail industry.

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