Kelly A. Knight is an attorney and mediator based in Los Angeles, CAlifornia. He handles matters throughout California.

Court of Appeal holds that "call-in shifts" or "on-call shifts" requiring employees to call in two hours before the shift trigger reporting-time pay

In Ward v. Tilly’s, Inc., 31 Cal. App. 5th 1167 (2nd Dist. Feb. 4, 2019) (Google Scholar link here) (page citations below are to the slip opinion—the available version when this post was written), the Second District Court of Appeal held that an employer’s on-call or call-in scheduling system requiring employees to call in two hours before the scheduled shift triggers reporting-time pay if the employee is not called in, regardless of whether the employee physically shows up to work.

This one comes out of Judge Elihu Berle’s courtroom in Los Angeles. In a putative class-action complaint, the plaintiff, Ward, alleged that employees of Tilly’s were required to contact the store two hours before the start of their on-call/call-in shifts to determine whether they were needed to work. Id. The employees were to treat the on-call shift as actually scheduled until told that they are not needed. Id. at 2-3. On a given day, employees could be scheduled for a regular shift, an on-call shift, or both. Id. at 3-4. Employees were disciplined if they failed to contact the store two hours before the on-call shift. Id. at 5. Employees were not compensated for the on-call shift unless the employee actually worked the shift—the employee received no compensation if the employee called in before the shift and was told not to work the shift. Id. at 5. The plaintiff alleged class-wide violation of the reporting-time pay requirement under Wage Order 7.

Tilly’s filed a demurrer, arguing that calling in to ask whether to report for work does not constitute “report[ing] for work” under Wage Order 7. Id. at 6. The trial court sustained the demurrer and ruled that “report for work” means that an employee must physically report to the workplace—calling in doesn’t count. Id.  The Court of Appeal reversed in a 2-1 opinion.

Under Wage Order 7-2001 (8 Cal. Code Regs. § 11070(5)) (“Wage Order 7”), employers are required to compensate non-exempt retail employees with “reporting time pay” in the following two instances:

(A) 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, the employee shall be paid for half the usual or scheduled day's work, but in no event for less than two (2) hours nor more than four (4) hours, at the employee's regular rate of pay, which shall not be less than the minimum wage.

(B) If an employee is required to report for work a second time in any one workday and is furnished less than two (2) hours of work on the second reporting, said employee shall be paid for two (2) hours at the employee's regular rate of pay, which shall not be less than the minimum wage.

8 Cal. Code. Regs. § 11070(5)(A-B).

An interesting issue before the appellate court was whether the “report for work” language in Wage Order 7 must be interpreted with the exact same meaning as when the wage order was drafted (in the 1940s) or whether that language can change in meaning over time. The majority agreed with Tilly’s and the dissent that “at least in 1947, the phrase ‘report [for] work’ meant physically showing up.’” See id. at 13. But that didn’t end the discussion.

Cleverly citing a Supreme Court case that itself quoted a joint book by the late Justice Scalia (the “original intent” proponent) and legal scholar Bryan Garner, the Court of Appeal started with the premise that the Legislature knows that its statutes will be applied in future contexts that have circumstances that it could not anticipate:

The contemporaneous understanding of “report for work” is not dispositive of our analysis, however. To the contrary, our Supreme Court has held in construing statutes that predate their possible applicability to new practices or technology, “courts have not relied on wooden construction of their terms. Fidelity to legislative intent does not ‘make it impossible to apply a legal text to technologies that did not exist when the text was created. . . . Drafters of every era know that technological advances will proceed apace and that the rules they create will one day apply to all sorts of circumstances they could not possibly envision.’ (Scalia & Garner, Reading Law: The Interpretation of Legal Texts (2012) pp. 85–86.)” (Apple Inc. v. Superior Court (2013) 56 Cal.4th 128, 137 (Apple Inc.).) Thus, in applying existing statutes to new circumstances, “ ‘we must maintain our usual deference to the Legislature in such matters and ask ourselves first how that body would have handled the problem if it had anticipated it. [Citation.]’ (People v. Butler (1996) 43 Cal.App.4th 1224, 1229.)” (WorldMark, The Club v. Wyndham Resort Development Corp. (2010) 187 Cal.App.4th 1017, 1036 (WorldMark), italics added.)

Id. at 14.

The Court of Appeal went on to discuss two cases where courts (including the Supreme Court in Apple Inc.) applied statutory language to new contexts to hold that the statutory language had a different meaning as applied in the modern context. See id. at 14-16. (e.g., in Apple Inc., holding that the Song-Beverly Credit Card Act’s prohibition on retailers requiring credit-card holders from writing any personally identifying information on a credit-card transaction—a prohibition enacted a decade before online transactions became widespread—did not apply to online credit-card transactions; key was the Legislature’s purpose in enacting the statute when applying it to technology that was not envisioned when the statute was drafted).

Wage Order 7 does not reference telephonic reporting nor is there evidence that telephonic reporting was ever considered in the drafting of this wage order. Id. at 16. The appellate court analyzed the Wage Order’s history (there had been a history of employers allowing employees to show up ready to work and then choosing how many to put to work on a given day, causing the employees to suffer time and expense costs) and purpose (to encourage proper notice and scheduling of work shifts by employers and to compensate employees for the time and expense involved in reporting to work). See id. at 17-20. With this history and purpose in mind, the Court of Appeal next considered whether the Industrial Welfare Commission would have intended the reporting-time-pay requirement to apply to telephone and cell phones. Id.

The Court of Appeal concluded that if the IWC would have required reporting-time pay for telephonic on-call shifts and that telephonic on-call shifts have much in common with reporting-time shifts (being both beneficial to employers and imposing costs and burdens on employees):

We conclude that had the IWC confronted the issue, it would have determined, as we do, that the telephonic call-in requirements alleged in the operative complaint trigger reporting time pay. We note as an initial matter that the on-call practices plaintiff alleges have much in common with the specific abuse the IWC sought to combat by enacting a reporting time pay requirement in 1942. Like requiring employees to come to a workplace at the start of a shift without a guarantee of work, unpaid on-call shifts are enormously beneficial to employers: They create a large pool of contingent workers whom the employer can call on if a store’s foot traffic warrants it, or can tell not to come in if it does not, without any financial consequence to the employers. This permits employers to keep their labor costs low when business is slow, while having workers at the ready when business picks up. It thus creates no incentive for employers to competently anticipate their labor needs and to schedule accordingly.

Like other kinds of contingent shifts, unpaid on-call shifts impose tremendous costs on employees. Because Tilly’s requires employees to be available to work on-call shifts, they cannot commit to other jobs or schedule classes during those shifts. If they have children or care for elders, they must make contingent childcare or elder care arrangements, which they may have to pay for even if they are not called to work. And they cannot commit to social plans with friends or family because they will not know until two hours before a shift’s start whether they will be available to keep those plans. In short, on-call shifts significantly limit employees’ ability to earn income, pursue an education, care for dependent family members, and enjoy recreation time.

Further, because employees must contact Tilly’s two hours before the start of on-call shifts, their activities are constrained not only during the on-call shift, but two hours before it as well. That is, at the time employees are required to call in to find out whether they will be required to work on-call shifts, they cannot do things that are incompatible with making a phone call, such as sleeping, watching a movie, taking a class, or being in an area without cell phone service. For example, consider an employee who has been scheduled for an on-call shift from 10:00 a.m. to 12:00 p.m., followed by a scheduled shift from 12:00 p.m. to 4:00 p.m. If Tilly’s tells the employee at 8 a.m. that she is not needed for the on-call shift, she will not be paid anything for that shift. Nevertheless, she will necessarily have forgone sleeping, working another job, taking a class, etc. both at 8 a.m. and between 10:00 a.m. and 12:00 p.m. In short, the employer will have imposed to some degree on four hours of the employee’s time—an imposition for which it will not owe the employee any compensation.

For all of these reasons, we conclude that requiring reporting time pay for on-call shifts is consistent with the IWC’s goals in adopting Wage Order 7. Reporting time pay requires employers to internalize some of the costs of overscheduling, thus encouraging employees to accurately project their labor needs and to schedule accordingly. Reporting time pay also partially compensates employees for the inconvenience and expense associated with making themselves available to work on-call shifts, including forgoing other employment, hiring caregivers for children or elders, and traveling to a worksite. Finally, reporting time pay makes employee income more predictable, by guaranteeing employees a portion of the wages they would earn if they were permitted to work the on-call shifts.

Id. at 21-22. See also id. at 2-3 (“[O]n-call shifts burden employees, who cannot take other jobs, go to school, or make social plans during on-call shifts—but who nonetheless receive no compensation from Tilly’s unless they ultimately are called in to work. This is precisely the kind of abuse that reporting time pay was designed to discourage.”)

There’s a lot more discussion of the majority’s rationale in the opinion (e.g., that employees may have to get ready and/or start commuting to work well in advance of the two-hour call-in time because they live farther than two hours out, have to iron uniforms and get ready for work, etc.).

Ultimately the Court of Appeal held that “report for work” in Wage Order 7 “is best understood as presenting oneself as ordered.” Slip op. at 25 (italics in original). “ ‘Report for work,’ in other words, does not have a single meaning, but instead is defined by the party who directs the manner in which the employee is to present himself or herself for work—that is, by the employer.” Id.

“As thus interpreted, the reporting time pay requirement operates as follows. If an employer directs employees to present themselves for work by physically appearing at the workplace at the shift’s start, then the reporting time requirement is triggered by the employee’s appearance at the job site. But if the employer directs employees to present themselves for work by logging on to a computer remotely, or by appearing at a client’s job site, or by setting out on a trucking route, then the employee “reports for work” by doing those things. And if, as plaintiff alleges in this case, the employer directs employees to present themselves for work by telephoning the store two hours prior to the start of a shift, then the reporting time requirement is triggered by the telephonic contact.” Id. at 25-26.

Finally, the Court of Appeal discussed that this holding and interpretation is consistent with Augustus v. ABM Services, Inc., 2 Cal. 5th 257 (2016), the blockbuster opinion from the Cal. Supremes that held that requiring security guards to remain on-call during rest periods violated the obligation to fully relieve the employees of all control. See slip op. at 26-29. Although Augustus dealt with rest periods, the Court of Appeal noted that limiting the types of activities an employee can do during off-duty time makes the employee not truly off-duty. Id. at 29. Similarly here, by requiring employees to check in two hours before their shift, Tilly’s limited how its employees can use their off-duty time. Id. “[T]he call-in requirement is inconsistent with being off-duty, and thus triggers the reporting time pay requirement.” Id.

The Court of Appeal also noted that a more difficult question is where to draw the line: how long before a scheduled shift will advance notice of no work trigger the reporting-time pay requirement? See id. at 32. In other words, if an employee is scheduled to work a shift some time in the future but is expected to confirm the schedule X days before or is otherwise given some amount of advance notice that the shift is canceled, at what point is the reporting-time pay triggered? The Court of Appeal acknowledged that this is a difficult question, but it was only deciding the alleged practice before it—Tilly’s 2-hour call-in-shift practice. See id.

Unless reversed by the California Supreme Court, this holding has widespread ramifications and all employers who have some sort of call-in scheduling should be examining their systems in light of this opinion. As noted by the dissent, most of the other Wage Orders have identical language:

Does [the rule adopted in the majority holding] apply to almost every other industry in our state? Fifteen of California’s 18 wage orders―governing everything from manufacturing to transportation to “amusement and recreation” to “handling products after harvest”―contain the identical phrase: to report for work.

See slip op. at 47 (Egerton, J., dissenting).

Court of Appeal affirms tax-neutralization award as a component of economic loss, including on future-lost-income amounts

Court of Appeal holds that finding of malice to support punitive damages requires an intent to cause injury, not actual injury; malice finding subject to substantial-evidence review