When non-exempt employees are performing their “regular” duties, employers typically understand their responsibility to pay for the time. But in some circumstances, it is unclear whether an employee’s time is compensable. Recently, in Mendiola v. CPS Security Solutions, Inc., the California Supreme Court addressed two such situations: on-call time and sleep time.

Facts

CPS employed security guards at construction sites. The guards actively patrolled during the day, and were “on-call” at night. During the on-call time, the guards were required to be on the worksite and to respond to disturbances. The guards had written agreements with CPS to reside in trailers on the premises, with typical residential amenities like a bed, bathroom, and kitchen. Although they could use on-call time as they wished, children, pets, and alcohol premises were not permitted on the premises, and the guards could only entertain adult visitors with permission from the CPS client. A guard wishing to leave the premises had to notify a dispatcher and wait for a replacement to arrive. Even if relieved by a replacement, the guard also had to be accessible by pager or phone while away form the worksite, with the ability to return within 30 minutes.

CPS did not pay the guards for this on-call time. The security guards filed a class action, claiming the time was compensable working time.

On-Call Time

To evaluate the plaintiff’s claims, the Court looked to the definition of “hours worked” in the applicable wage order (Wage Order 4). The wage orders are regulations promulgated by the Industrial Welfare Commission (the “IWC”), a currently non-operational California government entity established to regulate employee wages, hours and working conditions. The wage orders, divided by industry or occupation, include many important rules that govern employee wages and related issues.

The Court acknowledged that while on-call time may be compensable in certain circumstances, that is not always the case. The key factor is the degree of the employer’s control. To assess the degree of control, courts take into account factors such as: (1) whether the employee is required to live on the premises; (2) whether there are excessive geographic restrictions on the employee’s movements; (3) whether the frequency of calls is unduly restrictive; (4) whether on-call employees can easily trade responsibilities; (5) whether use of a pager could ease restrictions; and (6) whether the employee could actually engage in personal activities during on-call time.

The Court determined that the guards were entitled to be paid for the on-call time because CPS exercised significant control over them. The guards were required to live on site, to respond to calls immediately and in uniform, and to contact the dispatcher if they became aware of suspicious activity. They could not easily trade their on-call responsibilities, had to remain available even when they left the worksite, and were subject o restrictions on nonemployee visitors, pets, and alcohol. Moreover, their onsite presence was clearly for CPS’s benefit, to prevent theft and vandalism.

In claiming the time was not compensable, CPS relied on a federal rule limiting when an employee who resides on the employer’s premises is entitled to be paid. However, the Court pointed out that nothing in Wage Order 4 indicated that the IWC intended to incorporate that rule. Moreover, the fact that the guards could engage in personal activities like sleeping, showering, eating, reading, watching TV, and browsing the Internet was similarly unpersuasive, because it did not lessen the amount of CPS’s control over the guards.

Sleep Time

CPS also attempted to exclude a portion of the on-call time as “sleep time.” Again, it relied on a federal regulation, and California cases interpreting the regulation, that permitted employers to exclude sleep time from compensable time on shifts of 24 hours or more.

The Court again rejected CPS’s arguments, noting that Wage Order 4 did not include or incorporate the federal sleep time rule, and the cases the employer relied on fell under another wage order. Because the IWC did include sleep time provisions in other wage orders, the Court reasoned that it had not intended to incorporate the federal sleep time rule into Wage Order 4 or it would have done so explicitly. In contrast, for example, the IWC did address sleep time in Wage Order 9, relating to sleep time for ambulance drivers and attendants.

Advice for Employers

Following Mendiola, California employers must carefully evaluate whether employees who are on-call or who are permitted to sleep while working are entitled to be paid for the time. To make the assessment, employers must first know which wage order applies, and read it carefully. Then, to assess the compensability of on-call time, employers must realistically look at the degree of control they exercise over on-call employees. And in the rare instance that an employer can lawfully exclude sleep time from hours worked, the employer must ensure it understands and follows any defined restrictions on doing so (for example, by entering into a written agreement).

Employers who must pay for on-call and sleep time can take various steps to reduce their costs. For example, employers can set a reduced rate (not below minimum wage) for the on-call or sleep time, assign exempt employees to be on-call without providing additional compensation (provided doing so does not compromise their exempt status), or strategically alter on-call arrangements to decrease the degree of control they exercise over the on-call employees. Although the compensability of such time will be determined on a case-by-case basis, understanding and proactively managing these responsibilities will enable employers to minimize financial burden while ensuring employees are compensated as required by law.