Employers must pay workers for “reporting time” when employees call in to determine if they will be expected to work, according to the California Court of Appeal’s decision in Ward v. Tilly’s, Inc.  If the California Supreme Court denies Tilly’s pending petition for review, this decision requires employers to change their call-in policies and will lead to significant wage-hour liability.

California’s Industrial Welfare Commission Wage Orders mandate a number of wage and hour actions, such as minimum wage, overtime pay, meal periods, suitable seating, and more. They include a rule on “reporting time” and “call-back” pay, contained in section 5 of most Wage Orders.

Reporting time pay is intended to compensate employees who report for work, but are sent home or given less than half of scheduled hours. The traditional application of the rule required employees to physically report to work.  “Call-back” pay is required when employees must return to work twice in the same work day.

In Tilly’s, employees who called in two hours before their scheduled shift to see if they were required to work claimed they were due “reporting time” pay. They argued they were “reporting to work” for reporting time pay purposes.  The Court of Appeal decided that because the two-hour timeframe unduly burdened employees from taking other jobs or making social plans, the employer must issue reporting time pay when the employees called in, but were not required to come to the worksite that day.  That is, the Court decided, the mere act of calling in two hours before a shift counts as “reporting to work” for purposes of the reporting time provisions in the Wage Order (section 5 of Wage Order 7-2001, in this case).

This ruling is retroactive, unless it is later de-published or if the California Supreme Court grants review and overturns it. (Subscribe to our blog at https://shawlawgroup.com/blog/ for updates.)  As a result, any employer using a similar call-in procedure may be liable for at least three years of reporting time pay, plus associated penalties, interest and attorney’s fees.

The Court’s discussion about technology and its applicability to the Wage Orders was particularly noteworthy.  The Court decided that because employees were required to check in by telephone two hours prior to their on-call shifts, they were entitled to reporting time pay even though they did not have to physically “report” to the workplace. Presumably, employees who must access an electronic system at a certain time to see if they are on the schedule could be similarly entitled to reporting time.

On-Call Pay

The decision also provides an opportunity for employers to review the rules on other pay issues derived from employee scheduling. Scheduled “on-call” time is another issue that may be examined anew given the Tilly’s decision.  Unlike reporting time pay described above, on-call time may not be compensable, even though the employer subjects the employee to some level of control. 

The California Supreme Court in Mendiola v. CPS Security Solutions discussed several factors to determine compensability for on-call time.  These factors include whether the employee lives at the worksite; whether the employer imposes excessive travel restrictions during the on-call time; the frequency of calls to the employee during on-call time; and whether the employee could engage in personal activities during the on-call time.

If these factors point to significant employer control, then the on-call time is compensable (including overtime); otherwise, it is not.  As noted above, employer control may have played a part in the Court’s decision in Ward because of the concern that the employee could not engage in other pursuits due to the call-in schedule.  It was also significant to the Court that employees had to call in two hours before the shift started, rather than a day or more before the shift.

Call-Back Pay

As stated, employers must pay an employee a minimum number of hours when an employee who is required to return to work after having worked that day.  An employee who has already reported for work for fewer than two hours is entitled to a minimum of two hours’ pay. 

Case law after Tilly’s may affect this requirement.  Will call-back pay be due if an employee calls in, finds out she does not have to report, but the employer later calls the worker in for fewer than two hours?  Because the Court held that employees calling in are reporting to work, the second call may be deemed a “call-back.”  

Fair Scheduling Laws

Several California cities have what are referred to as “fair scheduling” ordinances. Among other things, San Francisco and Emeryville require certain employers to post employee schedules two weeks in advance.  If an employer changes the schedule within that time-period, it must provide two to four hours of additional pay depending on the circumstances.  Some ordinances also require employers to offer hours to existing employees before hiring new ones.

The local ordinances only cover employers of certain sizes or industries.  Although there is no statewide fair scheduling law, the California Legislature recently attempted to pass a predictive scheduling law for retail and food establishments.  The bill failed last year.  But because local municipalities continue to pass ordinances such as the ones above, the issue may be on the horizon again.

Employers that need flexibility for scheduling may pursue lawful alternatives to reporting time pay, even after Tilly’s.  Much will depend on the nature of the business and industry, and the workforce.  At the same time, Tilly’s leaves unanswered questions regarding the limits of employers’ flexibility.  Therefore, as always, employers should work with employment counsel to determine their options and to assess the risks of each approach.

X