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California Supreme Court Rules On-call and Sleep Periods Considered “Hours Worked”

“Hours worked” under California law includes all hours an employee is under an employer’s control, even when the employee is not actively engaged in carrying out job duties.

On Jan. 8, 2015, in Mendiola v. CPS Security Solutions, Inc., the California Supreme Court reaffirmed that “hours worked” under California law include all hours an employee is under an employer’s control, even when the employee is not actively engaged in carrying out job duties. The Supreme Court held that sleep periods during which an employee is on-call cannot be excluded from hours worked by an agreement between employers and their employees.

Significantly, the Court ruled that California wage and hour laws do not implicitly incorporate federal law, unless there is convincing evidence that the state laws intend to adopt federal standards.

Background Security guards employed by CPS Security Solutions (CPS) filed a class-action lawsuit in 2008, alleging that CPS’ compensation policy violated California’s minimum wage and overtime requirements.

The CPS security guards were employed to provide security at construction worksites for 16 hours per day on weekdays and 24 hours per day on weekends. While on the worksite, the security guards were required to reside in trailers provided by CPS. Guards could not leave the worksite unless they received consent from the CPS dispatcher and another guard was available to relieve them. If relieved, CPS required that the security guard remain available by pager or phone and within 30 minutes of the worksite.

During the week, the security guards’ 16-hour shifts consisted of eight hours of active patrol and eight hours of being on-call. On the weekends, the 24-hour shifts consisted of 16 hours of active patrol and eight hours of being on-call.

Under the terms of their employment agreement, the security guards were paid hourly for the time they spent on active patrol. However, they were not paid for any on-call hours, unless they actually worked during those hours.

The trial court ruled in favor of the security guards by determining that CPS was required to compensate the guards for all on-call time. Subsequently, CPS appealed and the California Court of Appeals affirmed the trial court’s decision in part. According to the Court of Appeals, CPS was required to pay the guards for the eight hours of on-call time during the 16-hour weekday shifts, but not for the on-call time during the 24-hour weekend shifts. The Court of Appeals determined that California law incorporated federal wage and hour regulations, and CPS could exclude up to eight hours of on-call time from compensation during 24-hour shifts, as long as the time was uninterrupted by the employer and the guards had previously agreed to the arrangement.

California Supreme Court Decision
The California Supreme Court ruled in favor of the security guards, and, in reaching its decision, the court examined two issues:
• Whether the security guards’ on-call time constituted as “hours worked”; and
• If it did, whether California law allowed employers and their employees to exclude a sleep period from the hours worked during an on-call period by a written agreement.

The California Supreme Court first determined that the on-call time worked by the security guards indeed constituted as hours worked. The court reached this decision by determining that CPS exercised sufficient control over the security guards to constitute compensable hours worked. Next, the California Supreme Court held that sleep periods during on-call shifts could not be excluded from hours worked through an agreement, unless such an agreement is specifically allowed under California law. In doing so, the court rejected an argument by CPS that the court should read into the California Industrial Welfare Commission’s Wage Order No. 4, which provided two federal regulations that:
• Allow employers who require employees to reside on its property to exclude time the employee is not carrying out his or her duties from hours worked; and
• Allow an employer and employee to agree that a sleep period of no more than eight hours may be excluded from hours worked when the employee is scheduled to work a 24-hour shift.

Impact on California Employers

In light of the Supreme Court’s decision, California employers should no longer exclude sleep periods from hours worked under the terms of an agreement with their employees, unless such agreements are explicitly allowed under California law. In a broader sense, employers should not rely on federal exemptions for hours worked, unless there is convincing evidence that the Industrial Welfare Commission’s wage orders intended to adopt the relevant exemption.

Additionally, employers should review their on-call and compensation policies to ensure they are in compliance with the Supreme Court’s decision.

Filed under: Workers' Compensation — Jillian Bender-Cormier @ 6:47 pm February 23, 2015