Reporting Time Pay in the Retail Industry: An Analysis of Ward v. Tilly’s

This article will discuss a recent case out of the Second Appellate District of the California Court of Appeals, Ward v. Tilly’s, Inc. On February 4, 2019, the Court determined that an employee who works in retail is entitled to “reporting time pay”, when the employer schedules that employee for “on-call shifts” and requires that employee to call in two hours prior to the start of that “on-call shift” to determine whether or not they are required to work that day. While this case will likely be appealed to the California Supreme Court, the Second District Court of Appeals covers Los Angeles, and is therefore the law until something else happens. Given that requiring employees to call in for “on call shifts” is a common practice in the retail industry, the case itself is worthy of in-depth analysis.

While it is an axiomatic concept in employment law that employees be paid for “all hours worked”, the vast majority of litigation has surrounded what constitutes “hours worked.” A far more obscure, but equally important question arises in the context of the “reporting time pay” provisions of the wage orders.  This article will discuss: (1) the history of the IWC Wage Orders; (2) The actual language of the relevant provisions of IWC Wage Order 7, the wage order governing the retail industry; (3) The various arguments at issue in Tilly’s case; (4)The history and purpose of the relevant provisions of IWC Wage Order 7; and (5) a discussion of why sections (1) through (3) mandate that employers pay employees who are required to call in to confirm their “on call shift” two hours prior to the start of that shift.

  1. History of the IWC Wage Orders

In 1913, the California Legislature, “spurred by concerns over inadequate wages and poor working conditions – delegated to the [IWC] authority for setting minimum wages, maximum working hours, and working conditions”, created the Industrial Welfare Commission (“IWC”). Augstus v. ABM Security Services, Inc. (2016) 2 Cal.5th 257, 263. Keeping in line with the California Legislature’s mandate, in 1916, the IWC issued industry- and occupation-specific wage orders; notwithstanding the fact that the IWC was defunded in 2004, those wage orders remain in effect today. Mendiola v. CPS Security Solutions, Inc. (2015) 60 Cal.4th 833, 838, fn. 6. The wage order governing the retail industry is Wage Order 7, which expressly governs “all persons employed in the mercantile industry,” other than persons employed “in administrative, executive, or professional capacities.” Cal. Code Regs., tit. 8, § 11070, subd. (1)(A). The “mercantile industry” is “any industry, business, or establishment operated for the purpose of purchasing, selling, or distributing goods or commodities at wholesale or retail; or for the purpose of renting goods or commodities.” Id., subd. (2)(H).

  1. The Language of IWC Wage Order 7

This section will address the specific “reporting time pay” provisions of IWC Wage Order 7. An employer is required to pay their employees “reporting time pay” in the following situations:

“(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.”

CLASSIC EXAMPLE: Eric works in retail, typically works 8 hours per day, and is required to come in to work on Friday’s as an additional employee for the business’ busiest day of the week. On one of these Fridays, Eric comes into work, but it’s an unusually slow day and he is sent home. Under the usual days’ work. Under these facts, Eric is entitled to 4 hours of reporting time pay because he was required to report for work, did report for work, and was furnished less than half.

NOTE: This case turns on whether an employer requiring their employees to call in to work prior to the start of their shift, assuming the employee does call in, is the same as requiring an employee to show up to work; in other words, did that employee report for work when they called in pursuant to their employer’s requirements.

“(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.”

CLASSIC EXAMPLE: Eric works in retail and is regularly scheduled for two 6-hour shifts; the second 6-hour shift is for the purpose of having workers available if the store is having a particularly busy day. In most instances, Eric takes a small break and returns to the store to see if he is needed. Most days, Eric is sent home without having to work any portion of his second shift. Under these facts, Eric is entitled to 2 hours of reporting time pay, because he physically showed up for a second shift, and was not put to work.

“(C) The foregoing reporting time pay provisions are not applicable when:

(1) Operations cannot commence or continue due to threats to employees or property; or when recommended by civil authorities; or

(2) Public utilities fail to supply electricity, water, or gas, or there is a failure in the public utilities, or sewer system; or

(3) The interruption of work is caused by an Act of God or other cause not within the employer’s control.”

NOTE: These carve outs were created to spare the employer from reporting time pay requirements when circumstances beyond their control were to blame, rather than their own business decisions.

“(D) This section shall not apply to an employee on paid standby status who is called to perform assigned work at a time other than the employee’s scheduled reporting time.” Cal. Code Regs., tit. 8, § 11070, subd. (5).”

This case is primarily a case of interpretation, and it is important to understand the arguments involved.

  1. The Arguments

The crux of the question presented, and the question answered, in this case is what it means to “report for work”, particularly in light of the fact that Wage Order 7 does not define that phrase.

On the one hand, the Employer (Tilly’s) argued that an employee must be physically present at the job site, at the start of their shift, in order to “report for work” as envisioned by Wage Order 7; in contrast to calling in to verify their schedule.

On the other hand, the Plaintiff (Ward) argues that there is no reason to read in language, requiring physical presence, to the Wage Order. Moreover, in today’s economy it is increasingly common for employees to work remotely; therefore, “reporting for work” must include things beyond physical presence, or absurd results would occur in an emerging type of employment. This is particularly true in light of the reason the IWC and wage orders were promulgated in the first place, the California Legislature’s “concerns over inadequate wages and poor working conditions.” Augustus.

  1. The History of Wage Order 7, and “Reporting Time Pay”

The first wage orders, promulgated by the IWC in 1916, were designed to set minimum wages, maximum hours, and standard working conditions for the protection of minors and women. Within 7 years, by 1923, wage orders covered most industries. The IWC revised almost all their wage orders between 1942 and 1943. In 1942, the Canning and Preserving Industries Wage Board explained the need for reporting time pay:

“Allowing a large number of workers to come to the plant when there is little or no work for them is serious abuse. The testimony [to the Wage Board] showed that able employers through the information collected by their organization eliminated this evil almost entirely. Incompetent employers are able, however, to make the worker pay for their incompetency. It is an obvious advantage to the employer to have plenty of workers around for all emergencies if he does not have to pay for them. . . . [¶] . . . [¶] . . . [Reporting time pay] is a penalty which will make the employers careful to see that there is work and some compensation for the time and expense of the employee in reporting.” (Kidd, Chairman, Comment on the Rep. of the Wage Bd. for the Canning and Preserving Industries (July 21, 1942) pp. 8–9.)

In response, effective 11 months later on June 21, 1943, the IWC adopted revised Wage Order 7, which included the following provision:

“Each day an employee is required to report for work and does report for work but is not put to work or works four (4) hours or less, the employer shall pay the employee for not less than four (4) hours at fifty cents (50¢) per hour . . . .” The IWC explained it was necessary to require employers to pay employees who reported but were not put to work because of “the prevalence of such practices, and in order to compensate the employee for transportation costs and loss of time.”  The same year, IWC also revised the wage order governing the housekeeping industry (wage order No. 5) to include a reporting time pay requirement. In 1979, The IWC adopted the current iteration of the reporting time pay provision of Wage Order 7. The IWC explained that “[t]he requirement for reporting time pay historically has been included in the commission’s orders on the basis that it is necessary to employee[s’] welfare that they be notified in advance when changes in their starting time must be made. It has been deemed a [maximum] of four hours’ pay adequate to encourage proper notice and scheduling. This history thus reveals, as the Supreme Court has said, that the IWC’s purpose in adopting reporting time pay requirements was two-fold: to “compensate employees” and “ ‘encourag[e] proper notice and scheduling.’ ” Murphy, supra, 40 Cal.4th at pp. 1111–1112.

  1. Conclusion

The Court concluded that requiring employees to call in to determine whether they were required to work an on-call shift constitutes “reporting to work” based on the history and purpose of IWC Wage Order 7. Specifically, the Court reviewed the Augustus rationale that “one cannot square the practice of compelling employees to remain at the ready, tethered by time and policy to particular locations or communications devices, with the requirement to relieve employees of all work duties and employer control during 10-minute rest periods.” Augustus, supra, 2 Cal.5th at p. 269. The court explained: “ Further, the  “. . . Whatever else being on call entails in the context of a required rest break, that status compels employees to remain at the ready and capable of being summoned to action. Employees forced to remain on call during a 10-minute rest period must fulfill certain duties: carrying a device or otherwise making arrangements so the employer can reach the employee during a break, responding when the employer seeks contact with the employee, and performing other work if the employer so requests. These obligations are irreconcilable with employees’ retention of freedom to use rest periods for their own purposes.” Id.

Similarly, requiring employees to remain available for work up to 2 hours prior to the start of an on call shift would deprive that employee of any real free time; it would prohibit them from scheduling classes or working another shift, because if they could not be sure if they were available for those activities until they knew if they were obligated to work

“The court’s holding in Augustus was grounded in its conclusion that if an employer limits the kinds of activities employees can engage in during off-duty time, they are not truly off-duty. That analysis plainly has resonance in this case, where, as we have described, the employer’s on-call requirement limits how employees can use their off-duty time— and does so not merely for 10 minutes (during breaks which, by their nature, impose “practical limitations on an employee’s movement” Augustus, supra, 2 Cal.5th at p. 270, but instead over several hours before and during on-call shifts. Indeed, as we have said, Tilly’s call-in requirement imposes significant limitations on how employees can use their time both two hours before an on-call shift, when they must be available to contact Tilly’s, and during the on-call shift itself, when employees must be available to work. As such, the call-in requirement is inconsistent with being off-duty, and thus triggers the reporting time pay requirement.” Ward v. Tilly’s Inc.

If you or a loved one is required to call in prior to an on-call shift, without reporting time pay, contact the attorney’s at Yeremian Law today; the California Legislature sought to protect you, the California Court of Appeals agrees, and you are entitled to compensation.

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