On February 4, 2019, a California Court of Appeal ruled in Ward v. Tilly's that an employer must pay reporting time pay to employees who are required to call in two hours before a potential shift to learn whether they are needed to work, when they are told not to come in that day.
The court limited its finding to the particular policy at Tilly's under Wage Order 7-2001, but the same language appears in 15 of the 18 other wage orders. The court left unanswered the precise factors that trigger reporting time pay for call-in scheduling policies. Nonetheless, California employers should now review their call-in practices to avoid potential reporting time pay liability and consider ending any policy that requires employees call in or log in while on call, in favor of a policy in which the employer contacts on-call employees when they need to report to work.
Reporting Time Pay Requirement
California employers must generally pay "reporting time" pay when 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." Wage Order 7-2001 (Cal. Code Regs. Tit. 8, § 11070) (emphasis added). The amount of pay owed is half the usual or scheduled day's work, but in no event less than two hours or more than four hours (except that the 2-hour minimum does not apply to scheduled days of less than 2 hours). If an employee must report for work a second time in a workday and works for less than two hours on the second reporting, then the employee must be paid for at least two hours. See our prior advisory on reporting time pay here.
Plaintiff Skyler Ward alleged that under Tilly's call-in policy, employees were required to contact their stores approximately two hours before the start of their on-call shifts to determine whether they needed to work. Employees could be disciplined, up to and including termination, if they failed to contact their stores before on-call shifts, if they contacted the stores late, or if they refused to work on-call shifts.
Tilly's did not pay for the time to make the call and did not include on-call shifts as part of the employee's "scheduled day's work" and did not pay for the on-call time unless the employee worked the on-call shift. In addition, it did not consider an employee to have "reported for work" if the employee called the store prior to an on-call shift and was told he or she need not come in to work.
Ward argued that Tilly's employees were owed reporting time pay for on-call shifts within the meaning of Wage Order No. 7, and that Tilly's alleged failure to pay reporting time pay for those shifts resulted in violations of Wage Order No. 7, California Labor Code sections 200-203, 226, and 226.3, and Business and Professions Code section 17200. Conversely, Tilly's argued that no reporting time pay was owed under its call-in scheduling policy because employees "report for work" only by physically appearing at the work site at the start of a scheduled shift, and thus, employees who call in and are told not to come to work are not owed reporting time pay. The trial court agreed with Tilly's. Ward appealed.
The Court's Decision
On appeal, the focus was on the meaning of "report for work," which is undefined in the wage orders. Tilly's argued that "report[ing] for work" requires an employee's physical presence at the workplace at the start of a scheduled shift. The plaintiff argued that Wage Order 7-2001 does not contain any requirement for employees to physically present themselves at work, but could instead be triggered by any manner of reporting, whether in person, telephonically, or otherwise.
The court, siding with Ward, concluded that employees are entitled to reporting time pay under Wage Order 7 when employees are required to call their employers two hours before an on-call shift to determine whether they are needed for work that day. After analyzing the plain language and legislative history, the court interpreted "report for work" broadly to mean "presenting oneself as ordered" and that report for work 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." The court found that an employee may report for work through several means, including "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 . . . 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."
The court also concluded that on-call shifts like Tilly's "impose tremendous costs on employees," who cannot commit to other jobs, schedule classes, care for dependent family members, or make social plans during on-call shifts—but who receive no compensation from Tilly's unless they ultimately are called in to work. The court noted that Tilly's on-call practices were "precisely the kind of abuse that reporting time pay was designed to discourage."
The court limited its holding to Tilly's on-call system and left open whether its holding applied to employers governed by California wage orders other than No. 7.
In her dissenting opinion, Judge Anne H. Egerton concluded that the "legislative history of the phrase 'report for work' reflects the drafters' intent that―to qualify for reporting time pay―a retail salesperson must physically appear at the workplace: the store."
She also placed the responsibility on the Legislature, not the court, to balance the competing needs and interests of employers and employees as it relates to on-call scheduling and to enact legislation to address any hardship to employees who are required to call their employers to discover if they must report for work. She strongly urged that the majority's holding apply prospectively only because of the lack of clarity on the issue, but the majority did not do so.
Key Takeaways for Employers
In light of the 2-1 split decision overturning a trial court ruling and the absence of precedent regarding the statutory language at issue, this case is a prime candidate to be reviewed by the California Supreme Court. To further complicate matters, the 9th Circuit will address the same issue in Herrera v. Zumiez, Inc. No. 18-15135 in the next few months. In the interim, unless appealed, Ward is the only published California appellate decision addressing this specific issue and is controlling precedent in California.
Although the court's holding is specific to employers under Wage Order No. 7 and the particulars of Tilly's policy, given the court's failure to define the parameters between a lawful and unlawful call-in policy, all employers in California should review and revisit on-call scheduling. Employers should contact on-call employees who are required to report to work, rather than depending on employees to call in or log into a computer or phone app and exposing, which would likely cause liability for reporting time pay. Although Ward dealt with the issue of reporting time pay triggered by a mandatory requirement that the employee call in, (thereby “reporting to work”) this should be distinguished from mandatory on-call shifts, where an employee is on-call waiting to be called to work. Mandatory on-call shifts are lawful post-Ward, depending on the on-call policy’s language, and subject to the compliance with compensation requirements for controlled on-call time.
Employers that will continue to have on-call employees who are expected to contact their employers to find out if work is available should consult with experienced counsel as to how to proceed.