On September 2, 2020, the Ninth Circuit Court of Appeals ruled in Frlekin v. Apple, Inc. (Case No. 15-17382) that Apple must compensate a certified class of California non-exempt employees for time spent waiting for, and submitting to, bag searches required by Apple’s policies.
This decision underscores the need for employers to be vigilant in ensuring compliance with California’s complex framework of wage and hour laws, and, perhaps more importantly, the importance of minimizing class action exposure through carefully-drafted arbitration agreements.
The Lawsuit: Must Employees Be Compensated for Bag Searches?
Pursuant to an “Employee Package and Bag Searches” policy, Apple’s retail employees were required to submit to searches of all personal packages and bags before leaving their employing store. The searches were conducted by an employee’s manager or a security guard, and employees were forbidden from leaving the store until and unless a search was conducted. The policy expressly stated that failure to submit to a search would result in disciplinary action, up to and including termination of employment.
The onus was placed on the employee to “[f]ind a manager or member of the security team…to search your bags and packages before leaving the store.” In other words, the unavailability of a manager or security guard did not excuse the requirement to submit to a search, and the employee was obliged to wait until a manager or security guard was available for a search before being permitted to leave for the day. Most employees estimated that they spent between five and twenty minutes completing the search requirement, while some reported having to wait up to 45 minutes. However, these searches typically occurred after employees had clocked out for the day, and Apple did not compensate its employees for the time spent waiting for and submitting to the searches.
Several plaintiffs filed a putative class action contending, on behalf of themselves and current and former non-exempt employees of Apple who were employed at a California retail location since July 25, 2009, that Apple was required to pay its employees for the time they spent waiting for and submitting to the searches required by Apple’s policy. A federal district court certified a subset of the plaintiff’s proposed class, and both sides filed motions for summary judgment asking the district court to decide the issue of compensability of the time. The district court sided with Apple, ruling that the time employees spent waiting for and submitting to bag searches was not compensable as “hours worked” under California law because such time was neither “subject to the control” of the employer nor time during which class members were “suffered or permitted to work.” The plaintiff’s appealed the district court’s ruling.
The California Supreme Court Holds that Employer Control is Determinative
Because the controlling issue was one of California and not federal law, and had not been previously addressed by an authoritative California decision, the Ninth Circuit Court of Appeals asked the California Supreme Court to weigh in on the issue. The California Supreme Court granted the Ninth Circuit’s request and, in February 2020, held that employees are entitled to be paid wages for the time that they on an employer’s premises waiting for, and undergoing compulsory searches of packages, bags, and personal technology devices brought to work for personal convenience.
In answering the Ninth Circuit’s certified question, the California Supreme Court held that Apple’s employees “are subject to Apple’s control while awaiting, and during, Apple’s exit searches.” Therefore, Apple was obligated to compensate those employees for time spent waiting for and undergoing the exit searches required by its policy. The California Supreme Court reasoned: “Apple’s exit searches are required as a practical matter, occur at the workplace, involve a significant degree of control, are imposed primarily for Apple’s benefit, and are enforced through threat of discipline.” Thus, according to the legal standard for “hours worked” under California law, which turns on employer “control,” Apple was required to pay its employees for that time.
After the California Supreme Court’s decision, the Ninth Circuit’s course of action was effectively charted. The Ninth Circuit held that the federal district court had erred in granting summary judgment for Apple, reversed that ruling, and instructed the trial court to instead grant summary judgment for the plaintiffs.
As shown by the California Supreme Court’s decision in this case, employers must be vigilant and ensure that employees are compensated for all time during which they are subject to the employer’s control. The failure to do so risks significant exposure to employees for back wages and potential attorneys’ fees.
The exposure to class action damages in such litigation can add up quickly even though the damages per employee are comparatively slight. Employers can, and should, mitigate their exposure to such tactics by implementing strong, bilateral arbitration agreements containing class action waivers, which have been repeatedly upheld by the United States Supreme Court under the Federal Arbitration Act. Had Apple done so here, it likely would have been able to address bag-search claims on an individual basis and to resolve them for a reasonable settlement value. Of course, care must be taken to draft those agreements consistent with California law, and employers should not undertake the task without the assistance of experienced employment counsel.
If nothing else, this case highlights the need for employers to review their policies and onboarding paperwork, to update those documents regularly in light of new risks and developments in the law, and to draft those documents in a way that protects your organization against unnecessary risk. Please contact the author or your current counsel at AALRR for additional information concerning this case or for assistance in updating your employment policies and onboarding paperwork.
This AALRR post is intended for informational purposes only and should not be relied upon in reaching a conclusion in a particular area of law. Applicability of the legal principles discussed may differ substantially in individual situations. Receipt of this or any other AALRR post does not create an attorney-client relationship. The Firm is not responsible for inadvertent errors that may occur in the publishing process.
© 2020 Atkinson, Andelson, Loya, Ruud & Romo
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