AMANDA FRLEKIN et al., Plaintiffs and Appellants, v. APPLE INC., Defendant and Respondent.
S243805
Supreme Court of California
February 13, 2020
8 Cal. 5th 1038 | 258 Cal. Rptr. 3d 392 | 457 P.3d 526
Ninth Circuit 15-17382;
Chief
Industrial Welfare Commission wage order No. 7-2001 (Wage Order 7) requires employers to pay their employees a minimum wage for all “hours worked.” (
We granted the request of the United States Court of Appeals for the Ninth Circuit to decide the following question of California law, as reformulated by this court (see
Defendant Apple Inc. (Apple) is a leading personal technology provider. It operates retail stores worldwide, including 52 in California, that display and sell Apple products.
Apple requires its retail store employees to undergo exit searches pursuant to its “Employee Package and Bag Searches” policy (hereafter the bag-search policy), which imposes mandatory searches of employees’ bags, packages, purses, backpacks, briefcases, and personal Apple technology devices, such as iPhones. The bag-search policy states:
Employee Package and Bag Searches
All personal packages and bags must be checked by a manager or security before leaving the store.
General Overview
All employees, including managers and Market Support employees, are subject to personal package and bag searches. Personal technology must be verified against your Personal Technology Card (see section in this document) during all bag searches.
Failure to comply with this policy may lead to disciplinary action, up to and including termination.
Do
- Find a manager or member of the security team (where applicable) to search your bags and packages before leaving the store.
Do Not
- Do not leave the store prior to having your personal package or ba[g] searched by a member of management or the security team (where applicable).
- Do not have personal packages shipped to the store. In the event that a personal package is in the store, for any reason, a member of management or security (where applicable) must search that package prior to it leaving the store premises.
The record indicates that Apple employees bring a bag to work for a variety of reasons. For example, some employees bring bags to carry Apple-provided apparel, which employees must wear while working but are required to remove or cover up while outside the store. Others bring bags containing their cell phones, food, keys, wallets, or eyeglasses. Managers estimated that 30 percent of Apple employees bring such bags to work; employees estimated that “nearly all” do.
Apple employees are required to clock out before submitting to an exit search pursuant to the bag-search policy. Employee estimates of the time spent awaiting and undergoing an exit search range from five to 20 minutes, depending on manager or security guard availability. On the busiest days, Apple employees have reported waiting up to 45 minutes to undergo an exit search. As a rule, they are not compensated for this time.
Plaintiffs Amanda Frlekin,1 Taylor Kalin, Aaron Gregoroff, Seth Dowling, and Debra Speicher, suing on their own behalf and on behalf of a class of similarly situated Apple retail store employees, filed a complaint against Apple in federal district court. The operative complaint alleges, among other things, that Apple failed to pay plaintiffs minimum and overtime wages for time spent waiting for and undergoing Apple‘s exit searches in violation of California law.2
Cross-motions for summary judgment followed. The district court granted Apple‘s motion and denied plaintiffs’ motion. It ruled that time spent by class members waiting for and undergoing exit searches is not compensable as “hours worked” under California law. As relevant here, the court determined that the “hours worked” control clause in Wage Order 7 requires proving both that the employer restrains the employee‘s action during the activity in question and the employee has no plausible way to avoid the activity.
Plaintiffs appealed to the Ninth Circuit, which asked us to address the state law issue. (Frlekin v. Apple, Inc. (9th Cir. 2017) 870 F.3d 867, 869 (Frlekin).)
II. DISCUSSION
The Industrial Welfare Commission (IWC) was established more than a century ago “to fix minimum wages, maximum hours of work, and standard conditions of labor.” (Martinez v. Combs (2010) 49 Cal.4th 35, 50 (Martinez);
We construe wage orders, like wage and hour laws, so as to promote employee protection. (Mendiola v. CPS Security Solutions, Inc. (2015) 60 Cal.4th 833, 840 (Mendiola).) Our prior decisions have made clear that “wage orders are the type of remedial legislation that must be liberally construed in a manner that serves its remedial purposes” of protecting and benefitting employees. ( Dynamex Operations West, Inc. v. Superior Court (2018) 4 Cal.5th 903, 953 (Dynamex); see also Augustus v. ABM Security Services, Inc. (2016) 2 Cal.5th 257, 262 (Augustus) [when construing wage orders, courts adopt the construction that best gives effect to the Legislature and the IWC‘s purpose of protecting employees]; Industrial Welfare Com. v. Superior Court (1980) 27 Cal.3d 690, 702 [same].)
Wage Order 73 is one such wage order. (See
We have explained that the two phrases of the “hours worked” definition establish “independent factors, each of which defines whether certain time spent is compensable as ‘hours worked.’ ” (Morillion v. Royal Packing Co. (2000) 22 Cal.4th 575, 582 (Morillion).) Thus, an employee who is subject to the control of an employer does not have to be working during that time to be compensated under the applicable wage order. (Ibid.) Likewise, an employee who is suffered or permitted to work does not have to be under the employer‘s control to be compensated, provided the employer has or should have knowledge of the employee‘s work. (Id. at pp. 584-585; Troester v. Starbucks Corp. (2018) 5 Cal.5th 829, 853; Hernandez v. Pacific Bell Telephone Co. (2018) 29 Cal.App.5th 131, 137 (Hernandez).)
With these principles in mind, we first consider whether the time spent waiting for and undergoing Apple‘s exit searches is compensable as “hours worked” under the control standard.
A. The Language and History of the Control Clause Suggest that the Exit Searches are Compensable
“We independently review the construction of statutes [citation], and begin with the text. If it ‘is clear and unambiguous our inquiry ends.’ [Citation.] Wage and hour laws ‘are to be construed so as to promote employee protection.’ [Citations.] These principles apply equally to the construction of wage orders. [Citation.] Additionally, when the relevant facts are not in
Based on the language of the control clause, Apple employees are entitled to compensation for the time during which they are subject to Apple‘s control. (
Bono Enterprises, Inc. v. Bradshaw (1995) 32 Cal.App.4th 968, 972 (Bono) (disapproved on other grounds in Tidewater Marine Western, Inc. v. Bradshaw (1996) 14 Cal.4th 557), supports our interpretation of the control clause. In Bono, temporary workers at a manufacturing plant were not given security clearance and were required to “remain on the plant premises during their 30-minute lunch period unless they ma[d]e prior arrangements to reenter the plant after leaving for lunch.” (Ibid.) The Court of Appeal, relying on the dictionary definition of “control,” held that the employees who were required to remain onsite during their lunch hour were entitled to compensation for that time. (Id. at p. 975.)
The Bono court focused on the phrase ” ‘subject to the control of an employer[,]’ ” concluding that “[t]his language is neither vague nor unclear.” (Bono, supra, 32 Cal.App.4th at pp. 947-975.) Based on two dictionary definitions of the word “control,” the court interpreted the clause to mean “[w]hen an employer directs, commands or restrains an employee.” (Id. at p. 975.) It explained: “These definitions are not obscure; they are meanings commonly attributed to the words chosen by the IWC to communicate the obvious — an employer must compensate an employee for the time during which the employer controls the employee.” (Ibid.) Thus, “[w]hen an employer directs, commands or restrains an employee from leaving the work place . . . and thus prevents the employee from using the time effectively for his or her own purposes, that employee remains subject to the employer‘s control. According to [the applicable wage order], that employee must be paid.” (Ibid.)
Nor is Apple‘s interpretation consistent with the history of the “hours worked” definition in Wage Order 7. In 1943, the IWC issued a “New Series” of Wage Orders (the “NS” series), which included a two-part definition of “[h]ours employed” modeled from the 1939 federal Interpretive Bulletin. (IWC wage order No. 7NS (June 21, 1943) (Wage Order 7NS).) Under Wage Order 7NS, ” ‘[h]ours employed’ includes all time during which: [¶] 1. A [person] is required to be on the employer‘s premises ready to work, or to be on duty, or to be at a prescribed work place. [¶] 2. A [person] is suffered or permitted to work, whether or not required to do so. Such time includes, but shall not be limited to, time when the employee is required to wait on the premises while no work is provided by the employer and time when an employee is required or instructed to travel on the employer‘s business after the beginning and before the end of her work day.” (
In 1947, Congress enacted the Portal-to-Portal Act, which significantly narrowed the federal definition of “hours worked.” (Martinez, supra, 49 Cal.4th at p. 59.) “In response, the IWC, exercising its authority to provide employees with greater protection than federal law affords [citations], revised its wage orders from 1947 forward to define the term ‘hours worked’ as meaning ‘the time during which an employee is subject to the control of an employer, . . . includ[ing] all the time the employee is suffered or permitted to work, whether or not required to do so.’ ” (Id. at p. 60; see IWC wage order No. 7R (June 1, 1947).) Since 1947, the IWC has issued ten more amended wage orders for the mercantile industry, but it has never changed the definition of “hours worked.”
The history of the “hours worked” definition in Wage Order 7 indicates that the IWC purposely abandoned the narrower standard of compensating only “required” activities more than 70 years ago. The changes made in 1947 suggest that the IWC intended to make compensable the time “during which” employees are “control[led],” even if such time is not required. (
B. Morillion and its Progeny do not Preclude Relief
Despite the plain language and history of the “hours worked” control clause, Apple maintains that its exit searches are not compensable under Morillion and its progeny because Apple employees may avoid such searches by choosing not to bring a bag, package, or personal Apple technology device to work. But it is not clear that Morillion supports such a conclusion.
In Morillion, we considered whether the time employees spent traveling to and from a worksite on employer-provided buses was compensable under the “hours worked” control clause. (Morillion, supra, 22 Cal.4th at p. 578.) There, the employer required its employees to meet each day at specified assembly areas and ride the employer-provided bus to and from agricultural fields where the employees worked. (Id. at p. 579Ibid.) Employees who drove their personal vehicles to work were subject to disciplinary action, including the loss of a day‘s wages. (Id. at p. 579, fn. 1.)
We held that the employees in Morillion were entitled to compensation for their compelled travel time under the applicable wage order because they were ” ‘subject to the control of an employer’ ” during that time. (Morillion, supra, 22 Cal.4th at p. 578, citing
In reaching this conclusion, we relied on Bono‘s interpretation of the “hours worked” control clause. (Morillion, supra, 22 Cal.4th at p. 582, citing Bono, supra, 32 Cal.App.4th at p. 975.) Citing Bono, we held that the employees’ compulsory travel time, which included the time they spent waiting for their employer‘s buses to begin transporting them, was compensable. (Morillion, at p. 587.) We explained: “[The employer] required [its employees] to meet at the departure points at a certain time to ride its buses to work, and it prohibited them from using their own cars, subjecting them to verbal warnings and lost wages if they did so. By ’ “direct[ing]” ’ and ’ “command[ing]” ’ [its employees] to travel between the designated departure points and the fields on its buses, [the employer] ’ “control[led]” ’ them within the meaning of ‘hours worked’ . . . .” (Ibid., citing Bono, at pp. 974-975.)
We emphasized in Morillion that our holding was limited to compulsory travel time. (Morillion, supra, 22 Cal.4th at pp. 587-588.) We clarified that the time employees spend commuting from home to the departure points and back again is not compensable. (Ibid.) We also noted that “[t]ime employees spend traveling on transportation that an employer provides but does not require its employees to use may not be compensable as ‘hours worked.’ ” (Id. at p. 588.) Courts have applied Morillion in other cases involving employer-provided transportation, concluding that compulsory use of such transportation is compensable and optional use is not. (E.g., Hernandez, supra, 29 Cal.App.5th at p. 141 [time spent in company-provided vehicle between technician employee‘s home and customer‘s residence was not compensable as hours worked under control test because employee was not required to use company vehicle]; Overton v. Walt Disney Co. (2006) 136 Cal.App.4th 263, 271 (Overton) [time spent waiting for and riding employer-provided shuttle bus was not compensable as hours worked under control clause because shuttle was optional and alternative means of transportation existed].)
However, we are not aware of any California case4 discussing the precise issue of whether time spent at the worksite waiting for and undergoing exit
As a preliminary matter, there are inherent differences between cases involving time spent traveling to and from work, and time spent at work. Commuting is an activity that employees ordinarily initiate on their own, prior to and after their regular workday, and is not generally compensable. (Morillion, supra, 22 Cal.4th at p. 587;
In the present case, by contrast, Apple controls its employees at the workplace, where the employer‘s interest — here, deterring theft — is inherently greater. Moreover, the level of Apple‘s control over its employees — the “determinative” factor in analyzing whether time is compensable under the control standard (Morillion, supra, 22 Cal.4th at p. 587) — is higher during an onsite search of an employee‘s bags, packages, and personal Apple devices. Apple employees who bring an item subject to search under the bag-search policy are: confined to the premises until they submit to the search procedure; required to locate a manager or security guard and wait for that individual to become available; and compelled to take specific actions and movements during the search, including opening their bags, unzipping internal compartments, removing their personal Apple technology devices and technology cards, and proving ownership of such items. Because Apple‘s business interests and level of control are greater in the context of an onsite search, the mandatory/voluntary distinction applied in Morillion is not dispositive in this context.
The nature of the controlled activity here is distinct from Morillion and its progeny in another respect: those cases involve optional services that primarily benefit the employee. In Morillion, we characterized optional employer-provided transportation as an employee benefit that should be encouraged as
In other cases involving the “hours worked” control clause, we have found whether an employee‘s activity primarily benefits the employer to be a relevant consideration. (E.g., Mendiola, supra, 60 Cal.4th at pp. 841-842 [in deciding whether on-call waiting time constitutes “hours worked” under the control clause, courts have considered whether such time is spent primarily for the benefit of the employer and its business].) In Madera Police Officers Assn. v. City of Madera (1984) 36 Cal.3d 403, 409, we adopted a two-step analysis in determining whether limitations placed on police department employees’ mealtime periods converted that time into hours worked. We examined first, “whether the restrictions on off-duty time are primarily directed toward the fulfillment of the employer‘s requirements and policies,” and second, “whether the employees’ off-duty time is so substantially restricted that they are unable to engage in private pursuits.” (Ibid.) We concluded that the meal break restrictions, which required employees to return to duty if necessary, banned the conducting of personal business while in uniform, and prevented employees from scheduling personal appointments, were imposed primarily for the benefit of the employer. (Id. at p. 410.)
Here, like Madera and Mendiola, and unlike Morillion and Overton, the employer-controlled activity primarily serves the employer‘s interests. The exit searches are imposed mainly for Apple‘s benefit by serving to detect and deter theft. In fact, they are an integral part of Apple‘s internal theft policy and action plan. The exit searches burden Apple‘s employees by preventing them from leaving the premises with their personal belongings until they
Apple acknowledges that the exit searches promote its interest in loss prevention, but nevertheless urges this court to view the searches as part of a broader policy that benefits its employees. Apple argues, in this regard, that it could have totally prohibited its employees from bringing any bags or personal Apple devices into its stores altogether, and thus employees who bring such items to work may reasonably be characterized as having chosen to exercise an optional benefit. However, Apple has not imposed such draconian restrictions on its employees’ ability to bring commonplace personal belongings to work. Under the circumstances of this case and the realities of ordinary, 21st century life, we find far-fetched and untenable Apple‘s claim that its bag-search policy can be justified as providing a benefit to its employees.5
Moreover, as in Morillion and unlike Overton or Hernandez, Apple‘s exit searches are enforceable by disciplinary action. In Morillion, the employer‘s work rules specified that its employees would be subject to verbal warnings and lost wages if they drove a personal vehicle to work. (Morillion, supra, 22 Cal.4th at pp. 579, fn. 1, and 587.) In the present case, Apple‘s written policy explicitly provides that failure to comply with its bag-search policy may lead to disciplinary action, up to and including termination. Employees who do not comply with the policy may also be compelled to attend a “Warning Meeting,” cited for “Behavior to be Corrected,” and assigned to a “Coaching Tracker.” This factor also strongly suggests that plaintiffs are under Apple‘s control while waiting for, and undergoing, the exit searches.
Furthermore, case law suggests that the employee‘s ability to avoid an employer-controlled activity is not dispositive outside of the commuting context. As discussed above, the Bono court concluded that temporary workers who were required to remain on the premises during their lunch break were entitled to compensation because they were subject to the employer‘s control. (Bono, supra, 32 Cal.App.4th at p. 975Id. at p. 972.) Notwithstanding this exception, the Court of Appeal concluded that the employees who had not
Here, as in Bono, Apple employees may be able to avoid the employer-controlled activity if they make prior arrangements (i.e., by not bringing a bag, package, or iPhone to work). But, similar to the workers in Bono, the potential antecedent “choice” by some employees not to bring any searchable items to work does not invalidate the compensation claims of the bag-toting or Apple-device-carrying employees who are required to remain on the employer‘s premises while awaiting an exit search of those items.
Finally, notwithstanding the IWC‘s removal of the word “required” from Wage Order 7‘s “hours worked” control clause, courts have considered whether an activity is required in determining whether it is compensable. (Morillion, supra, 22 Cal.4th at p. 587Frlekin, supra, 870 F.3d at p. 873Ibid., citing Alcantar v. Hobart Service (9th Cir. 2015) 800 F.3d 1047, 1055, and Greer v. Dick‘s Sporting Goods, Inc. (E.D.Cal., Apr. 13, 2017, No. 2:15-cv-01063-KJM-CKD) 2017 U.S.Dist. LEXIS 57165.) The Ninth Circuit explained that some “actions . . . are, practically speaking, required, even though they are nominally voluntary. For example, a search policy in a cold climate that applied to all jackets would be effectively unavoidable, even if a person theoretically could commute to work without a jacket.” (Frlekin, at p. 873Ibid.)
We agree with the Ninth Circuit. Based on our review of the record, it is obvious that Apple‘s exit searches are, as a practical matter, required. Pursuant to its bag-search policy, Apple requires all of its retail store employees to undergo exit searches of their bags, purses, backpacks, briefcases, packages and personal Apple technology devices every day, and any
Apple‘s personal convenience argument rings especially hollow with regard to personal Apple technology devices, such as an iPhone. As the United States Supreme Court observed in Riley v. California (2014) 573 U.S. 373, 385, “modern cell phones . . . are now such a pervasive and insistent part of daily life that the proverbial visitor from Mars might conclude they were an important feature of human anatomy.” More recently, the high court remarked that “individuals . . . compulsively carry cell phones with them all the time.” (Carpenter v. United States (2018) 585 U.S. ___, ___ [138 S.Ct. 2206, 2218].) Apple has publicly agreed with the high court‘s description of cell phones, joining an amici curiae brief filed in Carpenter that characterized smartphones as “practical necessities of modern life,” “fundamental tools for participating in many forms of modern-day activity,” and “not just another technological convenience.” Consistent with this view, Apple‘s CEO Tim Cook recently referred to the iPhone as having “become so integrated and integral to our lives, you wouldn‘t think about leaving home without it.” (Jim Cramer interviews Tim Cook: the complete transcript (interview with Tim Cook, Apple CEO) CNBC (May 3, 2017) <https://www.cnbc.com/2017/05/03/tim-cook-on-jim-cramer-complete-transcript.html> [as of Feb. 4, 2020].)6
The irony and inconsistency of Apple‘s argument must be noted. Its characterization of the iPhone as unnecessary for its own employees is
C. Application of Control Clause to Exit Searches
In sum, we reaffirm our holding in Morillion that “[t]he level of the employer‘s control over its employees, rather than the mere fact that the employer requires the employees’ activity, is determinative” concerning whether an activity is compensable under the “hours worked” control clause. (Morillion, supra, 22 Cal.4th at p. 587.) We also emphasize that whether an activity is required remains probative in determining whether an employee is subject to the employer‘s control. But, at least with regard to cases involving onsite employer-controlled activities, the mandatory nature of an activity is not the only factor to consider. We conclude that courts may and should consider additional relevant factors — including, but not limited to, the location of the activity, the degree of the employer‘s control, whether the activity primarily benefits the employee or employer, and whether the activity is enforced through disciplinary measures — when evaluating such employer-controlled conduct.
Applying these factors here, it is clear that plaintiffs are subject to Apple‘s control while awaiting, and during, Apple‘s exit searches. 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 “hours worked” control clause, plaintiffs “must be paid.” (Bono, supra, 32 Cal.App.4th at p. 975.) We reiterate that Apple may tailor its bag-search policy as narrowly or broadly as it desires and may minimize the time required for exit searches by hiring sufficient security personnel or employing
D. We Decline to Consider Whether the Searches Are Compensable Under the Suffered or Permitted to Work Clause
Plaintiffs contend the time spent waiting for and undergoing Apple‘s exit searches is also compensable under the “suffered or permitted to work” clause. Because we have concluded that plaintiffs are entitled to compensation under the control clause, we express no view concerning plaintiffs’ alternative argument that the searches are compensable under the “suffered or permitted to work” clause.
E. Our Ruling Applies Retroactively
Apple asserts that if we conclude the time waiting for and undergoing exit searches is compensable as “hours worked,” our holding should be given prospective application only. We are not persuaded.
” ‘The general rule that judicial decisions are given retroactive effect is basic in our legal tradition.’ ” (Mendiola, supra, 60 Cal.4th at p. 848, fn. 18.) However, “fairness and public policy sometimes weigh against the general rule that judicial decisions apply retroactively.” (Alvarado v. Dart Container Corp. of California (2018) 4 Cal.5th 542, 573 (Alvarado).) For example, prospective application might be warranted when a judicial decision changes an established rule on which the parties below have relied. (Ibid.)
Apple contends that it reasonably relied on Morillion‘s holding that purely voluntary activities do not constitute employer control. But that is neither an accurate description of our holding in Morillion, nor a fair characterization of the nature of the exit searches at issue in this case. Morillion addressed compulsory employer-provided transportation to and from work. (Morillion, supra, 22 Cal.4th at p. 578any employer-controlled activity must be unavoidably required in order to be compensable as “hours worked.” “In short, [Apple] cannot claim reasonable reliance on settled law.” (Alvarado, supra, 4 Cal.5th at p. 573.) Moreover, we have declined to restrict our decisions to prospective application when doing so “would, in effect, negate the civil penalties, if any, that the Legislature has determined to be appropriate in this context, giving employers a free pass as regards their past conduct” and hence “would exceed our appropriate judicial role.” (Ibid.) Accordingly, we see no reason to depart from the general rule that judicial decisions apply retroactively.
We conclude that plaintiffs’ time spent on Apple‘s premises waiting for, and undergoing, mandatory exit searches of bags, packages, or personal Apple technology devices, such as iPhones, voluntarily brought to work purely for personal convenience is compensable as “hours worked” within the meaning of Wage Order 7.
CANTIL-SAKAUYE, C. J.
We Concur:
CORRIGAN, J.
LIU, J.
CUÉLLAR, J.
KRUGER, J.
GROBAN, J.
EDMON, J.*