A case involving on-call workers at an Orange County retailer could put other California companies at risk for expensive wage-and-hour lawsuits, OC attorneys said.
Mark Payne, partner at Troutman Sanders LLP in Irvine, said a 2-1 decision in February by the U.S. Court of Appeals in California widens the definition of the state’s wage order and could affect employers across all industries.
The decision came following a 2015 lawsuit filed by a former employee at Irvine-based Tilly’s Inc. (NYSE: TLYS) which challenged a common scheduling practice among California retailers—that of having on-call employees to contact the company and confirm their shift status; the ruling said such workers are entitled to reporting time pay, whether or not they’re told to work the shift.
Tilly’s is a fashion retail chain but the use of unpaid on-call shifts is in place at other workplaces—restaurants, hotels and hourly, service-oriented industries in general.
“Even though on its face it appears to apply to a clothing retailer like Tilly’s, I think all California businesses need to be aware of how this decision impacts their scheduling practices,” Payne said.
Schedule Change
He expressed surprise at the outcome because “the language in the wage orders has been around for 75 years [and] it’s a substantially meaningful departure from [how] companies have handled this.”
Though the court’s decision directly affects Tilly’s, and by immediate extension other retailers, law firms have been encouraging clients who schedule on-call workers in industries including manufacturing and personal services, to re-examine their policies. Several retailers also began this work when the case was first filed.
Payne said Troutman Sanders sent an advisory notice to clients about the case and its potential impact, counseling employers to “promptly assess scheduling and on-call policies … to ensure proper compensation and compliance.”
Calling In
The case directly involves OC law firms.
Bridgford, Gleason & Artinian, with offices in Newport Beach’s Corporate Plaza layout near Fashion Island, represented the plaintiff, Skylar Ward. Adam Karr and Briana LaBriola of O’Melveny & Myers LLP’s Newport Beach office represented Tilly’s, along with Apalla Chopra in the firm’s L.A. office
In 2012, Ward was working a mix of regular and on-call shifts at a Tilly’s in Torrance. On-call employees were required to call the store two hours before a possible shift to check whether or not they were needed. If they didn’t call or phoned late, employees could receive anything from a formal written reprimand to being fired.
On-call shifts take various forms including:
• Employees scheduled for a regular shift and on-call duties later the same day; if told during their main shift they’d be needed for the later one, they had to stay
• A reversal of the above, in which employees on-call before a regular shift, are required to call two hours ahead of time or come to work to check; a scheduled regular shift of noon to 4 p.m. could be preceded by an on-call shift of 10 a.m. to noon, meaning a call or arrival by 8 a.m.
• Standard on-call scheduling: whatever the possible shift, workers call two hours prior for a shift later in the day, or the night before, if the on-call shift was in the morning
Workers were paid only if they completed the on-call shift.
Background Check
Ward’s case involved the first example and one in which she was sent home after her regular shift. She filed a class-action complaint in September 2015, alleging Tilly’s failed to offer reporting time pay for on-call shifts and created a burden for workers, especially lower-income ones; those who arranged child- or elder-care and encountered “obstacles in pursuing their education, experience[d] adverse financial effects, and … stress and strain on their family life;” and people pursuing other jobs to supplement their income.
The case was dismissed but Ward appealed and the decision was reversed last month, reviving a potential class action lawsuit against Tilly’s.
“Requiring employees to come to a workplace at the start of a shift without a guarantee of work, unpaid on-call shifts are enormously beneficial to employers,” but, “like other kinds of contingent shifts, unpaid on-call shifts impose tremendous costs on employees,” the judge wrote in the decision.
Tilly’s said via email, “The Ward decision was made in the context of a motion to dismiss before any factual discovery and when all of the plaintiffs allegations were presumed to be true. Tilly’s respectfully disagrees with the two of three judges who decided the appeal in favor of the plaintiffs. Tilly’s is confident that its practices will be found fair and lawful, either upon further appellate review of this decision or by the trial court upon remand.”
Bridgford, Gleason & Artinian founding partner Richard Bridgford hailed the decision, which “levels the playing field” for employees and employers.
He said the latter can easily reach the former via technology, but the downside is the worker must always be available. If greater contact and more accessibility are part of the equation employees should be compensated, based on the court’s decision.
Holding that physical reporting at the job isn’t required means, “the decision recognizes the modern reality of the workplace in the digital age.”
Career Path
The basis of the case was a 1943 directive by California’s now-defunct Industrial Welfare Commission that required companies to pay employees who reported for work but were given less than four hours on a shift—a regulation meant to protect workers who showed up but were sent home early.
Labor and employment attorneys Jennifer Katz and Jill Schubert of Ogletree Deakins in Los Angeles said in a statement the IWC order “has been subject to very little interpretation by courts or agencies” because it isn’t often litigated; Ward’s case changed that.
The Court of Appeals considered the IWC phrasing, “report to work” ambiguous in that it could require workers not physically present to be compensated for their time.
Payne said the issue is growing in importance. Recently, several cases have wrestled with it and San Francisco in 2014 enacted an ordinance requiring employers to pay for up to four hours of work related to on-call shifts, with a number of elements considered: shift length, amount of notice time, and cancellations, among others.
The issue could also touch temporary agencies that provide shift workers to service and manufacturing industries. More recently, several companies, including Irvine-based ShiftPixy Inc. (Nasdaq: PIXY), have launched to apply current technology to schedule workers for such industries.
The intent is to streamline scheduling and offload temp agency work, but it also connects to the technological innovations—email and text—Bridgford noted.
The Tilly’s case could be reviewed by the California Supreme Court, but Payne cautioned employers to review their policies because other wage orders have similar wording.
