California Supreme Court Clarifies The Scope Of "Hours Worked" Under California Law

On March 25, 2024, the California Supreme Court issued a highly anticipated decision in Huerta v. CSI Electrical Contractors, Inc. The Court responded to the request from the Ninth Circuit to answer three questions about Wage Order No. 16 and clarify the scope of the term "hours worked." Although the case discusses the "hours worked" standard in the context of the construction industry, the decision is likely to impact every industry, especially businesses that require employees to go through security checks at the beginning and end of the workday and businesses that confine employees to specific areas of company property during meal breaks.

The Court answered three questions:

First, is time spent on an employer's premises in a personal vehicle and waiting to scan an identification badge, having security guards peer into the vehicle, and then exiting a security gate compensable as hours worked within the meaning of Wage Order No. 16? The Court held that an employee's time spent on an employer's premises awaiting and undergoing an employer-mandated exit procedure that includes the employer's visual inspection of the employee's personal vehicle is compensable as "hours worked" within the meaning of Wage Order No. 16, section 2(J).

Second, is time spent on the employer's premises in a personal vehicle, driving between a security gate and the employee parking lots, while being subject to certain rules from the employer, compensable as "hours worked" or as "employer-mandated travel" within the meaning of Wage Order No. 16? The Court held that the time that an employee spends traveling between a security gate and the employee parking lots is not compensable as "employer-mandated travel" under Wage Order No. 16, section 5(A) because the employee's presence at the security gate was required based on the practical necessity of accessing the worksite. However, the Court opined that if an employee's presence at a location is required for an employment-related reason other than to simply access the worksite, then that time may become compensable as "employer-mandated travel." Separately, the Court held that this travel time is not compensable as "hours worked" because an employer's imposition of ordinary workplace rules on employees during their drive to the worksite in a personal vehicle does not create the requisite level of employer control.

Third, is time spent on the employer's premises, when workers are prohibited from leaving but not required to engage in employer-mandated activities, compensable as "hours worked" within the meaning of Wage Order No. 16, or under California Labor Code Section 1194, when that time was designated as an unpaid "meal period" under a qualifying collective bargaining agreement? The Court held that when an employee is covered by a collective bargaining agreement that complies with Labor Code section 512, subdivision (e) and Wage Order No. 16, section 10(E), and provides the employee with an "unpaid meal period," that time is nonetheless compensable under the wage order as "hours worked" if the employer prohibits the employee from leaving the employer's premises or a designated area during the meal period and if this prohibition prevents the employee from engaging in otherwise feasible personal activities. An employee may bring an action under Labor Code section 1194 to enforce the wage order and recover unpaid wages for that time.

Background

The relevant facts occurred on the California Flats Solar Project ("the Site"), a solar power facility located on privately owned land in Monterey and San Luis Obispo Counties. First Solar Electric, Inc. ("First Solar") owns the facility. A subcontractor hired George Huerta ("Huerta" or "Plaintiff") and other workers to assist CSI Electrical Contractors ("CSI"), the company providing "procurement, installation, construction, and testing services" at the Site.

A designated road provided access between a guard shack located at the Site's perimeter and the employee parking lots. A security gate was located on that road several miles from the guard shack. It would take the Plaintiff approximately 10 to 15 minutes to reach the parking lots once through the security gate. Huerta underwent security checks at the security gate and was told by CSI management that this gate was the "first place" he had to be at the beginning of the workday.

According to the Plaintiff, in the morning, vehicles formed a long line outside the security gate, where guards scanned each worker's badge and sometimes peered inside vehicles and truck beds. At the end of the day, workers again formed a long line inside the security gate, where the exit procedure took place. The exit procedure could take up to a minute or more per vehicle and caused delays of 5 to over 30 minutes. Plaintiff was told by CSI that security guards had the right to search vehicles during the entry and exit processes, and guards could visually inspect the bed of his truck for stolen tools or endangered species. Critically, Plaintiff was not paid for this time, at the start or end of his day.

Due to environmental restrictions at the worksite, the Department of Fish and Wildlife required First Solar to impose a speed limit of 20 miles per hour on the access road between the guard shack and the parking lots and restrict the roads that could be taken at the Site. Workers were prohibited from traveling by bike or walking on to the Site and making loud noise, honking, playing music, etc., that might disturb the wildlife at the Site. As part of these restrictions, biologists would be on the Site some mornings ensuring that no endangered species were on the roads. This would lead to additional delays upon entry for Plaintiff and other workers. A violation of any of these rules could result in suspension or termination. Plaintiff and other workers were not paid for the time traveling between the entrance and the parking lots.

Plaintiff's employment was governed by two collective bargaining agreements ("CBAs") specifying that the standard workday included an unpaid 30-minute meal period. CSI did not allow workers to leave the Site during the workday and instructed workers to spend their meal periods at a designated area near their assigned worksite. In accordance with the CBAs, Plaintiff was not paid for his meal periods.

The Court's Analysis

The Court analyzed the "hours worked" standard under Wage Order No. 16, which governs wages, hours, and working conditions in the construction, drilling, logging, and mining industries. Wage Order No. 16, as well as every other wage order, entitles certain employees to at least minimum wage compensation for all "hours worked," which is evaluated per minute and not based upon an average over a workweek as allowed under federal law.

On the first issue, the Court reasoned that under the indicia of employer control, Huerta was subject to CSI's control "while awaiting, and during" the exit security procedure even though he was in his personal vehicle during that time. The exit procedure was mandatory, and workers were required to remain on the Site throughout this process, without freedom of movement. The Court noted that Huerta was required to perform "specific and supervised tasks" as part of the exit procedure: he had to drive his vehicle to the security gate, wait in his vehicle until it was his turn to undergo the security check, roll down his window and present his security identification badge to the guard, and submit his vehicle to visual inspection and possible physical search. The Court also found that the exit procedures served the employer's interests because CSI was bound by its contract with First Solar to follow the Site's exit procedures. Finally, the Court rejected CSI's attempts to analogize the exit procedure with parking garages, which generally only involve security cameras or automated gates that open after "the mere lowering of the window, reaching out of an arm, and scanning a card."

On the second issue, the Court concluded that if an employer requires an employee's presence at a location for an employment-related reason other than the practical necessity of reaching the worksite, then that time becomes compensable even if the employee is not under complete control of its employer (e.g., being required to ride on a company bus to a worksite at a separate location). Examples include situations where an employee's presence at an initial location is required to pick up work supplies, receive work orders or other directives, or perform work before traveling to a second job. In this case, it was undisputed that workers were not allowed to enter the access road between the security gate and the employee parking lots until a biologist cleared the road each day and security guards scanned their identification badges, which Huerta says caused 5- to 20-minute delays entering the security gate in the morning. In the Court's view these restrictions or protocols were all required for a purpose other than accessing the worksite, i.e., ensuring compliance with CSI's security and environmental protection protocols. The Court distinguished the time it took Plaintiff to drive from the parking lot to the security gate, holding that such time was not compensable. The Court was not willing to invite claims of unpaid wages simply because an employee is traveling on an employer's premises, including before or after a work shift.

As to the third issue, the Court held that where the employer prevents employees from leaving the premises, prevents employees from returning to their personal vehicle, and requires employees to take lunch in a designated area, the employee remains under the employer's control despite being relieved of official duties. The Court noted, however, that this decision was tied to the fact that the restrictions were implemented by CSI, suggesting that if travel away from the worksite was impractical because of factors outside an employer's control, such as the worksite being in a remote location, the result may have been different.

Takeaways From the Decision

The Huerta opinion presents several important takeaways to California employers.

Huerta significantly limits the protections regarding meal periods that are afforded by CBAs pursuant to Labor Code § 512(e). While CBA exemptions pertaining to meal periods are still effective with respect to length and timing of the meals, they do not operate to allow employers to avoid compensating employees for the time spent during on-duty meal periods, or meal periods where employees are restricted from leaving the worksite, or otherwise under employer control. Following Huerta, employers that meet the Labor Code § 512(e) exemption should either (1) compensate employees for the time spent during any meal period where restrictions are in effect regardless of how employees spend their meal or (2) ensure employees are free from employer control during their meal periods, e.g., the employees are free to return to their vehicles, leave the worksite, or otherwise spend their meal break as they like. The Huerta Court noted that there may be practical limitations on an employee's freedom of movement based on the remote locations of some construction worksites; however, the Court further opined that employers' policies and procedures must ensure that employees remain free to use their meal periods "for their own purposes" to qualify as an off-duty meal. Failure to make adjustments like those proposed above could expose employers to unpaid wage claims and, more significantly, waiting time penalties.
Following Huerta, California employers should evaluate procedures for employees leaving worksites, especially with respect to security checks performed on employee vehicles when the employees are off the clock. The Huerta Court suggests that any required activity beyond "the mere lowering of the window, reaching out of an arm, and scanning a card" as part of an employee exit shows that the process involved more than mere facilitation of ingress and egress and so should be considered "hours worked" within the meaning of the wage order. Therefore, employers must re-evaluate how they perform security checks on employees and their vehicles after they finish at the worksite to ensure they are compensated for time spent undergoing such processes.
California employers should examine the process followed by their employees when they enter their worksite and where they begin performing work. Requiring an employee to appear at an initial location before they reach their actual worksite, plus some other employment-related reason, such as picking up work supplies, receiving work orders or other directives, or performing work before traveling to a second job, will likely require that the employees start to be compensated upon arrival at the initial location. The Court did rule that simply requiring an employee to drive from a security checkpoint to the worksite does not trigger an "other employment-related reason." The threshold of proof required to establish such a reason, however, will likely be low.

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