By Trevor D. Large, Partner

January 2015

Employers have struggled with the issue of how to properly compensate employees who are “on-call” or who may be obligated to sleep on the employer’s premises.  Recently, and until yesterday, employers had relied upon the California appellate court case, Seymore v. Metson Marine, (2011) 128 Cal.Rprt.3d 13.  That case stated two positions regarding on-call employees and overtime wages: (1) that according to specific factors, off-duty, but “standby” periods were considered “hours worked”; but (2) employers could exclude up to eight-hours of sleep time from compensation owed to employees during their 12 hour off-duty standby periods.  Today, the California Supreme Court issued its opinion in Mendiola v. CPS Security Solutions, Inc.[fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][1] (S212704).  This case dramatically changes the on-call landscape for employers.

Mendiola concerned security guards who, in addition to their regular work shifts, were also required “to reside in a trailer” provided by [their employer] CPS at various construction sites.  The trailers ranged from 150 to 200 square feet in size and had residential amenities, including a bed, bathroom, kitchen, heating, and air conditioning.  Only the assigned guard and, maintenance staff had keys to these on-site trailers.  Guards could keep personal items in the trailers and, generally, use standby or on-call time as they chose.  However, children, pets, and alcohol were not allowed, and adult visitors were permitted only with the approval of the CPS client.  Id. at p. 2.  In addition, there were restrictions on when the guards could leave the trailer and where they could go.  Id.  The guards were not compensated for any time spent in the trailer or when on-call.  The Mendiola lawsuit was filed to determine whether the CPS employees should have been compensated for the trailer/on-call time.

Generally speaking, employers must compensate employees for all “hours worked.”  As applied to on-call time, Mendiola confirmed that “California courts considering whether on-call time constitutes hours worked have primarily focused on the extent of the employer’s control.”  Id. at p. 7.  “Courts have identified various factors bearing on an employer’s control during on-call time:  (1) whether there was an on-premises living requirement; (2) whether there were excessive geographical restrictions on employee’s movements; (3) whether the frequency of calls was unduly restrictive; (4) whether a fixed time limit for response was unduly restrictive; (5) whether the on-call employee could easily trade on-call responsibilities; (6) whether use of a pager could ease restrictions; and (7) whether the employee had actually engaged in personal activities during call-in time.”  Id. (internal quotes omitted).  “Courts have also taken into account whether the ‘[o]n-call waiting time . . . is spent primarily for the benefit of the employer and its business.’”  Id. at pp. 7-8 (citations omitted).

Based on the above factors, the Mendiola Court determined that compensation was due for all the on-call time of the security guards, because of (1) the restrictions placed on the employees, and (2) the benefit that CPS received by having the security guards remain on-site in the trailers.  Id. at p. 9.  This conclusion was consistent with the prior holding in Seymore.

However, the Mendiola Court did not stop there.  Seymore had held that all California employees were subject to the exclusion from compensation of up to eight (8) hours of sleep time in a twenty-four (24) hour period, assuming that the employer and employee had agreed to such an exclusion.  Mendiola disapproved of this holding and concluded that “wage order [4] does not permit the exclusion of sleep time from compensable hours worked in 24-hour shifts.”[2]  Id. at p. 19.  Thus, despite an agreement with its employees to allow eight (8) hours of sleep time without compensation, all 24-hours of the shifts worked by the CPS security guards were deemed to be compensable at straight, overtime and double time rates.

This is a significant change.  Most employers that have employees sleeping on their premises are now likely required to compensate those employees even for the time they are sleeping if they are under the control of their employer.  This compensation would be in addition to whatever other hours they may have worked or been on-call for that day.

This holding will create substantial additional overtime/double-time liability for employers.  We recommend that employers immediately look at their policies and practices to determine what impact Mendiola may have.  We also recommend contacting your attorney to discuss strategies for dealing with this important change in the law.

Trevor D. Large, Partner

TLarge@BFASlaw.com

(Direct) 805.966.7716

This Advisor is one of a series of business, real estate, employment and tax advisories prepared by the attorneys at Buynak, Fauver, Archbald & Spray, LLP. This Advisor is not exhaustive, nor is it legal advice. You should discuss your particular situation with us or with your own attorney. Our legal representation is only undertaken through a written engagement letter and not by the distribution of this Advisor.

[1] The opinion in Mendiola can be found at http://www.courts.ca.gov/opinions/documents/S212704.PDF

[2] Mendiola specifically held that it was expressing no opinion as to circumstances regulated by other wage orders.  However, the Court notes that Wage Order 5 (public housekeeping) and Wage Order 9 (transportation – may be limited to ambulances) have provisions related to exempt sleep time, while such an express exemption is absent in other Wage Orders.  Thus, unless your business operates under either Wage Order 5 or 9 (or if there is specific statutory language related to a sleeping exemption – potentially as with live-in care employees) it should be assumed that there is no 8 hour sleeping exemption.[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]