As we previously reported, a number of state and local governments have passed legislation aimed at requiring employers to provide their employees with advance notice of their work schedules. So-called "predictable scheduling" laws have been passed by the State of Oregon, New York City, Seattle, and San Francisco. Most recently, the City of Los Angeles passed a motion on March 1, 2019, directing the City Attorney to draft a "Fair Work Week" ordinance that would require certain retail businesses to provide workers with 14 days' notice of their schedule, and other predictable scheduling rules. The specific details of the proposed ordinance should be made public soon.

Not surprisingly, enterprising plaintiffs' lawyers have entered the fray, arguing that the definition of "reporting" to work includes the employee's merely calling in to find out if they are needed to work. This is an especially nettlesome development with so many employees working non-routine on-demand schedules.

"Reporting pay" has been included in the various Industrial Welfare Commission (IWC) Wage Orders for over 70 years. In the most recent version of the reporting pay rule, whenever an employee physically reports for work and is not permitted to work at least half of the scheduled shift, the employer must pay that employee reporting time pay equal to half the scheduled work hours (with a minimum of two hours and no more than four hours).

Less clear is whether the same rules would apply to the mere act of an on-call employee calling in to find out if they are needed to work. Such arrangements are especially common in the retail and hospitality industries, where the employer's staffing is driven by customer demand. It is not surprising that employers benefit from the flexibility of having a ready source of on-demand labor when customer traffic justifies the extra labor expense.

The federal courts in California are split over whether reporting pay rules should apply to on-call employees. A case was argued last month before the Ninth Circuit Court of Appeals. We could have a decision in a few months.

Meanwhile, in a first of its kind ruling, a California state appellate court recently weighed in on the subject. In a case involving the Tilly's retail chain, the appellate court ruled in a 2-1 decision that the State's reporting pay rules DO apply to on-call employees when they call in, but are not put to work. (Ward v. Tilly's, Inc. (February 4, 2019) 31 Cal.App.5th 1167.) Here is what happened, and what you need to know.

Many of Tilly's employees were working short shifts (e.g, 4 hours), and were told that the shift could be longer if customer demand warranted the additional staffing. This way, Tilly's did not have to commit to providing a full day's work schedule in advance. Employees were told that they had to call the store two hours before the scheduled start time to see if they were needed for the extra hours. In some cases, employees were required to call in to see whether they worked that day at all. Tilly's policy provided that the failure to timely call in just two hours in advance, or report to work if needed, could result in discipline, including termination. If the employee was not needed to work the on-call shift, they were not paid anything for their trouble.

A group of Tilly's employees filed a class action against the retailer, asserting they were entitled to reporting pay whenever they called in but were not required to work the additional hours or at all. The trial judge did not buy that argument and dismissed the lawsuit on the grounds that the State's reporting pay rules only applied when employees physically reported to work, and not merely called in.

On appeal, the appellate court sided with the employees and reinstated the class action lawsuit. In doing so, the Court took a long look at the history of the rule and found that modern technology required the rule to be analyzed in the context of our current technological environment. The Court noted that when reporting pay rules were first added to the Wage Orders in 1947, it was before the widespread availability of telephones, and the only way for employees to report for work was to physically show up. Given the advances in technology, and particularly the widespread use of cell phones, the Court considered whether the IWC would have intended the rules to apply to on-call employees who report for work by calling in.

The Court found that had the technology been available, the drafters of the rule would have intended it to apply to calling-in procedures, like the one used at Tilly's. It reasoned that employees today may present themselves for work by calling in, and should be paid for the inconvenience as if they physically showed up to the workplace but were sent home.

In reaching that conclusion, the Court observed that reporting pay was intended to compensate employees for the time and expense spent reporting to work, and to penalize employers who were not careful when scheduling employees. The Court found these same public policies are advanced when on-call employees are not permitted to work.

According to the majority, the Tilly's on-call employees were severely limited by the arrangement in their ability to work second jobs, go to school, and/or arrange for child care, for example. Further, it reasoned that if employers are not required to pay reporting pay to on-call employees, then employers have no incentive to effectively anticipate their labor needs and schedule accordingly. Accordingly, the Court ruled that Tilly's on-call employees are thus entitled to reporting pay if they are not permitted to work at least half of their scheduled on-call shift.

The dissent would limit reporting pay to only employees who physically report to work. While extending the reporting pay rules to on-call employees may be good social policy, the dissent believes that it was for the IWC or the Legislature to decide, not the courts.

The Court of Appeal decision results in a major shift for companies that utilize on-call employees, and another step in the growing trend towards requiring employers to implement predictable scheduling for all employees.

However, the decision still leaves several important questions unanswered. For example, the Court made it clear that it was not deciding if the ruling applies retroactively or just to new cases. It will take other court decisions to get a ruling on that important issue. Also, it is unclear if the Court would have reached the same decision had the on-call employees been given considerably more advance notice that they were not needed to work, such as requiring them to call in 12 or 24 hours before the shift started, rather than just two hours under the Tilly's policy. Yet another open question is whether reporting pay would be required for employees working other types of on-call arrangements, such as where employees merely indicate their availability to work certain shifts, and are not subject to discipline if they decline to work an on-call shift that is offered by their employer. These unresolved issues no doubt will be the fodder of future court decisions as the law continues to develop.

In light of this recent important decision, employers should review any on demand or on-call scheduling arrangements for legal compliance. If you have any questions, please call your firm contact at 818.508.3700, or visit us on-line at www.brgslaw.com.

Sincerely,
Jeffrey P. Fuchsman
Richard S. Rosenberg
Ballard Rosenberg Golper & Savitt, LLP