By Reno F.R. Fernandez III, Macdonald | Fernandez LLP
In Mendiola v. CPS Security Solutions, No. S212704 (Cal. January 8, 2015), the Supreme Court of California ruled that employers cannot exclude sleep time from wages during “on call” time by agreement between the employer and the employee unless a state wage order provides otherwise. The impact of this decision is rippling through industries where no such wage order is in effect. This article discusses Mendolia, its impact and potential solutions.
In Mendiola, CPS Security Solutions employed guards to provide security at construction sites. In addition to daytime duties, guards were required to be on call on site each evening and to respond to disturbances as needed. On-call guards were required to reside in a trailer with a bed and other amenities provided by the employer. Guards could keep personal items in the trailers and use on-call time as they chose, but children, pets and alcohol were not allowed, and adult visitors were permitted only with approval.
Guard were paid hourly for time spent patrolling the sites but not for on-call time unless an alarm or other circumstances required that the guard conduct an investigation or the guard had waited for or been denied a reliever. The exclusion of this time, including sleep time, was provided in an agreement between the employer and the employee.
In 2008, two class action lawsuits were filed alleging that CPS’s on-call compensation policy violated minimum wage and overtime obligations imposed by the applicable Industrial Welfare Commission (IWC) wage order and Labor Code statutes, including the IWC’s Wage Order 4. The parties filed cross-
motions for summary judgment of certain claims.
The trial court granted the plaintiffs’ motion, ruling that CPS’s compensation policy violated Wage Order 4 because of the extent of CPS’s control during on-call hours and the fact that the guards’ presence on worksites primarily benefitted CPS. The court concluded that the on-call hours constituted compensable “hours worked.”
CPS appealed. Ultimately, the Supreme Court of California affirmed.
The court disapproved of an earlier case, namely Seymore v. Metson Marine, Inc. 194 Cal.App.4th 361 (2011), which ruled that an employee could agree to exclude sleep periods from hours worked. The court also found that the scope of Monzon v. Schaefer Ambulance Service, Inc. 224 Cal.App.3d 16 (1990) is limited to its facts. In that case, an eight-hour sleep period was excluded by agreement with the employer in a 24-hour shift for ambulance drivers and attendants.
The court held that Wage Order 4 covers the defendant’s employees, and it does not provide language permitting an employer to exclude sleep time or other time that an employee is under the employer’s control. By contrast, certain other Wage Orders do, including Wage Orders 5 and 9. Accordingly, the court held that the IWC intentionally omitted such language from Wage Order 4.
CPS argued for application of the more favorable federal Fair Labor Standards Act, which permits sleep time exclusions under certain circumstances. However, the court ruled that California courts should not incorporate federal standards on compensable time unless there is convincing evidence that the Industrial Welfare Commission intended to do so. The court found no such intent.
Mendolia may require not only compensation for sleep time in the future, but it may also mean that certain businesses face claims for unpaid sleep time previously accrued over several years. Some steps may help prevent or minimize the impact of a claim, including getting into compliance, effectively communicating with employees or even reorganizing the business and seeking to reduce and discharge the claims in bankruptcy. It is clear that Mendiola will have a lasting effect in many industries, and it’s full impact is yet to be seen.
About the author
Reno Fernandez is a partner with Macdonald Fernandez LLP, a law firm focusing on wills and trusts, estate planning, probate, business matters, commercial litigation and bankruptcy. Follow the firm on Twitter: @CalBKAttorneys.