California Court of Appeal Expands Reporting Time Pay Requirements for On-Call Shifts

On February 4, 2019, a divided panel of the California Court of Appeal held in Ward v. Tilly’s, Inc., No. B280151, that employees scheduled for “on-call” or “call-in” shifts may be entitled to reporting time pay, even when they do not physically come to work. While this is the California Court of Appeal’s first published decision on this issue, it does not come as a surprise. In recent years, this issue has garnered increased attention—and differing opinions—in the federal courts.

The Facts and Procedural History

According to Plaintiff’s complaint, Tilly’s scheduled its employees for a combination of regular and “on-call” shifts. Both regular and on-call shifts had fixed beginning and end times. But while employees were always expected to show up for their regular shifts, they were required to contact their stores by phone two hours before the start of their on-call shifts to find out whether they would need to come in. Failure to call in could lead to discipline.

The on-call shifts came in three different forms:

1. Employees were scheduled for both a regular shift and an on-call shift in the same workday, with the regular shift scheduled before the on-call shift. Employees were told during the regular shift whether they would be needed for the later on-call shift. Example: Employee is scheduled for a regular shift from 11:00 a.m. to 3:00 p.m. and an on-call shift from 3:00 p.m. to 5:00 p.m.
2. Employees were scheduled for both a regular shift and an on-call shift in the same workday, with the on-call shift scheduled before the regular shift. Employees were required to call in two hours before the on-call shift (or by 9:00 p.m. the night before for any shift beginning before 10:00 a.m.). Example: Employee is scheduled for an on-call shift from 10:00 a.m. to 12:00 p.m. and a regular shift from 12:00 p.m. to 4:00 p.m.
3. Employees were scheduled for only an on-call shift on a particular workday. Again, employees were required to call in two hours early. Example: Employee is scheduled for an on-call shift from 10:00 a.m. to 2:00 p.m.

Plaintiff filed a class action complaint alleging that she and other Tilly’s employees were entitled to “reporting time pay” for their on-call shifts under Industrial Welfare Commission (“IWC”) Wage Order 7, which applies to employees in the “mercantile industry” (e.g., retail). With respect to reporting time pay, Wage Order 7, states:

(A) Each workday an employee is required to report for work and does report, but is not put to work or is furnished less than half said employee’s usual or scheduled day’s work, the employee shall be paid for half the usual or scheduled day’s work, but in no event for less than two (2) hours nor more than four (4) hours, at the employee’s regular rate of pay, which shall not be less than the minimum wage.

(B) If an employee is required to report for work a second time in any one workday and is furnished less than two (2) hours of work on the second reporting, said employee shall be paid for two (2) hours at the employee’s regular rate of pay, which shall not be less than the minimum wage.

Tilly’s filed a demurrer to the complaint, which the trial court sustained. Plaintiff appealed, and—in a 2 to 1 split—the Court of Appeal reversed and remanded.

The Court of Appeal’s Decision

The central issue addressed in Ward is the meaning of the phrase “report for work” in Wage Order 7. Tilly’s argued that “report for work” can only mean physically showing up to the work site, thereby excluding on-call shifts. Plaintiff, on the other hand, argued that “report for work” encompasses any kind of reporting, whether in person, telephonic, or otherwise.

The two-justice majority sided with Plaintiff and interpreted “report for work” broadly to mean “presenting oneself as ordered.” In the majority’s view, the phrase “report for work” “does not have a single meaning, but instead is defined by the party who directs the manner in which the employee is to present himself or herself for work—that is, by the employer.” So if an employer directs employees to “present” themselves for work by physically appearing at the work site, then reporting time is triggered when they physically appear but are sent home. If, however, the employer directs employees to “present” themselves for work by telephoning in, then reporting time is triggered when they call but are told not to come in.

The Court reasoned that although the meaning of “report for work” is not clear on its face, a broad interpretation was consistent with the purposes of the Wage Order’s reporting time provision. According to the Court, the purposes are two-fold: (1) to compensate employees, and (2) to encourage proper notice and scheduling by employers.

As to the first purpose, the Court explained that “unpaid on-call shifts impose tremendous costs on employees.” From coordinating contingent child or elder care arrangements, to the inability to make personal or social plans, all without compensation, employees who work on-call shifts are burdened in much the same way as employees who report physically to work but are sent home.

As to the second purpose, the Court found that on-call practices allow employers to keep business costs low without any “incentive to competently anticipate their labor needs and to schedule accordingly.” In other words, since the reporting time pay provision is designed to induce employers to be more diligent and careful in their scheduling practices, the distinction between reporting physically or by phone is immaterial.

The Concurrence/Dissent

The third justice on the panel concurred in part and dissented in part. By and large, she sided with Tilly’s, explaining that the history of Wage Order 7, which was originally adopted in the 1940s, did not indicate any legislative intent to apply the reporting time pay requirements to anything other than employees who physically report to work. She concurred, however, to the extent the majority reversed and remanded as to the first on-call shift scenario described above (i.e., where an employee is scheduled for a regular shift followed by an on-call shift). She reasoned that, in that scenario, because the employee has physically “report[ed] for work” for his or her regular shift but is then sent home without working the on-call shift, the reporting time pay requirements are triggered.

The Law Going Forward

This opinion will not be the last word for Tilly’s. It may choose to petition the California Supreme Court to review or depublish the opinion. Even if it doesn’t, because the case was on appeal from a demurrer, there is still much litigation left to be done.

In the meantime, Ward leaves more questions than answers. For example, while the opinion dealt only with Wage Order 7 and the “mercantile industry,” most of the IWC Wage Orders, which apply to other industries, contain the exact same provision. Though they will likely be interpreted the same way, as the dissent points out, that is not guaranteed.

As another example, the majority opinion replaces one ambiguous phrase (“report for work”) with another one (“presenting oneself as ordered”). The contours of what it means to “present oneself” are not at all clear.

Additionally, while the court was careful to restrict its opinion to the facts of the case (i.e., calling in two hours early), the majority opinion expressly declined to set any temporal limits for liability.

Finally, many questions are left open by the conclusion in the concurrence that as to the first on-call shift scenario described above, employees who are notified during their “regular” shift that they will not have to stay for their “on call” shift are entitled to reporting time pay. It is unclear how, if at all, this scenario is functionally different from an employer’s decision to dismiss an employee early from a single shift. The majority opinion says nothing specific about this scenario, so it is unclear to what extent the concurrence speaks for the other two members of the panel.

What Employers Need to Know

Despite these uncertainties, Ward is the law in state court and the latest in a debate that has been brewing in the federal courts for several years now. In fact, on the day Ward came out, the Ninth Circuit Court of Appeals heard oral argument in Herrera v. Zumiez, Inc., No. 18-15135, which will address this same issue. It remains to be seen whether the Ninth Circuit will part ways with the California Court of Appeal.

Employers in all industries with any type of on-call scheduling practices should be mindful of this trend and consult with trusted employment counsel to review their pay practices.