Fourteen years ago I filed a class action lawsuit against Polo Ralph Lauren over its practice of conducting bag checks or exit searches of employees after they had clocked out and were no longer being paid.   At Polo all employees were required to undergo exit searches whenever they left the premises.  Waiting for and undergoing these searches for meal breaks and at the end of their shift sometimes added 30 minutes of uncompensated time every day.

After engaging in several years of discovery and numerous court motions, we went to trial against Polo in July 2008 in the Federal District Court in San Francisco.  After we had finished presenting three weeks of testimony to a federal jury, Polo and our clients settled the case for $4 million on behalf of the 6,700 Polo employees in the certified class.

The central issue in the case was simple:  Is the time an employee spends participating in the exit searches compensable work time under California law?  On behalf of the Polo employees, we argued that bag check time is work time and is therefore compensable.  Polo’s lawyers argued the time spent was minimal and that it did not constitute compensable work time.  Because the case settled before a verdict was rendered, the central contested legal issue went unanswered in Otsuka v. Polo Ralph Lauren.

The California Supreme Court Now Has Decided This Off-the-Clock Wage Issue

On February 13, 2020, the California Supreme Court rendered its decision in Frlekin v. Apple, Inc., a case involving the compensability of time Apple employees spend waiting for and undergoing bag checks.

“The exit searches burden Apple’s employees by preventing them from leaving the premises with their personal belongings until they undergo an exit search — a process that can take five to 20 minutes to complete — and by compelling them to take specific movements and actions during the search.”

Apple argued that employees could avoid the delays associated with bag check inspections by simply not bringing a bag to work. Apple claimed that because it could have prohibited employees from bringing any bags to work, the bag check practice provided employees who bring a bag to work an “optional benefit” that they have chosen.

As we had argued in the Polo Ralph Lauren case a decade ago, the employees in Frlekin argued that because they were under the control of Apple as they waited for managers to search their bags, they must be paid for the time.

The Court’s Reasoning

The Court found that the inspections were “an integral part of Apple’s internal theft policy and action plan.”  Thus, the loss prevention searches were primarily for Apple’s benefit.  The Court rejected Apple’s counter-argument that the policy was primarily for the employees’ benefit.

The Apple employees’ wage rights are governed by California Industrial Wage Commission Order 7-2001, which applies to workers in the “Mercantile Industries.”  (Cal. Code Regs., tit. 8, § 11070, subd. 4(B))  Section 11070(2(G) defines “hours worked” as “the time during which an employee is subject to the control of an employer, and includes all the time the employee is suffered or permitted to work, whether or not  required to do so.”

The Supreme Court acknowledged that California labor laws are meant to be interpreted or construed to promote employee protection. (Mendiola v. CPS Security Solutions, Inc. (2015) 60 Cal.4th 833)  The Court explained that Wage Orders in particular are designed to be “liberally construed in a manner that serves its remedial purposes of protecting and benefiting employees.”

With respect to the exit search time, the Court focused on the language and history of the “control clause” of the applicable Wage Order.  The Court found that Apple controlled the employees in specific ways before and during the exit searches.  First, employees who fail to abide by the policy can be disciplined and terminated.  Second, Apple confines the employees to within the stores’ premises.  Third, employees are compelled to find a manager, request that the manager take time to search their bags, open bags and pockets in the bags, remove Apple devices for inspection and provide manager a personal technology card to verify they own the Apple products in their bags.

The time and efforts expended in this loss prevention process met the requirements of the control clause of the Wage Order.  The Court reaffirmed its earlier holding in Morillion v. Royal Packing Co. (2000) 22 Cal.4th 575 that ““[t]he level of the employer’s control over its employees, rather than the mere fact that the employer requires the employees’ activity, is determinative” concerning whether an activity is compensable under the “hours worked” control clause.”  This means that whether the activity is required by the employer is probative of the issue of control.  But, the Court held that other factors should be considered as well.  This includes the location of the activity, the degree of employer control, whether the activity is for the benefit of the employee or the employer and whether the activity is enforced through disciplinary measures.

“Applying these factors here, it is clear that plaintiffs are subject to Apple’s control while awaiting, and during, Apple’s exit searches. Apple’s exit searches are required as a practical matter, occur at the workplace, involve a significant degree of control, are imposed primarily for Apple’s benefit, and are enforced through threat of discipline. Thus, according to the “hours worked” control clause, plaintiffs “must be paid.”

Frlekin Applies Retroactively

The retroactive application of the factors proscribed in Frlekin means that anyone who has not been paid for the time spent undergoing exit searches has the right to rely on Frlekin in cases for unpaid wages due over at least the past three years.  Under California’s Unfair Competition Law, employees should be able to reach back as many as four years for unpaid wages.  (Please see, the Kitchin Legal Takeaway on statutes of limitations on wage claims.)

Frlekin’s Implications for Workers and Employers

Although the Supreme Court’s decision addresses only Wage Order 7-2001 in Frlekin, the “control clause” appears in 15 other industry-specific Wage Orders.  Consequently, the Court’s reasoning applies more widely than just to the mercantile industries.  Any job that requires an employee to undergo loss prevention bag inspections should place close attention to the Frlekin decision.  As should any business that requires employees to undergo any kind of activity without compensation before or after work, or before a meal period.

If an employee is required to undergo a bag check before they are permitted to leave the premises for a 30-minute meal period, the inspection process time could result in violations of meal period law.  If an employee clocks out for a 30-minute meal and then is required to wait 10 minutes for a bag check, their meal period is short by 10 minutes.  That could require the employer to pay an extra hour of wages to each employee for every short meal period.

Frlekin is the kind of case that will lead to significant changes in the loss prevention practices of employers across California.  Given the media attention to the case, employees who have been required to preform uncompensated “off-the-clock” work are becoming more knowledgeable about their wage rights as well.  Wage theft, broadly defined as an employers failure to pay all wages and benefits to employees required under the law, remains a concern.  The clarity of the Supreme Court’s reasoning in Frelekin will help to stop some of the practices in California that keeps earned wages out of the pockets of workers.

If you have questions about your rights under California wage and hour laws, please reach out to Patrick Kitchin at 415-677-9058, or by email to prk@kitchinlegal.com