A recent decision by a California appellate court may increase the frustration level for retailers trying to implement effective flexible work scheduling plans. In Ward v. Tilly’s Inc., No. B280151, 2019 WL 421743 (Cal. Ct. App. Feb. 4, 2019 ), a majority of the court reversed a trial court’s decision and reinstated a class action filed against an Orange County retailer. The complaint alleges that the company’s employee call-in procedures violated provisions of a California Wage Order requiring reporting pay, by not paying employees who were required to call-in two hours before a previously-scheduled ‘on call’ shift. The dissenting judge strongly criticized the outcome, observing that it was nonsensical for California employers to face “tens of millions of dollars in liability” as a result of an erroneous interpretation of the language of the Wage Order.
The Company’s Practices and the Lawsuit
Like many retailers, Tilly’s uses on-call shifts to optimize scheduling. Tilly’s required its employees to call their stores two hours before the start of an on-call shift, to determine whether they would actually be needed to work the shift. If the employee was told not to come in, Tilly’s did not consider the employee to have “reported for work” within the meaning of the relevant California Wage Order.
Tilly’s was sued in a class action complaint alleging that its practices violated the Industrial Welfare Commission (“IWC”) Wage Order 7. The complaint alleged that Tilly’s was required by Wage Order 7 to pay reporting time pay to employees who utilized the company’s call-in procedure.
Tilly’s filed a demurrer to the complaint, arguing that Wage Order 7 did not apply to its call in policy because the only way an employee could “report for work” within the meaning of the Wage Order was by physically appearing at the store at the start of a shift. The trial court agreed, and dismissed the lawsuit.
The Appellate Court’s Decision
On appeal, Plaintiff argued that Wage Order 7 is triggered by any manner of reporting, whether in person, telephonic, or otherwise. The court’s majority accepted this position and concluded that Tilly’s employees were entitled to reporting pay if they were told not to come into work when they called in two hours before the shift.
Wage Order 7 does not define the phrase “report for work.” The court analyzed the phrase’s meaning in context, beginning with several dictionary definitions of the word “report.” The majority concluded that those definitions do not conclusively establish whether the phrase “report for work” requires the employee’s presence at a particular time and place, or whether it is satisfied by an employee “presenting” himself or herself in whatever manner the employer has directed, such as the telephone call-in required under Tilly’s system.
The court’s opinion gets more interesting when it gets to the legislative intent of Wage Order 7. Tilly’s argued for an originalist interpretation of the phrase, to reflect the understanding of the phrase at the time of the language’s adoption in the 1940s. The majority acknowledged that, back in the day, the phrase would have been understood to require the employee’s physical presence at the work site. The majority cited statistics suggesting that telephones were not widely available to the public in the 1940s, in support of the conclusion that physical presence would have been the common understanding of the phrase. The court then observed that the advent of the cell phone and other technologies has altered the way in which employees communicate with their employer. The court concluded that, given the employee protection objectives of the California Wage Orders, it was appropriate to ask how the IWC would have addressed this question had it anticipated the realities of modern technology. In what some might call a presumptuous form of mind-reading, the court concluded that, had the IWC addressed the issue, it would have concluded Tilly’s alleged on-call system triggers the payment of reporting time pay.
The majority gave the following explanation for the policy supporting its interpretation of the phrase: “[O]n-call shifts burden employees, who cannot take other jobs, go to school, or make social plans during on-call shifts—but who nonetheless receive no compensation from [the employer] unless they ultimately are called in to work. This is precisely the kind of abuse that reporting time pay was designed to discourage.”
Justice Egerton dissented in a robust and colorful opinion. Her review of the legislative history of the Wage Order clearly reflected “the drafters’ intent that―to qualify for reporting time pay―a retail salesperson must physically appear at the workplace: the store.”Tilly’s at *15. Justice Egerton rejected the majority’s focus on cell phone technology. “But there has been no technological change pertinent to proper statutory interpretation in this case. Nothing turns on whether a cord or a cell tower connects the phone. The notion that phones were unfamiliar in the 1940s is ahistorical: spend some enjoyable time listening to Glenn Miller’s 1940 hit Pennsylvania 6-5000. (The Andrews Sisters’ rendition is delightful.)” Id. at *18.
Justice Egerton relied on a district court decision (Casas v. Victoria’s Secret Stores, LLC (No. CV 14-6412-GW) 2014 WL 12644922, at * 5 (C.D. Cal., Dec. 1, 2014), which held on-call shifts do not trigger reporting time pay under Wage Order 7 unless employees actually reported to work in the traditional sense of the term, rejecting contrary “interpretations that promote the Court’s view of good policy.’” Id. While Justice Egerton acknowledged the hardships an on-call system may impose on employees, she reasoned employers do not have on-call systems just to “torture employees” Id. at *18.
What this Means for California Employers
The majority’s decision in Ward endorses the view of advocates who oppose employer predictive scheduling initiatives and other flexible staffing strategies. While the decision may be reviewed by the California Supreme Court, California retailers should be aware that Ward may well represent the current view of California courts as to on-call scheduling practices. And, because other Wage Orders implemented by the IWC contain the same language regarding reporting pay, California employers in other industries should assume that advocates will seek to extend the rationale of Ward to their businesses.