Appellate Court Clarifies Employer Reporting Time Pay and Split Shift Obligations

On December 21, 2011, in a case of first impression, the California Court of Appeal in Aleman v. AirTouch Cellular held that employees are not entitled to “reporting-time pay” when they report to work for a scheduled meeting and work at least one-half of that time, even when that time is less than two hours.  The court also ruled that an employee is not entitled to a “split-shift” premium if the employee’s daily compensation already exceeds the minimum wage for all hours worked plus an additional hour.  Additionally, the court upheld an employee’s release of claims where the parties had a bona fide dispute over liability, and the employee released these claims in exchange for consideration.

Background

Former retail sales and customer service representatives who sold cell phones and other items for AirTouch, a wireless service provider, brought a class action alleging that AirTouch failed to pay nonexempt employees properly for attending mandatory meetings.  Plaintiffs alleged that AirTouch did not comply with the provisions on reporting-time pay and split-shift pay that appear within Industrial Welfare Commission Wage Order 4-2001, otherwise known as Wage Order 4.

AirTouch sales and customer service representatives were required to attend periodic “store meetings” that would last up to one and one-half hours.  Plaintiffs complained that AirTouch paid them for only the length of the meeting and did not pay them reporting-time pay on those days when they had to report to work just to attend the meeting.  Plaintiffs also claimed they were improperly denied split-shift compensation on days when they attended a meeting in the morning, and then worked a longer shift later the same day.

AirTouch responded that it did not owe the plaintiffs reporting-time pay and had sufficiently compensated them for split-shifts. Additionally, AirTouch claimed that one plaintiff had waived her claims by signing a settlement agreement and release.

The trial court granted summary judgment to AirTouch and dismissed the plaintiffs’ claims.

Reporting Time

Wage Order 4 states: “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.”
One plaintiff, Daniel Krofta, asserted that Wage Order 4 required AirTouch to pay him for a minimum of two hours on days when he was required to report to work just to attend a meeting, regardless of whether the meeting was scheduled or whether he worked more than one-half of his scheduled time.  The Court of Appeal disagreed, finding that reporting-time pay was not owed because, even if the scheduled meeting lasted less than two hours, Krofta would still be furnished more than one-half of his scheduled day’s work.

To illustrate, the court described a hypothetical situation in which an employee’s only scheduled work for the day is a mandatory meeting of one and one-half hours, but the meeting concludes after one hour, leaving the employee with only one hour worked.  In this situation, as with Krofta, the employee would not be entitled to reporting-time pay, because the employee still was furnished work for at least one-half of the scheduled 1.5 hour meeting.  However, the court pointed out that if the meeting had been cut short after one-half hour, then the employee would be entitled to two hours of reporting-time pay, because the employee would have been furnished work for less than one-half of the scheduled time.

Split Shift

Wage Order 4 defines a “split-shift” as “a work schedule, which is interrupted by non-paid non-working periods established by the employer, other than bona fide rest or meal periods.”  Under the Wage Order, an employee who works a split-shift is entitled to one hour of pay at the minimum wage in addition to the minimum wage for that workday.

The court found that Krofta worked a split-shift on several occasions, when he attended a meeting in the morning, then returned for a longer shift later the same day.  AirTouch argued that it had properly paid Krofta on these days, because his total daily pay exceeded the minimum wage for all hours worked plus an additional hour at minimum wage.

The court agreed with AirTouch, noting that the Wage Order required one hour at the minimum wage to be paid in “addition to the minimum wage for that day,” rather than the “regular wage” for that day.  Accordingly, the court held that an employee who works eight hours on a split-shift must receive minimum compensation of nine hours times the minimum wage, as opposed to eight hours of regular wages plus one hour of minimum wage.

Release of Claims

One plaintiff, Mary Katz, signed a “Release of Claims Agreement,” in exchange for the right to exercise long-term incentive awards exceeding $25,000.  AirTouch raised the release as a defense to Katz’s wage claims.  Katz contended that the release was invalid under Labor Code section 206, which requires an employer in a wage dispute to pay, without condition, all amounts conceded to be due. 

The court noted that Labor Code section 206 does not require unconditional payment of disputed amounts, and held that the release was enforceable because a bona fide dispute existed as to whether the employer owed Katz additional compensation, and because Katz received consideration for releasing her disputed claims.  The court therefore affirmed the trial court’s order granting summary judgment against Katz.

What AirTouch Means for Employers

As long as employee meetings are scheduled ahead of time, and employees work at least one-half of the time scheduled, an employer does not owe the employee reporting-time pay for attending such meetings.  Accordingly, when an employer requires an employee to report to work for a meeting or other event, the employer should (1) ensure that the meeting or event is scheduled in advance for a specified length of time, and (2) ensure that the employee works at least one-half of the scheduled time.

Because the court also held that employees are not allowed additional split-shift compensation if their compensation already exceeds the minimum wage for all hours worked plus an additional hour, it appears that employers need only be concerned about split-shift pay for employees whose hourly wage is close to the minimum wage.

Finally, employers should not expect a court to uphold a release agreement purporting to waive an employee’s undisputed wage claims.  Instead, employers should seek releases from employees only with respect to bona fide wage disputes, and only when the employee receives consideration in exchange for the release.

By: Anthony DiBenedetto

Anthony DiBenedetto is an associate in Seyfarth’s Sacramento office.  If you would like further information, please contact your Seyfarth attorney or Anthony DiBenedetto at adibenedetto@seyfarth.com.