On February 4, 2019, in the matter of Ward v. Tilly’s a California appellate court held, for the first time, that a retail employer’s on-call scheduling scheme* triggered the reporting time pay requirements of California Industrial Welfare Commission Wage Order 7. 

The scheduling practice at issue is fairly common in retail and other industries where customer flow or workload can be difficult to predict:  Employees are assigned on-call shifts, but are not told until they call in two hours before their shifts start whether they should actually come in to work.  If they are told to come in, they are paid for the shift; if not, they do not receive any compensation for having been “on call.”

Plaintiff, a former employee of clothing retailer Tilly’s, alleged this practice violated the reporting time pay provisions which are present in most of the wage orders.  Wage Order 7 (governing the mercantile industry) requires employers to pay employees “reporting time pay” for 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.”  In this scenario the employer must pay the employee for half the usual or scheduled day’s work, but no less than two hours and nor more than four hours. Plaintiff argued that when on-call employees contact Tilly’s two hours before on-call shifts, they are “report[ing] for work” within the meaning of Wage Order 7, and thus are owed reporting time pay.

The trial court dismissed the lawsuit finding the phrase “report for work” meant that an employee must physically appear at the workplace.  The appellate court, relying in large part on public policy, disagreed.

Initially the court found the wage order to be “ambiguous” and “susceptible to more than one reasonable interpretation.”  It thus considered a variety of extrinsic circumstances to interpret the regulation including “the evils to be remedied, the legislative history, public policy … [and] the consequences that will flow from a particular interpretation.”

The “report for work” language was adopted by the Industrial Welfare Commission (IWC) in the 1940’s.  The court agreed with Tilly’s that, at the time, this likely meant physically showing up for work.  However, interpreting the regulation in light of new technology, the court found that had the IWC had anticipated cell phones and telephonic call-in requirements it would have intended the reporting time pay requirement to apply.

The court also considered the original purpose of the reporting time pay requirement, which was to compensate employees for transportation costs and loss of time involved in getting to work.  It was meant to encourage employers to provide proper notice and scheduling.  The court found Tilly’s on-call practices shared similarities with the abusive practices the IWC sought to combat when it first enacted the reporting time pay requirement. Both requiring employees to come to work at the start of a shift without a guarantee of work, and unpaid on-call shifts benefit employers by creating a pool of contingent workers the employer can utilize if the store’s foot traffic warrants it, or tell them they are not needed without any financial consequence to the business.

The court found the unpaid on-call shifts impose tremendous costs on employees because they cannot commit to other jobs, schedule classes or anything else during those shifts; they may make contingent child care arrangements which they then need to pay for even if they are told not to come to work, and they could not otherwise make plans during the times they may be called into work. The court also noted that the employees’ activities were constrained at call in time as they had to be sure to be in a place where they could make a phone call. 

As such, the court found that employees need not necessarily physically appear at the workplace to “report for work.”  And, that requiring reporting time pay for on-call shifts is consistent with the IWC’s goals in adopting Wage Order 7, as it would require employers to absorb costs associated with overscheduling and thereby encourage them to more accurately predict their labor needs and schedule accordingly.

The court declined to decide whether its interpretation of the wage order applies prospectively or retroactively, leaving employers vulnerable even if they modify or eliminate on-call shifts going forward.  The court also declined to speculate on how much advance notice employers must provide to avoid a reporting time penalty, but acknowledged that four-hour, eight-hour or 24-hour call in shifts would likely not be as beneficial or “economically desirable” to employers because of the inability to predict staffing needs, for example, eight hours before the start of a shift.

A partially dissenting judge, who believed reporting time pay was only owed if the employee had physically appeared at the workplace, accused the majority of “drawing up interpretations that promote the Court’s view of good policy” and suggested this was a matter that should be decided by the Legislature, not the courts.

*Notably, Tilly’s call-in shifts worked three different ways:

1. Employees were scheduled for a regular shift as well as an on-call shift later that same day. The employee would be told during her regular shift whether she would be required to work her on-call shift. For example, the regular shift is scheduled from 11:00 a.m. to 3:00 p.m. and the on-call shift from 3:00 p.m. to 5:00 p.m.

2. Employees were scheduled for on-call shifts earlier in the day than regular shifts scheduled on that same day. The employee was required to call the employer two hours before the on-call shift to see if she should report. For 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 to 4:00 p.m.

3. Employees were scheduled for on-call shifts on days they were not scheduled to work any regular shifts.  For example, the employee was scheduled for an on-call shift from 10:00 a.m. to 12:00 p.m. with no regular shift that day.

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