The U.S. Court of Appeals for the Ninth Circuit (whose geographic scope covers the state of California) issued an opinion on October 24, 2022 finding that employees may be entitled to pay for the time they spend logging onto computers before they can open a computer-based timekeeping application.  The court joined the U.S. Court of Appeals for the Tenth Circuit in finding this time might be compensable under the federal Fair Labor Standards Act (“FLSA”).  While both decisions were fact-specific and employers may still have defenses under certain circumstances, this new decision suggests that employers who use computer-based timekeeping applications should consider examining their own clock-in and -out practices and compensation practices and assess whether to make any changes to mitigate possible risk.

Under the FLSA, employees must be paid for all “hours worked.” Activities performed before or after a regular work shift are considered “hours worked” if they are “integral and indispensable” to the principal productive activities the employee has been hired to perform. On the other hand, activities that are “preliminary or postliminary” to the employee’s principal activity are not required to be paid.

In Cadena v. Customer Connexx LLC, 2022 WL 13743450 (9th Cir. Oct. 24, 2022), the Ninth Circuit found that call center employees who had to turn on or wake up a computer at their call center, then log in and load the electronic timekeeping system before clocking in for the day were engaged in tasks that were “integral and indispensable” to their principal activities.  The Court found it important that the employees used these same computers to accept customer calls through a computer-based application. The employees also used the same computer to load scripts that corresponded to the scheduling services the employees were hired to provide. In this context, the Ninth Circuit held that time spent turning on (or waking up) the computer, entering the employee’s credentials and loading the timekeeping program at the start of the shift was integral and indispensable to their principal activity of receiving customer phone calls and scheduling appointments using those same computers, and thus, was theoretically compensable time. The Ninth Circuit declined to rule on other potential defenses to FLSA claims (including the employer’s arguments that it did not have sufficient notice of the time employees spent logging on and off and that the uncompensated time need not be paid because it was de minimis) and instead returned the case to the District Court for consideration of these issues. (Note, while California generally follows the FLSA on what is compensable time, there is no de minimis defense under California law.)

In coming to its conclusion, the Ninth Circuit cited a Tenth Circuit case decided last year, Peterson v. Nelnet Diversified Sols., LLC, 15 F.4th 1033 (10th Cir. Oct. 8, 2021), which also found that time spent by call center employees “waking up” their computers, waiting for a program to launch, and then click a link to the payroll system was “integral and indispensable” to their work because the workers could not perform their computer-based jobs without doing these tasks.

Notably, in Nelnet the Tenth Circuit went even further than the Ninth Circuit and rejected the employer’s argument that this time was de minimis (and therefore need not be counted as hours worked). The court found that even though the daily time was between 1.1 and 2.27 minutes (a relatively small amount of time), the time was still not de minimis because the unrecorded time was incurred during every shift, and it would not be administratively burdensome for the employer to estimate the amount of time that employees spent on each day. Thus, this was compensable time.

In both cases, the courts rejected employers’ comparison of time spent turning on and logging in to the computer (and the reverse at the end of the day) to time spent waiting in line to punch an old-fashioned time clock. In rejecting this analogy, the courts explained that the main reason the employees need to turn on and log in to their computers is not to punch a time clock, but instead, to perform their work duties.

The courts in both cases specifically stated that their holdings were limited to the facts of these cases – in which in-person call center employees had to log-in to computers at their employer’s worksite to perform their primary duties. They specifically did not decide whether the same time would be compensable if the employees worked remotely or used their personal computers to perform the same duties.  And, as noted, the Ninth Circuit did not opine on the applicability of the de minimis defense under these circumstances.

Nevertheless, employers who use computer-based timekeeping applications should consider examining their own practices for individuals whose primary job functions are computer-based to determine whether to adjust their practices regarding clocking in and out or compensation practices to mitigate the risk that time spent turning on, waking up, and/or logging on to computers and timekeeping software might be found to be compensable.

If you have questions about how this new case may affect your business, please contact us.

• Mary P. Snyder (msnyder@wilsonturnerkosmo.com)
• Katie M. McCray (kmccray@wilsonturnerkosmo.com)
• Lois M. Kosch (lkosch@wilsonturnerkosmo.com)

Wilson Turner Kosmo’s Special Alerts are intended to update our valued clients on significant employment law developments as they occur. This should not be considered legal advice.