Apple employees sued the employer claiming they are owed unpaid wages for time spent undergoing a search prior to leaving the Apple retail stores.  The issue presented to the California Supreme Court: Is time spent on the employer’s premises waiting for, and undergoing, required exit searches of packages, bags, or personal technology devices voluntarily brought to work purely for personal convenience by employees compensable as “hours worked” within the meaning of Wage Order 7?  In Frlekin v. Apple, Inc., the California Supreme Court held that this time is considered hours worked and needs to be paid by Apple.

The case reached the California Supreme Court at the request of the United State Court of Appeals for the Ninth Circuit, which was reviewing the issue after the district court held that the searches were not compensable.

1. Apple’s policy and Plaintiff’s Complaint

Apple’s mandatory bag search policy states:

Employee Package and Bag Searches

All personal packages and bags must be checked by a manager or security before leaving the store.

General Overview

All employees, including managers and Market Support employees, are subject to personal package and bag searches.  Personal technology must be verified against your Personal Technology Card (see section in this document) during all bag searches.

Failure to comply with this policy may lead to disciplinary action, up to and including termination.

Do

Find a manager or member of the security team (where applicable) to search your bags and packages before leaving the store.

Do Not

Do not leave the store prior to having your personal package or ba[g] searched by a member of management or the security team (where applicable).

Do not have personal packages shipped to the store. In the event that a personal package is in the store, for any reason, a member of management or security (where applicable) must search that package prior to it leaving the store premises.

The employees are required to clock out before submitting to an exit search pursuant to the bag search policy.  There were varying estimates about the amount of time it took employees to go through the screening process.  The employees estimated it lasted from five to 20 minutes, and on busy days the employees estimated they had to wait up to 45 minutes.

The Plaintiffs’ complaint alleges that Apple failed to pay minimum and overtime wages under California law for time spent waiting for and undergoing these exit searches.

2. Definition of “hours worked” under California law

Wage Order 7 requires employers to pay their employees a minimum wage for all “hours worked” (Cal. Code Regs., tit. 8, § 11070, subd. 4(B)), defined 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” (id., § 11070, subd. 2(G)).

The Court explained that hours worked is determined by these two factors: (1) subject to the control of the employer or (2) if an employee is “suffered or permitted” to work.  Under the first control-factor, the employee does not have to be working during the time for it to be compensable.  Under the second “suffered or permitted” factor, the employee does not have to be under the control of the employer, but if the employer has or should have knowledge of the employee’s work, then it is compensable.

The Court’s decision was interpreting California law, which, as established in the decision provides a more employee friendly definition of what time qualifies as compensable work.  Illustrative of this, the Plaintiffs in the action dismissed all non-California law claims following the United States Supreme Court’s decision in Integrity Staffing Solutions, Inc. v. Busk (2014) 574 U.S. 27, which held that time spent undergoing mandatory security screenings was not compensable under the FLSA.

3. Apple “controlled” the employees during the exit screening

Apple argued that it did not have control over the employees, because it was the employees who made the decision to bring items to work that were subject to search under its policy.

The Court disagreed with Apple, holding that the employees were under the employer’s control while “awaiting, and during, the exit searches.”  The Court explained that Apple controlled employees during this time because:

• the employees were subject to discipline if they did not follow the search policy,
• the employees were confined to the premises during the search,
• the policy required employees to perform certain tasks during the search (such as find a manager or security personnel to perform the search, opening the bag, etc.…).

The Court explained:

It is to be expected that many Apple employees feel they have little genuine choice as a practical matter concerning whether to bring a bag or other receptacle containing such items to work.  Moreover, given that Apple requires its employees to wear Apple-branded apparel while working but directs them to remove or cover up such attire while outside the Apple store, it is reasonable to assume that some employees will carry their work uniform or a change of clothes in a bag in order to comply with Apple’s compulsory dress code policy.  Apple’s proposed rule conditioning compensability on whether an employee can theoretically avoid bringing a bag, purse, or iPhone to work does not offer a workable standard, and certainly not an employee-protective one.  (See Dynamex, supra, 4 Cal.5th at p. 952 [the wage orders are intended to accord workers “a modicum of dignity and self-respect”].)

The Court also disregarded Apple’s argument that the employees had a choice in whether to bring their smartphone to work:

Given the importance of smartphones in modern society, plaintiffs have little true choice in deciding whether to bring their own smartphones to work (and we may safely assume that many Apple employees own Apple products, such as an iPhone).

4. Level of control over employees determines if it is compensable time

The Court relied upon its prior holding in Morillion v. Royal Packing Co. 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.  The Court explained that whether an activity is required by the employer will still be a factor in making a determination of whether the employee is under the employer’s control.

The Court further explained that in in deciding if certain activities performed on the job site need to be compensated as time worked, other factors must be reviewed as well.  Factors such as the location of the activity, the degree of employer’s control, if the activity benefits the employer or employee, and if the activity is enforced through discipline must be given consideration in addition to whether the activity is required by the employer.

5. The holding applies retroactively

The Court held that its ruling in this case applies retroactively.  The Court disagreed with Apple that the holding did not change an established rule which Apple relied upon.  As such, even if employers modify their current policies to address this holding, there could still be potential liability for past claims.  As such, it is recommended that employers in California review policies that may be impacted by the Frlekin case.