Morillion v. Royal Packing Co.

A new decision was published this week on when commute time is required to be paid by employers. Plaintiffs represented current and former employees of defendant Pacific Bell Telephone Company who install and repair video and internet services in customers’ homes.

Plaintiffs alleged they were owed for the time they spent traveling in an employer-provided vehicle that carried equipment and tools between their homes and a customer’s residence under an optional and voluntary Home Dispatch Program established by the employer.

Key Facts

The Plaintiff technicians were paid on an hourly basis and installed equipment at customer’s homes.  The technicians could not use their own vehicles while on the job, were required to use a company vehicle. They were also required to carry all necessary equipment and tools to perform their job in the company vehicle.  Their work day schedule started at 8:00 a.m. and lasted eight hours.

There were two options made available to the technicians for travel with the company vehicle.  The first option was the Home Dispatch Program (HDP), under which the technicians were allowed to take a company vehicle home each night instead of returning all vehicles to the Pacific Bell garage. The HDP was optional, and the techs were permitted drive the company vehicles, containing tools and equipment, to and from home each day. Technicians were not paid for any time before 8:00 spent driving from their homes to the first worksite. The technicians were not paid for the time spent driving home with the equipment and tools after their last appointment. If the technicians had to drive to the employer’s warehouse to restock equipment, they were paid for this time.

The second option available to the technicians was to pick their company vehicle up at the company garage prior to going to the first customer visit.  Under this option, they were compensated for time spent traveling to and from the garage.

Plaintiffs alleged three causes of action: failure to pay the minimum wage, failure to pay wages timely, and unfair business practices.  All causes of action were based on the failure to pay for the transporting time. Here are five key issues regarding the new decision in Hernandez v. Pacific Bell Telephone Company.

1. The Control Test

The court explained that the wage order defined “hours worked” 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.

The court noted that the California Supreme Court rejected an argument that to constitute “hours worked” the time must be spent actually working. Instead, the court held that as long as the employee is “subject to the control of an employer,” the time is considered compensable “hours worked.” Morillion v. Royal Packing Co. (2000) 22 Cal.4th 575, 582-584.

In Morillion, although the employees could read or sleep on the bus, they could not use the time for their own purposes; they “were foreclosed from numerous activities in which they might otherwise engage if they were permitted to travel to the fields by their own transportation.” The court in Morillion noted that during the bus ride employees could not drop off their children, stop for food, or run other errands.  Therefore, the Supreme Court concluded, “When an employer requires its employees to meet at designated places to take its buses to work and prohibits them from taking their own transportation, these employees are ‘subject to the control of an employer,’ and their time spent traveling on the buses is compensable as ‘hours worked.’ ”  Therefore, under these facts, the employer controlled the employees within the meaning of “hours worked.”

In Morillion, the Court, however, made it clear that

“employers do not risk paying employees for their travel time merely by providing them transportation. Time employees spend traveling on transportation that an employer provides but does not require its employees to use may not be compensable as ‘hours worked.’ [Citation.] Instead, by requiring employees to take certain transportation to a work site, employers thereby subject those employees to [their] control by determining when, where, and how they are to travel. Under the definition of ‘hours worked,’ that travel time is compensable.” (Morillion, supra, 22 Cal.4th at p. 588.)

The court in this case noted: “The rule of Morillion applies only where use of the employer-provided transportation is compulsory.”  Plaintiffs relied on the case of Rutti v. Lojack Corp. (9th Cir. 2010) for support that the employees should be paid for this commute time.  The court rejected this argument in finding that the employees in Rutti were “required to use the company vehicle; here, plaintiffs were not.”

2. Time spent commuting in a company provided vehicle is only compensable when it is compulsory.

The court explained that employers are only required to pay for employee’s commute time in company provided vehicles if it is required.  The court examined the case of Overton v. Walt Disney Co. (2006) where Disneyland employees sued seeking compensation for the time riding the company provided shuttle from the employee parking lot one mile away from the theme park.  Because Disney did not require the employees to take the shuttle, and they were free to walk, bike, or could have been dropped off at the employee entrance, the court held that this was not considered work time.

3. Suffer or Permit to Work Test

Plaintiffs also argued that the drive time was compensable as “hours worked” under the “suffered or permitted to work” definition. They argue they were working while driving to and from home because they were transporting tools and equipment that were necessary for them to do their job.

The court explained that the phrase “suffered or permitted to work, whether or not required to do so” “encompasses a meaning distinct from merely ‘working.’ ”  The court explained: “Our high court explained an employee is “suffered or permitted to work” when the employee is working, but not subject to the employer’s control, such as unauthorized overtime when an employee voluntarily continues to work at the end of a shift with the employer’s knowledge.”

Here, the court explained that “the standard of ‘suffered or permitted to work’ is met when an employee is engaged in certain tasks or exertion that a manager would recognize as work. Mere transportation of tools, which does not add time or exertion to a commute, does not meet this standard.”  Therefore the court held that under the suffer or permit to work test, the employee’s time was not compensable.

4. Court rejected Plaintiffs’ reliance on workers compensation cases

Plaintiffs attempted to rely on two workers compensation cases, Joyner v. Workmen’s Compensation Appeals Board (1968) 266 Cal.App.2d 470 and Lane v. Industrial Acc. Com. (1958) 164 Cal.App.2d 523.  These cases held that where an employee is injured in a traffic accident on his commute home, while carrying equipment for his job, the employer relationship continued such that the employee’s injuries were compensable and not subject to the coming and going rule.  In rejecting these holdings as binding in this case, the court noted, “These cases address a different issue than the one before us and therefore we find them inapposite. Further, we note that in both of these cases, the employee was not being paid by his employer for his commute time when the accident happened.”

5. Simply carrying tools does not necessarily make employee commute time compensable.

Defendant made that because the employees were carrying tools in the vehicle during the commute, this made the time compensable work time.  The court rejected this argument in noting defendant’s argument that “if carrying equipment necessary for the job were always compensable, every employee who carries a briefcase of work documents or an electronic device to access work emails to and from work would need to be compensated for commute time.”

The court agreed with a federal district court’s decision in Dooley v. Liberty Mut. Ins. Co. that:  “To the extent that some of these cases state broadly that travel time is compensable if employees are transporting equipment without which their jobs could not be done, e.g., Crenshaw, 798 F.2d at 1350, I read these statements as implying that the transportation involves some degree of effort. Otherwise, as observed earlier, the commutes of police officers who carry guns, or indeed, employees who carry badges, would always be compensable.”  There is a difference in effort between transporting heavy equipment for servicing oil wells as compared to the “incidental” transportation of cable TV equipment and tools in the case at hand.  Therefore, the fact that employees carried tools from and from work in this case did not make the time compensable.

The case, Hernandez v. Pacific Bell Telephone Company (November 15, 2018) can be downloaded here.

California employers need to routinely need to review their policies and practices to make sure they are complying with intricacies that may arise in their work place.  In law school, attorneys-to-be are taught to “issue spot,” and the unfortunate litigation landscape that faces California employers, business owners and their supervisors must also “issue spot” and make sure the unique aspects of California employment law are being complied with to avoid liability.  This Friday’s Five covers five issues employers should issue spot on a routine basis to help ensure compliance and reduce liability:

1. Reporting time pay

Reporting time pay is triggered when an employee is required to report for work, but is not put to work or is furnished less than half their usual or scheduled day’s work.  If this occurs, the employee needs to 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 cannot not be less than the minimum wage.

It is important for employers to train managers and supervisors about this requirement, so that they understand the need to pay reporting time pay, or report the instance to HR to ensure the employee receives reporting time pay if they are sent home before one-half of their shift is worked.

2. Split shift pay

A split shift is a work schedule that is interrupted by a non-paid, non-working period established by the employer that is other than a meal or rest break.  So if the employee is required to work a shift, but then asked to report to a second shift over later in the same day, the employer may be obligated to pay a split shift premium.  Again, this issue is one that front-line managers and supervisors need to be trained on to ensure that split shifts are being reported to HR or other appropriate management in the company to ensure any split shift pay obligations are being paid.

3. Expense reimbursement issues

Under Labor Code section 2802, employers need to reimburse employees for any business expenses they incur in the course of completing their work for the employer.  This basic concept sounds easy in principle, but given the technology used in today’s workplaces, there can be many areas that expose employers to liability.  For example, if employees are required to work at home, have access to the internet, print reports, or send and receive faxes, the costs for completing this work should be reimbursed by the employer.  Other areas that are often litigated are cell phone reimbursement, mileage reimbursement, and reimbursement for the costs of uniforms and safety equipment.

4. Off-the-clock claims

Employers can be held liable for unpaid wages if they knew or should have known that employees were working and not being paid for the work.  Employers should establish and regularly communicate a time keeping policy to employees and supervisors.  The policy should set forth that employees always have an open door to complain to their supervisors and other managers or human resources about missed meal and rest breaks, unpaid wages, or unpaid wages.  If employees routinely acknowledge that they understand the time keeping policy and are agreeing to record their time through the employer’s system, this can go a long way in defending any off-the-clock claims.

5. On-Call time

Even though employees are traveling to a work site or even sleeping, if the employee is under the control of the employer, the employer may have to pay them for being on-call.  For example, the California Supreme Court held that security guards who were required to reside in a trailer provided by the employer at construction worksites would still need to be paid for the time they slept while on-call.  In that case, during weekdays the guards were on patrol for eight hours, on call for eight hours, and off duty for eight hours.  On weekends, the guards were on patrol for 16 hours and on call for eight hours.  The Court held that the employer was not permitted to exclude the time guards spent sleeping from the compensable hours worked in 24-hour shifts.  See Mendiola v. CPS Security Solutions, Inc.

Likewise, in Morillion v. Royal Packing Co., the California Supreme Court held that, “we conclude the time agricultural employees are required to spend traveling on their employer’s buses is compensable under Wage Order No. 14-80 because they are ‘subject to the control of an employer’ and do not also have to be ‘suffered or permitted to work’ during this travel period.”  Generally, travel time is considered compensable work hours where the employer requires its employees to meet at a designated place and use the employer’s designated transportation to and from the work site.

Businesses that have employees on standby waiting to be called for work must review whether this on-call time needs to be paid time.  It is a vOn Call Timeery fact intensive inquiry, that employers must ensure they get correct.  Any mistake in not paying employees for compensable on-call time can result in potential exposure for overtime, minimum wage, and additional penalties.  Here is a list of five items employers should understand about on-call time under California law.

1.      Courts generally look to the extent of control over employee in determining whether on-call time is compensable. 

In Mendiola v. CPS Security Solutions, the California Supreme Court held that, “[i]t is well established that an employee’s on-call or standby time may require compensation.”  The Court, quoted Armour & Co. v. Wantock, a seminal case on this issue, for the proposition employee on-call time may have to be paid:

Of course an employer, if he chooses, may hire a man to do nothing, or to do nothing but wait for something to happen. Refraining from other activity often is a factor of instant readiness to serve, and idleness plays a part in all employments in a stand-by capacity. Readiness to serve may be hired, quite as much as service itself, and time spent lying in wait for threats to the safety of the employer’s property may be treated by the parties as a benefit to the employer.

2.      Courts look to a number of factors in making the determination of when on-call time must be paid.

Generally courts will look at the following factors in determining whether the on-call time should be paid:

  1. whether there was an on-premises living requirement;
  2. whether there were excessive geographical restrictions on employee’s movements;
  3. whether the frequency of calls was unduly restrictive;
  4. whether a fixed time limit for response was unduly restrictive;
  5. whether the on-call employee could easily trade on-call responsibilities;
  6. whether use of a pager could ease restrictions; and
  7. whether the employee had actually engaged in personal activities during call-in time.

3.      Sleep time may be compensable when employee works 24-hour shifts.

The California Supreme Court held that security guards who were required to reside in a trailer provided by the employer at construction worksites would still need to be paid for the time they slept while on-call.  In that case, during weekdays the guards were on patrol for eight hours, on call for eight hours, and off duty for eight hours.  On weekends, the guards were on patrol for 16 hours and on call for eight hours.  The Court held that the employer was not permitted to exclude the time guards spent sleeping from the compensable hours worked in 24-hour shifts.  See Mendiola v. CPS Security Solutions, Inc.

4.      Employers may pay a lower rate of pay for controlled standby time.

Employers are permitted to pay employees a lower hourly rate for controlled standby time as long as the rate is set before the work is performed, and the rate for any hour worked does not fall below minimum wage.  In order to calculate overtime owed, the weighted average of the two rates is used to determine the regular rate of pay.

5.      Travel time may be compensable under some circumstances.

In Morillion v. Royal Packing Co., the California Supreme Court held that, “we conclude the time agricultural employees are required to spend traveling on their employer’s buses is compensable under Wage Order No. 14-80 because they are ‘subject to the control of an employer’ and do not also have to be ‘suffered or permitted to work’ during this travel period.”  Generally, travel time is considered compensable work hours where the employer requires its employees to meet at a designated place and use the employer’s designated transportation to and from the work site.