Compensable ‘hours worked’ further defined by California Supreme Court

At a glance

• Employers don’t need to compensate for ordinary exit procedures but must pay for time spent on employer-controlled vehicle inspections.
• Travel time on an employer’s premises is generally not compensable unless the employer imposes more than ‘ordinary workplace rules’.
• Employers don’t need to pay employees for meal periods unless they require employees to remain on premises or eat at a specific location.
• The court’s ruling has implications for California employers to re-examine their practices and adjust pay practices accordingly.

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On March 25, 2024, the California Supreme Court further clarified the boundaries of ‘hours worked’ under California law in Huerta v CSI Electrical Contractors. In the ruling, the court addressed three primary types of working time, and how they apply to employee compensation.

First, the court concluded that employers do not need to compensate employees for time spent in ordinary exit procedures, such as opening doors or badging out of a parking lot. However, employers must pay employees for time spent on the employer’s premises awaiting and undergoing employer-mandated and employer-controlled vehicle inspections at the end of a shift.

Second, the court concluded that travel time on an employer’s premises is generally not compensable as ‘hours worked’ when an employer imposes ‘ordinary workplace rules’ on employees as they travel. With respect to employers covered by Wage Order 16 (applicable to the construction industry), the court further concluded that employers do not need to pay employees for all time worked post-arrival at particular location, simply because that location is necessary to gain access to the worksite. In the construction industry, employers are only required to pay employees for all time worked after employees are mandated to report to a specific location for a work-related reason.

Third, the court held that employers do not need to pay employees for meal periods merely because the realities of the workplace prevent employees from leaving the premises during a meal period. Employers must only pay employees for meal periods if they require employees to remain on premises or to eat at a particular location.

Background

George Huerta was a construction worker for CSI Electrical Contractors, Inc, helping to build a solar power facility on privately-owned land. To reach the worksite, Huerta and other employees had to enter private land, present a badge at a security gate, and then drive approximately 10–15 minutes on an access road to an employee parking lot.

While driving along the access road, workers were required to comply with restrictions designed to minimize disturbances to surrounding wildlife. For example, employees could only drive 5–20 miles per hour, were prohibited from walking or biking along the access road and were prohibited from honking their horns or playing music that could be heard outside their vehicles. Violation of these restrictions could result in suspension or termination.

When leaving at the end of their shifts, workers exited along the same access road and were required to participate in a vehicle inspection at the security gate. The inspection included a visual review of the vehicle, and sometimes a physical review of the back seat and trunk of the vehicle, to confirm employees were not removing tools or protected species from the property.

CSI paid its employees from the time they boarded a shuttle in the parking lot headed to the worksite until the time the shuttle dropped employees off at the parking lot at the end of a shift. CSI did not pay its employees for the time spent traveling the access road, waiting for or passing through the security gate, or for their meal periods taken at the worksite.

Procedural background

Huerta filed a class action against CSI seeking payment of unpaid wages for the time spent passing through the security gate, traveling along the access road, and taking on-site meal periods. The district court granted summary judgment in favor of CSI, finding that: workers were not entitled to wages for the time periods at issue because CSI did not exercise sufficient control over its employees during the security check and travel times, and pursuant to applicable collective bargaining agreements, the workers were not entitled to compensation for their meal periods.

Huerta appealed to the Ninth Circuit, which certified the following three issues to the California Supreme Court:

• ‘Is time spent on an employer’s premises in a personal vehicle and waiting to scan an identification badge, have security guards peer into the vehicle, and then exit a Security Gate compensable as 'hours worked' within the meaning of Wage Order No. 16?’
• ‘Is time spent on the employer’s premises in a personal vehicle, driving between the Security Gate and the employee parking lots, while subject to certain rules from the employer, compensable as 'hours worked' or as ‘employer-mandated travel’ within the meaning of Wage Order No. 16?’
• ‘Is time spent on the employer’s premises, when workers are prohibited from leaving but not required to engage in employer-mandated activities, compensable as ‘hours worked’ within the meaning of Wage Order No. 16, or under California Labor Code Section 1194, when that time was designated as an unpaid 'meal period' under a qualifying collective bargaining agreement?’

Holdings

In an opinion authored by California Supreme Court Justice Goodwin H. Liu, the court unanimously agreed upon the answers to each of these certified questions.

Employer-controlled exit inspections are compensable 

In answering the first certified question, the California Supreme Court held that ‘an employee’s time spent on an employer’s premises awaiting and undergoing an employer-mandated exit procedure that includes the employer’s visual inspection of the employee’s personal vehicle is compensable as ‘hours worked’ within the meaning of Wage Order No. 16, section 2(J).’

The court reasoned that although the exit inspection process occurred while Huerta was in his personal vehicle, that fact ‘does not necessarily transform that time into commuting time, nor does it foreclose an employer’s ability to exert control over its employee. An employee in his personal vehicle may be subject to his employer’s control within the meaning of the wage order if sufficient indicia of control are present.’

The court found there were sufficient indicia of employer control to convert the wait time and inspection time into work time, including:

• Huerta was required to wait for and undergo the exit inspection before leaving;
• Huerta remained confined to the employer’s premises until completing the inspection;
• Huerta was required to perform specific tasks as part of the exit procedure, including driving to the security gate, rolling down his window to show the guard his security badge, and submitting his vehicle to a visual inspection and possibly a physical inspection; and
• The inspection primarily served CSI’s interests in ensuring that only approved individuals entered the site and that no employee removed tools or endangered species from the site.

The court contrasted the active security inspection at issue in the case with ordinary exit procedures – such as unlocking an exit door or scanning a badge to open a parking gate – which would not be sufficient to convert time spent exiting a worksite into work time.

Ordinary on-premises travel is not compensable

In answering the second certified question, the court held that, under Wage Order 16, time spent in a personal vehicle driving between the security gate and the employee parking lot was compensable only if the security gate was the first location where the employee’s presence was required for an employment-related reason other than the practical necessity of accessing the worksite. The court agreed with CSI that a location is not a ‘first location where the employee’s presence is required’ under Wage Order 16 merely because, as a practical necessity, the employer’s premises can only be accessed from that location.

The court also ruled that ordinary restrictions placed on employees while traveling on the employer’s premises (ie, prohibitions on discrimination, harassment, smoking, horseplay, consumption of alcohol, among others) are insufficient to convert the travel time into work time. The court noted that virtually every workplace has rules that are necessary to ensure safe, lawful, and orderly conduct.

The court concluded there was no meaningful distinction between CSI’s workplace transit rules and rules such as prohibiting a department store clerk from chewing gum in the store before or after a shift, or rules prohibiting a maintenance worker from skateboarding in an office building.

Unpaid meal periods under valid collective bargaining agreements

In answering the third certified question, the court concluded that the parties could not negotiate away through a collective bargaining agreement the employees’ right to be paid for working during their meal periods. Still, the question remained whether the employees were in fact required to work during their meal periods simply because they were unable to leave the worksite. Harkening back to its decision regarding on-premises rest breaks in Augustus v ABM Security Services, Inc, the court confirmed that an employee’s practical inability to leave the worksite during a meal period is insufficient to render a meal period a working one. The court stated: ‘the distances separating the Installation Site, parking lot, and public road, as well as the speed limit on the access road, might have made travel impractical during Huerta’s 30-minute meal period, and the fact that the features of a worksite make travel impractical in the time allotted is not sufficient to establish employer control.’

Key takeaways

Although the court analyzed the certified questions in the context of the construction industry and Wage Order 16, the court’s analyses have implications for California employers across a wide spectrum of industries. Employers are advised to re-examine their practices to determine whether they are exerting sufficient control to convert travel time and/or meal periods into work time and adjust their pay practices accordingly. Employers may also want to scale back on controls that are not necessary to maintaining a safe and orderly workplace.

For more information, please contact any of the authors.