California Supreme Court Holds Employees Must Be Compensated For Mandatory Exit Searches

California (February 26, 2020) - Last week, in Frlekin v. Apple Inc., the California Supreme Court held that employees must be compensated for employer-mandated exit searches of packages, bags, and personal technology devices. In arriving at this conclusion, the Court developed a new four-factor test to be used when analyzing on-site, employer-controlled activities.

The mandatory nature of the activity is no longer the only important factor to be considered. Lower courts must now additionally examine: (1) the location of the activity, (2) the degree of the employer's control, (3) whether the activity primarily benefits the employee or employer, and (4) whether the activity is enforced through disciplinary measures.

Apple's Policy

As part of a policy to prevent theft, Apple required retail store employees to undergo personal package, bag, or technology checks prior to leaving each store's premises. The baggage checks ranged between 5 minutes on slow days to 45 minutes on busy days. The issue with this policy was that Apple required its employees to clock out before undergoing the searches.

Eventually, Apple retail store employees filed a class action lawsuit in federal district court demanding Apple pay them for the time spent waiting for and undergoing personal baggage checks. The district court granted Apple's summary judgment motion, and the case was appealed to the Ninth Circuit. The Ninth Circuit requested the California Supreme Court resolve whether the employees should be paid under California's Wage Order 7, which requires employees to be compensated for all "hours worked."

The California Supreme Court's Decision

Under Wage Order 7, "hours worked" is 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." This is often referred to as the "control clause." The California Supreme Court was tasked with determining whether "the time spent waiting for and undergoing Apple's exit searches was compensable as 'hours worked' under the control standard." The Court reaffirmed that an employee can be subject to the compensable control of an employer while not actually performing work duties. Based on the control language of Wage Order 7, the Court found Apple's retail employees were entitled to compensation for the bag checks.

The California Supreme Court identified several reasons justifying compensation for the bag checks: "First, Apple requires its employees to comply with the bag-search policy under threat of discipline, up to and including termination. Second, Apple confines its employees to the premises as they wait for and undergo an exit search. Third, Apple compels its employees to perform specific and supervised tasks while awaiting and during the search."

Unlike prior cases where the employees did not have to be compensated, these bag checks were neither optional nor meant for the employees' sole benefit. The checks were conducted on Apple's premises as a condition to employees leaving work.

Fallout

The Frlekin  decision will have major effects on retailers imposing mandatory bag checks as a means to prevent theft. However, the decision should only impact employers in the mercantile industry. Wage Order 7 is limited to persons employed in the mercantile industry, which means any industry, business, or establishment operated for the purpose of purchasing, selling, or distributing goods or commodities at wholesale or retail, or for the purpose of renting goods or commodities. As such, California employers in the mercantile industry should review any policies pertaining to bag checks to ensure compliance with the Court's decision in Frlekin.

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