Wednesday, April 20, 2011

Court of Appeal Clarifies Rules Regarding "Workweeks" And Compensability Of Off-Duty On-Call Or Standby Time

In Symore v. Metson Marine, Inc., the California Court of Appeal once again reversed a trial court decision in favor of the employer and, construing liberally the statutes and regulations at issue "with an eye toward promoting" protection and benefit of employees, held (1) an employer cannot avoid obligations to pay overtime by designating a workweek in order to deprive employees of overtime compensation they would be entitled to and (2) that off-duty on-call or standby time was compensable time based on the facts of the case.
Labor Code section 500 defines a "workweek" as "any seven consecutive days, starting with the same calendar day each week.  'Workweek' is a fixed and regularly recurring period of 168 hours, seven consecutive 24-hour periods."  Emphasis added.
Metson's employees worked 14-day hitches on Metson's ships, which handle emergency clean up of oils spills and other hazardous materials off the California coast.   Metson established for all of its employees a workweek beginning on Monday at 12:00 a.m., and ending on Sunday at 11:59 p.m., which is a relatively common workweek.  However, all of Metson's employees assigned to ships worked alternating 14-day hitches beginning on Tuesday at 12:00 noon and ending at 12:00 noon 14 days later.  Under Metson's workweek, the employees worked six days in the first workweek, seven days in the second workweek, and two days in a third workweek.  Accordingly, Metson paid the employees the required premium pay for the seventh consecutive day worked only for the seventh consecutive day worked during the second workweek.  The trial court determined that Metson's workweek was lawful and that Metson properly paid its employees.
Although the text of Labor Code section 500 permits an employer to designate "any seven consecutive days starting with the same calendar day each week" as a workweek and seeming grants to employers complete discretion to designate the workweek as the employer sees fit, on appeal, the Court of Appeal held an employer does not have such complete discretion.  The court held "an employer may not designate its workweek in a manner that is designed primarily to evade overtime compensation."  The court went on to explain:  "[F]or all employees working aboard its vessels Metson has established a single work schedule that begins on a Tuesday, while designating the 'workweek' to begin on a Monday, accomplishing nothing apparent in the record other than the elimination of overtime." Thus, "an employer may designate a workweek used to calculate compensation that differs from the work schedule of its employees only if there is a bona fide business reason for doing so, which does not include the primary objective of avoiding the obligation to pay overtime."
During their 14-day hitches, Metson's employees were paid 12 hours each day for on-duty time regardless of whether the employees performed work for the full 12 hours, four of which were paid at the overtime rate.  Metson deemed the remaining 12 hours as standby time and allowed 8 hours for sleep on Metson's ships and the remaining 4 hours as meal or free time.  During that time, employees were free to leave their ships, but they were not permitted to consume alcohol and were required to return to their ships within a maximum of 45 minutes when necessary.  The trial court determined that Metson was not required to pay its employees for any of the 12 off-duty hours each workday. 
On appeal, the Court of Appeal held Metson was not required to compensate its employees for any of the 8 hours each day allowed for sleeping because the employees worked 24 hour shifts and because the employees entered into a non-written agreement with Metson that the time allowed for sleeping would not be considered compensable time.   
As for the 4 hours designated as meal or free time, the Court of Appeal held this time is compensable time because of the restrictions Metson placed on how the employees could spend that time.   Applying a previous California Supreme Court decision stating "'[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' of whether particular hours constitute hours worked,'" the Court of Appeal reversed the trial court and held the 4 hours designated as meal or free time is compensable time because "[t]he required response time [45 minutes] (and perhaps the alcohol ban) precluded plaintiffs from going places and pursing activities in which they might otherwise have engaged" and is compensable time even though "the undisputed evidence is that emergencies were rare and that plaintiffs were seldom called back to the ship during their off-duty hours." 
In light of this decision by the Court of Appeal, employers should be mindful that courts will scrutinize designated workweeks that differ from employees' actual work schedules to determine (a) whether a designated workweek deprives employees of overtime pay the employees would otherwise be entitled to and (b) whether the designated workweek is supported by a bona fide business reason for doing so apart from reducing or eliminating the payment of overtime compensation.  
Employers should be mindful, also, that courts will often deem non-work-time as compensable time if the employer places significant restrictions on how employees may use non-work-time based on the following seven factors: "(1) whether there was an on-premises living requirement; (2) whether there were excessive geographical restrictions on employee's [sic] 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."