We here at Who’s The Boss? just looove being right.

However, in this case, being right may not be good news for those California businesses who provide their employees with vehicles. Being right may instead prove to be very costly to these otherwise generous employers. (Sorry, we don't make the law, we just try to understand it.)

For those of you following the Commute Wars, you will remember last October's opinion by the 9th Circuit in Rutti v. Lojack, holding that commute time in a company vehicle was not a compensable event, even though the employer imposed certain restrictions on the employee’s use of the vehicle (such as no passengers, no personal errands, no use of cell phones other than calls from the office, must travel directly from home to first job and from last job to home without detours). (I'm sure "no pizza" was in there too.)

This was good news to employers. Who wants to pay their employees to sit in traffic for hours a day going to or from work? Indeed, it could lead to Geographic Discrimination (don’t hire anyone from the ‘burbs who have longer commutes). (Suburbanites, the new protected class?)

As we noted in our original blog summary on Rutti last October, the 9th Circuit held that despite the restrictions on employee use of the vehicle, the employee was not so much under the control of the employer as to consider the commute time “company time” rendering it compensable. The 9th Circuit held this to be the case under both federal law and Employee-Happy California law.

At the time, we questioned whether the 9th Circuit got it right under California law, stating in our own inimitable way:

“But what about California law? As we all know, just because an employment practice may be lawful under federal law does not mean that California sees things the same way. (See just about every California employment law.) Couldn’t California law take a more restrictive view of the daily commute and consider the restrictions and obligations imposed on Mr. Rutti’s commuting activities by his employer to require compensation?

California could. And it does. But not so much as to require payment of Mr. Rutti’s drive time. At least not according to the Ninth Circuit (which, I must warn you, does not always predict California law with 100% accuracy, as we have seen in the non-compete world).”

The fact is, under the Morillion v. Royal Packing Co. case, California has considered commute time compensable under certain conditions -– such as when the employee is under the control of the employer. The question thus was whether Lojack’s restrictions imposed on its technicians using company vehicles to commute to and from home were so substantial as to render the employee effectively under the control of the employer during that time.

Initially, two of the three judges on the 9th Circuit’s panel considering the matter felt that Lojack’s restrictions were insufficiently controlling under both federal and state law, hence the original ruling that the commute time was not compensable.

However, it appears that Judge Hall must have read our blog (at least that’s the story I’m sticking with), because in an almost unprecedented move, the 9th Circuit not only reconsidered its prior ruling in Rutti, but reversed itself as to its application of California law in Rutti II.

In the time between the original ruling in August 2009, and the amended ruling in March 2010, Judge Hall reconsidered the application of Morillion to the facts before the court and this time determined that Lojack’s control over its technicians was sufficiently pervasive as to render the commute time compensable. Judge Hall joined with the former dissenting Judge Silverman to create a new majority on this one issue.

WHAT DOES THIS ALL MEAN???

Seriously, this could be a major (i.e., expensive) problem for many California businesses who provide their employees with vehicles.

Under the 9th Circuit’s ruling, employers in California who provide their employees with vehicles, and imposes certain restrictions on that use, could end up paying for the employee’s commute time. In Southern California in particular, where it can take 20 minutes just to get to the gas station down the street, this can prove to be pretty costly. Commutes measured “by the hour” are not uncommon here. (And don’t think you northern Californians are immune. I’ve seen the 101 at rush(less) hour.)

For employers affected by this ruling, not only must they now pay for their employees’ commute time, but they may be subject to more overtime obligations. If the commute time now counts towards the employee’s eight hour regular work day, the employee will either need to work fewer hours between the commute so that the total work day (including commute) is eight hours or less, or be paid overtime for what previously was straight time. Ouch.

What should those generous vehicle-supplying employers do? Yanking the vehicles is certainly one option, but probably not necessary. Rather, these employers need to take a very hard and serious look at their vehicle policies, including a careful review of the restrictions imposed on their employees’ use of the vehicles, to determine whether, in light of the new Rutti opinion, they want to reconsider some of those restrictions. This is not a decision to be done lightly because an error can prove very costly.