Why it matters: California employers must pay workers for “all hours worked,” the state’s highest court recently determined, ruling that 24-hour security guards must be paid even while asleep. The guards filed a class action against a security company arguing that Wage Order 4 mandates that they be paid for all of their time on the clock while on call, whether watching TV, engaging in personal activities, or sleeping. The employer countered that federal law treats on-call time as uncompensated free time. While recognizing “the difficulty” facing employers, the California Supreme Court said state law sets a higher standard and examines the level of an employer’s control over the employee during the on-call time. As for the security guards, they remained under the employer’s control during the on-call time, the court said, and the fact that guards could engage in limited personal activities – including sleeping – did not lessen the extent of the employer’s control. Importantly, the court explicitly noted that its decision has retroactive application.

Detailed Discussion

In 2008, security guards employed by CPS Security Solutions filed a pair of class action lawsuits challenging the company’s on-call compensation policy. The plaintiffs alleged that CPS violated minimum wage and overtime obligations imposed by Wage Order 4.

Wage Order 4 requires that employers “pay to each employee … not less than the applicable minimum wage for all hours worked in the payroll period,” defining 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.”

CPS employed on-call guards to provide security at construction sites. Part of a shift involved active patrol, and each evening, guards were required to be on call at the worksite and to respond to disturbances should the need arise.

Pursuant to a written agreement, on-call guards were required to reside in a trailer on the premises provided by CPS. The trailers featured amenities like a bed, bathroom, kitchen, heating, and air conditioning, and guards were allowed to keep personal items in the trailers. Children, pets, and alcohol were not permitted, however, and adult visitors were allowed only with the approval of the CPS client.

On-call guards had to notify a dispatcher in order to leave the worksite and indicate where he or she was going and for how long. If another guard was available to provide relief, the on-call guard was required to remain on-site until the reliever arrived; if no reliever was available, the guard had to remain on-site even in the case of a personal emergency.

Guards were paid hourly for their time spent patrolling the worksite. On-call time was not compensated unless an alarm or other circumstances required that they conduct an investigation or they waited for, or were denied, a receiver. If three or more hours of investigation occurred during on-call time, the guard was paid for the full eight hours.

A trial court granted summary judgment for the guards, holding that CPS’s compensation policy violated Wage Order 4. An appellate panel agreed, although it carved out an exception for an eight-hour period of sleep for guards working a 24-hour shift.

The state’s highest court affirmed that the on-call policy violated state law and went a step further, concluding that CPS could not exclude time spent sleeping from 24-hour shifts.

An employee who is subject to an employer’s control does not have to be working during that time to be compensated, the court said. Factors used to determine the extent of an employer’s control include whether the on-call employee could easily trade on-call responsibilities, whether the employee actually engaged in personal activities during on-call time, whether an on-premises living requirement existed, and whether the on-call time is spent primarily for the benefit of the employer and its business.

“The guards here were required to ‘reside’ in their trailers as a condition of employment and spend on-call hours in their trailers or elsewhere at the worksite. They were obliged to respond, immediately and in uniform, if they were contacted by a dispatcher or became aware of suspicious activity. Guards could not easily trade on-call responsibilities. They could only request relief from a dispatcher and wait to see if a reliever was available. If no relief could be secured, as happened on occasion, guards could not leave the worksite,” the court wrote. “CPS exerted control in a variety of other ways. Even if relieved, guards had to report where they were going, were subject to recall, and could be no more than 30 minutes away from the site. Restrictions were placed on nonemployee visitors, pets, and alcohol use.”

The guards’ on-call time was spent primarily for the benefit of CPS, the court added. The company based its business model on the idea that construction sites need an active security presence around the clock to deter theft and vandalism. “Thus, even when not actively responding to disturbances, guards’ ‘mere presence’ was integral to CPS’ business,” the court said. “Indeed, the parties also stipulated that CPS would have been in breach of its service agreement had a guard or reliever not been at the worksite during all contracted for hours.”

Analogizing to listening to music and drinking coffee while working in an office setting, the court rejected CPS’s argument that because the on-call guards engaged in personal activities ranging from watching TV to showering to browsing the Internet, the time was not compensable.

“The fact that guards could engage in limited personal activities does not lessen the extent of CPS’s control,” the court said. “It is the extent of employer control here that renders on-call time compensable hours worked under Wage Order 4.”

CPS’s fallback position, that federal regulations treat on-call time as generally uncompensated, also failed to sway the court, which noted that California is free to offer greater protection to employees than federal law.

What about sleeping? Sleep time may not be excluded from the 24-hour shifts, the court wrote, finding no evidence that a federal regulation permitting the exclusion of eight hours of sleep time was incorporated into the wage order and declining to adopt the “vacillating and contradictory” viewpoint of the state’s Department of Labor Standards Enforcement.

To read the opinion in Mendiola v. CPS Security Solutions, Inc., click here.