By Josh Eidelson | Businessweek.com
Last month, when the Supreme Court ruled unanimously against workers suing an Amazon (AMZN) warehouse contractor, the e-commerce giant wasn't the only winner. That Integrity Staffing Solutions v. Busk decision—declaring that time spent waiting to go through security lines wasn't "integral and essential" to warehouse work, and so workers didn't have to be paid for it—also offered grounds for other companies to get employees' allegations dismissed. That's already started to happen—but companies still aren't in the clear.
"Busk obviously has limited the scope of security check claims that can be brought, especially under federal law," says attorney Brett Gallaway, who represents Apple Store employees currently suing to get paid for their daily wait time. "And by ‘limit,' I mean severely truncate." Gallaway and his colleagues recently dropped their allegations that Apple's (AAPL) refusal to pay for workers' wait time violated the federal Fair Labor Standards Act. (Other companies that have been hit with similar lawsuits include J.C. Penney (JCP), CVS Health (CVS), and TJX Cos. (TJX)) Still, Gallaway says his clients, and others like them, retain a different recourse: state law, starting with California.
Here's why. As I explained in October, the issue in Busk was whether security checks could be sufficiently "integral and indispensable" to employees' core duties to count as paid working time under the FLSA. Business groups argued that the wait was more like commute time, which Congress specified in 1947 that federal law doesn't mandate be paid. Labor groups argued it was—at least sometimes—more like butchers' time spent sharpening their knives, which the Supreme Court ruled in 1956 they can't be made to do for free. Business groups, warning that ambiguity could yield a stream of lawsuits, wanted a blanket rule that security checks aren't part of the workday; labor groups wanted the issue to be assessed case-by-case. Business won. The fact that a boss requires employees to do something, and benefits from them doing it, isn't enough to prove that the boss has to pay them to do it, Justice Clarence Thomas wrote in the Busk ruling. Integrity, the Amazon contractor that was the defendant in the lawsuit, Thomas wrote, "did not employ its workers to undergo security screenings."
But even if federal law doesn't require companies like Apple or Integrity to pay for waiting time, state law might. Regulations in California define "hours worked" as "the time during which an employee is subject to the control of an employer." Citing that language, the California State Supreme Court wrote in a unanimous 2000 decision that "an employee who is subject to an employer's control does not have to be working during that time to be compensated" under state law. The California justices also ruled that when Congress limited what it was requiring companies to pay for, it didn't stop states from setting a higher bar.
Even if time spent waiting for a security check isn't considered "integral and indispensable" to selling iPads, says Gallaway, it's still time that Apple Store workers are under their boss's control. And under California law, that's enough. "Because Apple has a black-and-white policy of preventing their employees from leaving the store before they undergo and subject themselves to a security check and a technology check, they remain under the employer's control," he says. "And because they're under the employer's control, they need to be compensated for that." (Apple did not respond to a request for comment; an Amazon spokesperson denied that workers in its warehouses experience long waits.)
Suing under state law is the right strategy, says Orly Lobel, a professor of employment and labor law at the University of San Diego. "A straightforward interpretation of the checkout time at the Apple stores, in which employees are subject to searches, would include that time as time in which the employees are subject to the control of the employer." And if a state has different standards than federal law, says UC Irvine law professor Catherine Fisk, "obviously state law might find the time spent on security checks compensable."
That could be costly for companies like Apple. Gallaway claims that his amended complaint, due to be filed in court on Jan. 9, will cover a class of about 12,500 current and former employees at 53 California Apple Stores, and employees report losing 10 to 20 minutes a day waiting without pay for a manager to perform a security check. California law also has heightened penalties and requirements that could increase the cost to companies, like an overtime rule that kicks in whenever employees work more than eight hours in a day, rather than only after 40 hours in a week. Other states offer opportunities for fresh lawsuits, says Gallaway: "Without giving away too much of where we want to go with this, it's certainly more than California." But even some solid blue states may be dead ends: Last month, while persisting with their California claims, Gallaway and his colleagues abandoned their allegations under state law in Massachusetts, New York, and Ohio, whose statutes they acknowledged "largely follow the ‘integral and indispensable' test under the FLSA."
Attorney Mark Thierman, who brought the lawsuit against Integrity and argued the case before the Supreme Court, is still suing Amazon contractors under state law in California, Nevada, Arizona, and Pennsylvania. "The state law claims are still valid, and now that people are aware of them, I think that other people will bring similar types of state law claims," he says. Still, following his defeat at the Supreme Court, Thierman adds, employees in many states are stuck without legal recourse if companies make them stand in line for free, and companies are left with less incentive to make those lines any more efficient. In "states that don't have any of their own labor law, and just use the feds'," he says, "it's a free pass."