California Supreme Court Provides Favorable Interpretations on Wage Order Provisions for Construction Workers, in Huerta v. CSI Electrical Contractors

California Supreme Court Provides Favorable Interpretations on Wage Order Provisions for Construction Workers, in Huerta v. CSI Electrical Contractors

This week, in Huerta v. CSI Electrical Contractors, the California Supreme Court provided favorable interpretative guidance for provisions surrounding compensable time and employer-mandated travel in the Industrial Welfare Commission (IWC)’s Wage Order No. 16. Wage Order No. 16 is a key regulation that defines the wages, hours, and working conditions for workers of on-site occupations, such as those in the construction, drilling, logging, and mining industries. This decision is a win for workers in these industries, as it both clarifies and broadens the kinds of time in the workday that should be considered compensable. The decision also helps employees who are union members to be able to assert statutory wage claims. This decision should put more money into workers’ pockets.

In Huerta v. CSI Electrical Contractors, the employer, CSI Electrical Contractors (“CSI”) was a contractor assigned to provide procurement, installation, and construction services for a solar power facility site (“Site”) in Monterey and San Luis Obispo. CSI hired the plaintiff, George Huerta, and several other workers to provide these services at the Site. Every day, Huerta and his coworkers had to go through a security gate, where guards would scan their badges and search their cars. After that search, the workers would then have to drive 10 to 15 minutes along a narrow access road to reach the parking lots and begin their shifts. At the end of their workday, the workers formed a line to exit the security gate, where the guards again scanned the workers’ badges, peered into their cars for stolen tools or endangered species, before letting them exit the security gate (“Exit Security Procedure”). This Exit Security Procedure led to a 5- to 30-minute delay for workers exiting the Site. Because the Site contained endangered species, it was subject to an Incidental Take Permit (ITP), which imposed additional regulations that led to further delay for the workers to begin and end their work shifts. Under the ITP regulations, a biologist had to survey the site every morning to ensure there were no endangered species on the roads, which often led to a 20-minute delay, the workers could only use one access road to reach the Site, and they could only drive at a maximum of 20 mph on that one road. Additionally, the workers had a collective bargaining agreement (CBA), which stated that they would receive one unpaid 30-minute meal period every day, but also stated that they were not permitted to leave the Site and had to take their meal period at a designated area on the Site.

Huerta and his co-workers were not paid for any of the additional time spent entering or exiting the Security Gate, driving between the Security Gate and the employee parking lots, or for the 30-minute meal periods where they were not permitted to leave. Huerta filed a wage and hour class action in the Superior Court of Monterey, to seek payment for all this unpaid time, and the action was then removed to the U.S. District Court for the Northern District of California. After the district court granted summary judgment for CSI on several class claims, the case was appealed to the Ninth Circuit. The Ninth Circuit then requested that the California Supreme Court answer three questions surrounding Wage Order No. 16: (i) whether the Exit Security Procedure was compensable as “hours worked” within the meaning of Wage Order No. 16; (ii) whether the time spent driving from the security gate to the parking lots, while subject to numerous rules, was compensable as “hours worked” or “employer-mandated travel” within the meaning of Wage Order No. 16; and (iii) whether time considered an unpaid “meal period” under a qualifying CBA is nonetheless still compensable as “hours worked” under Wage Order No. 16, when workers are relieved from duty but prevented from leaving the premises.

Before discussing these questions in detail, the Supreme Court began by providing an overview of Wage Order No. 16 and the “hours worked” provision in question. The IWC created several wage orders to provide minimum requirements for wages, hours, and working conditions in various industries, and Wage Order No. 16 covers on-site occupations in the construction, drilling, logging and mining industries. Wage Order No. 16, sec. 4 provides for a minimum wage that should be paid to workers for their respective “hours worked.” The wage order defines “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.” In previous decisions, the Court identified two clauses from this definition – the “control clause” and the “suffered or permitted to work clause” – that provided independent factors for deciding what time spent in work would qualify as “hours worked.”

For the first question, the Court held that the time workers spent going through the Exit Security Procedure was compensable as “hours worked” within the meaning of Wage Order No. 16. To support this holding, the Court discussed Frlekin v. Apple Inc. (2020) 8 Cal.5th 1038, and applied Frlekin’s reasoning to CSI’s Exit Security Procedure. Frlekin involved a similar question, on whether Apple’s procedures of requiring employees to agree to security searches of their bags before leaving was compensable as “hours worked.” The Court concluded that the time was compensable, because the employees were clearly under the control of Apple while awaiting, and during, the exit searches. For determining whether an employee was subject to an employer’s control during this time, the Court cited to several factors, such as (i) the strict compliance and discipline associated with the bag-search policy, (ii) the confinement of employees to a location during the search, (iii) the requirement for employees to do specific and supervised tasks, and (iv) the fact that the search was done primarily in the interests of Apple.

The Court applied these four factors to CSI’s Exit Security Procedure and concluded that Huerta and his co-workers were under CSI’s control during the Exit Security Procedure. All of the CSI workers were strictly required to undergo the Exit Security Procedure, and the workers remained confined to the access road and security gate, until the Exit Security Procedure was completed. CSI required workers to perform specific and supervised tasks during the procedure, such as driving the vehicle to the gate, presenting their identification badges to a security guard, and permitting the security guard to inspect and search their vehicles. Finally, the Exit Security Procedure was done primarily in service of CSI’s interests, since CSI was bound by its contract with the Site to comply with numerous protocols, and the Exit Security Procedure was important for ensuring that compliance.

For the second question, the Court held that the time workers spent driving between the security gate and the parking lots could be compensable as “employer-mandated travel,” under certain conditions within the meaning of Wage Order No. 16. Wage Order No. 16, sec. 5(A) provides that “[a]ll employer-mandated travel that occurs after the first location where the employee’s presence is required by the employer shall be compensated at the employee’s regular rate of pay . . . .” Huerta and CSI had conflicting interpretations of the phrase “first location where the employee’s presence is required by the employer.” Huerta believed it should be interpreted literally to cover the security gate where he first stopped his car at the start of the workday, while CSI believed it should be interpreted more conservatively, to generally refer to a certain location where employees initially gather, before traveling to another location.

Instead of favoring one interpretation, the Court reviewed the history of Wage Order No. 16 and formulated a different standard. Based on the supporting statement for Wage Order No. 16, the Court found that for time to be considered “employer-mandated travel,” the travel only must be done at the direction and command of the employer, after the employee’s arrival at the first location where his/her presence was required. For employees’ presence at a location to be “required by the employer,” their presence must be required for an employment-related reason other than accessing the worksite. Some examples of valid employment-related reasons include heading to a location to pick up work supplies, receive work orders, or to perform work before traveling to another work site. For determining other possible employment-related reasons, some key factors would include the purpose served by the employees’ presence at the location, the activities done in the location, and the amount of time spent in the location. The Court rejected the idea that the time between the security gate and the parking lots was compensable “hours worked” under the Wage Order, however.

For the last question, the Court held that unpaid “meal periods” from a qualifying CBA are still compensable as “hours worked” under Wage Order No. 16, when the CBA prevents them from leaving the premises during that meal period. Huerta and his co-workers signed a CBA that provided them with an unpaid, 30-minute meal period, but the CBA also stated that they could not leave the Site and that they had to take their meals at a designated area. CSI argued that under Wage Order No. 16, sec. 10(E), because of their valid CBA, they were not required to pay Huerta for his meal periods. The Court rejected this interpretation –– holding that employees are still entitled to a minimum wage for time they spend under the control of the employer, even for meal periods. Employees cannot bargain away their right to a minimum wage for compensable meal periods with a CBA, because their right to a minimum wage, under Labor Code sec. 1194, was separate and not waivable.

The Court then found that meal periods where employees were not allowed to leave the premises count as “hours worked” for which they should be paid minimum wage, because they remain under the control of their employer. To support this finding, the Court cited to Bono Enterprises, Inc. v. Bradshaw, 32 Cal.App.4th 968, and Brinker Restaurant Corp. v. Superior Court, 53 Cal.4th 1004, emphasizing that “absence of duty and freedom from employer control” were central to unpaid meal periods. In support of the holding, the Court also cited to a 2001 opinion letter from the Division of Labor Standards Enforcement (DLSE), which stated that unpaid, off-duty meal periods required that the employee (i) have at least 30 minutes uninterrupted, (ii) be free to leave the premises, and (iii) be relieved of all duty in the entire period.

The decision in Huerta is an important victory for workers’ rights, because the Court’s interpretations of “hours worked” and “employer-mandated travel” for Wage Order No. 16 broadens the scope of what may be considered compensable time for workers in the construction industry, as well as other on-site occupations. Other wage orders contain similarly phrased provisions, and this decision may broaden the scope of compensable time in other industries as well. The mere existence of a CBA with a meal period provision does not wipe out workers’ statutory wage claims.

If an entity like your company is involved in systemic wage and hour violations, it can be held accountable under the Labor Code. If you believe that you have wage and hour violations at your company, please contact Bryan Schwartz Law, P.C.