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Another Good reason for Dispute Resolution Plan - Employee Theft Prevention and Bag Search Time

Posted by Jon A. Dieringer | Apr 08, 2020 | 0 Comments

Here is another reason to have a good, lawful Dispute Resolution Plan that includes class-action waivers, trial and administrative hearing waivers, and arbitration as a final exclusive method to resolve employment and wage disputes.

Today, February 13, 2020, the California Supreme Court answered the following question:

Is time spent on the employer's premises waiting for, and undergoing, required exit searches of their bags compensable as 'hours worked' according to California wage law?

Employee theft is rampant in retail and other industries. Inventory shrinkage costs the U.S. retail industry over $46 billion annually. Of that, Employee theft is responsible for 33.2 percent, or over $15 billion.   Last year in Riverside, an employee and his friend stole over $100,000 from a Target store over a four-month period, so it's a local problem, too. So, it is not unusual to have employee bags checked on leaving.

Bags can carry inventory out the door unnoticed, unless checked.   Employers often respond to internal theft by implementing policies that require their employees undergo a search of their personal bags when they leave work. Most often, bringing a bag like a purse, backpack or briefcase is entirely voluntary - a matter of the employee's personal preference and convenience.   The mere threat that their bags may be checked may be enough to deter employees from engaging in theft.   But, these exit searches take time.

In Frlekin v. Apple Inc., the employer had a “bag-search” policy that required employees to have all personal packages and bags checked before leaving the store, and that failure to do so may lead to discipline including termination.   Apple employees were required to clock-out before submitting to the exit search pursuant to the bag-search policy.   Apple's exit searches ranged from five to 20 minutes, but on the busiest days it could be up to 45 minutes, depending on the availability of security or managers to conduct the search and the number of employees in line to be searched.

A handful of employees sued Apple, Inc. as a class action in federal court for all other employees who were not paid wages or overtime for the time waiting for and undergoing exit searches.    The federal court submitted the question above to the California Supreme Court.   California law provides greater employee protections and benefits than federal law, and those California wage and employment law questions must be answered based on how the California Supreme Court would answer.

In response to the question above, the Supreme Court answered: “Yes” – an employer must pay for the time an employee endures for an exit search of their bags.    The Court also held this ruling is retroactive, so it would apply to similar employees who have been subject to unpaid waiting time for exit searches.   The statute of limitations for these wage and overtime claims goes back three years.   So, we can expect many employees may seek claims for unpaid time during exit searches.   

By comparison, federal law addressed the same subject a few years ago, but ruled the other way – which is common as federal law provides a lower standard of employee protection or benefits. The US Supreme Court held that time spent undergoing mandatory security screenings was not compensable under the federal Fair Labor Standards Act (FLSA), as amended by the Portal-to-Portal Act of 1947 (29 U.S.C. § 251 et seq.). Integrity Staffing Solutions, Inc. v. Busk (2014) 574 U.S. 27.

The Frlekin v. Apple Inc. lawsuit will now proceed in federal court, applying this California law interpretation and likely limited to determining the value of wages and overtime owed to its employees, along with the attorney fees and costs.

Important take-aways and questions:

1. Review your policies, again:

  • Do you want to prohibit workers from bringing bags into the workplace, especially bags brought for personal preference or convenience?

  • If you prohibit employees from bringing “convenience” bags to work, make sure to allow for accommodations for medical, disability, hygiene or for other requirements for protected categories.

  • If you require exit searches as a policy, make sure employees are paid wages and overtime for the time of the search.

2. If you've performed exit searches of employees without paying them for this time, review those records with counsel to see if payment of wages is due.

3. Review with legal counsel the wisdom of having a good, lawful Dispute Resolution Plan that includes class-action waivers, trial waivers, and arbitration as a final and exclusive method to resolve any wage and employment disputes.

About the Author

Jon A. Dieringer

Jon believes in keeping a strong focus on preventive law; developing policies and practices to avoid costly disputes, and litigating only when required. Since the beginning of his law career in 1992, Jon has successfully litigated cases from intake through appeals, including discovery and deposit.

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