In Seymore v. Metson Marine, Inc., (— Cal.Rptr.3d —-, Cal.App. 1 Dist., April 14, 2011), a court of appeal considered whether an employer violated the Labor Code by designating the workweek to start on a particular day of the week or by not compensating employees for the time they were on call. The court of appeal held the employer violated the Labor Code because (1) its designation of the workweek was designed to reduce overtime compensation, and (2) its on-call requirements subjected the employees to employer’s control in such a manner that the on-call hours constituted time worked.
Andrew Seymore and Kenneth Blonden (“Employees”) filed a lawsuit to recover unpaid overtime wages against their former employers Metson Marine, Inc., and Metson Offshore, Inc. (“Employer”). Employees were crew members on ships operated by Employer that provided emergency cleanup of oil spills and other hazardous materials discharged in the waters off the California coast. Employees “worked on two-week rotational hitches, i.e. 14-day hitches, alternating with 14-day rest periods.” Each rotational hitch started on a Tuesday at noon and ended fourteen days later on a Tuesday at noon. Employer calculated overtime compensation for Employees “on the premise that the workweek began at 12:00 a.m. on Monday and ended at 11:59 p.m. the following Sunday.” Therefore, Employees “worked six days in the first workweek, seven days in the second workweek and two days in a third workweek” and were “paid a single seventh day premium at the end of the second workweek.”
Employees worked 12-hours shifts per day while they were on the ships, except for the days when they boarded or departed a ship. Employer paid employers an hourly rate for a full shift whether or not they performed any work during the 12 hours. Employer paid Employees their regularly hourly rate for the first eight hours of work and time and a half for the other four hours of their shift. If Employees were required to work more than 12 hours per day, they were paid double time for the time they worked in excess of 12 hours. Employees were “off-duty” for 12 hours per day. Employer designated eight hours of this time as sleep time, three as meal time, and one as free time. Employees were required to be on “standby” during their off-duty time but they could leave the boat provided they checked in and out when they departed and returned and carried a cell phone or pager. Employer required Employees to be able to return to the ship within 30 to 45 minutes if there was an emergency call. Employer provided Employees sleeping quarters and required Employee to sleep on board the ships. Employer prohibited Employees from consuming alcohol at any time during their two-weeks aboard the ships. Employees left their ship during off-duty time to walk, run errands, and go to the gym but sometimes they stayed aboard the ship to read, watch television, and call relatives.
The trial court granted summary judgment in favor of Employer. The court concluded that the facts established that Employer properly calculated Employees’ wages.
The court of appeal held the trial court erred in granting summary judgment in favor of Employer. The appellate court concluded it was impermissible for Employer “to artificially designate the workweek in such a way as to circumvent the statutory requirement to pay overtime rates for the seventh consecutive day in a workweek.” It further concluded that the restrictions Employer placed on Employees during their on-call hours subjected Employees to Employer’s “control for the full 14-day hitch, so that the on-call hours constitute time worked.”
Labor Code section 510, subdivision (a), provides in part: “[T]he first eight hours worked on the seventh day of work in any one workweek shall be compensated at the rate of no less than one and one-half times the regular rate of pay for an employee. . . . In addition, any work in excess of eight hours on any seventh day of a workweek shall be compensated at the rate of no less than twice the regular rate of pay of an employee.” “Workweek” is defined by Labor Code section 500, subdivision (b) as “any seven consecutive days, starting with the same calendar day each week” and “is a fixed and regularly recurring period of 168 hours, seven consecutive 24-hour periods.” Although section 500 allows an employer flexibility when designating a workweek, an employer’s authority to designate a workweek is not unlimited. Both federal and California law prohibit an employer from designating “its workweek in a manner that is designed primarily to evade overtime compensation.”
The court concluded there was no evidence in the record that “suggests that the designation of the workweek was designed to serve a legitimate business purpose or any purpose other than the avoidance of the obligation to pay overtime wages.” Employer presented no evidence that it created the workweek “schedule to accomplish some bona fide business objective or to accommodate employee preference.” The court reversed the decision of the trial court because Employer “did not establish that [Employees] were properly denied a second seventh day premium during each 14-day hitch.”
The court also reversed the trial court’s decision regarding overtime compensation for standby time. Employees’ claim for compensation is governed by Industrial Wage Commission Wage Order No. 9-2001, which “requires an employer to compensate its employees for all ‘hours worked’ and, subject to various other provisions and conditions not here relevant, to pay specific overtime rates for ‘hours worked’ in excess of either or 12 hours per day.” “Hours worked” is defined by the wage order as “the time during which an employee is subject to the control of an employer, and includes all the time employee is suffered or permitted to work, whether or not required to do so.”
When analyzing the level of control an employer exerts over an employee, a court must determine whether: (1) the employer required the employee to live on premises; (2) the employer placed “excessive geographical restrictions on [the] employee’s movements;” (3) the frequency of the employer’s calls to the employee “was unduly restrictive;” (4) the fixed time limit the employer placed on the employee “for response was unduly restrictive;” (5) “the on-call employee could easily trade on-call responsibilities;” (6) the “use of a pager could ease restrictions;” and (7) the “employee had actually engaged in personal activities during call-in time.” Employer allocated eight hours of standby time for sleeping and required Employees to sleep aboard the ship. Employer placed geographical restrictions on Employees for the remaining four hours of standby time. During those four hours, Employees were free to choose recreational activities.
The court found the entire 12 off-duty hours of each day that Employees were on the ship constituted “hours worked.” However, prior California case law provides “it is permissible for an employer and [employee] to enter into an agreement, which need not be written, to exclude up to eight hours of sleep time from work or compensable time on twenty-four-hour shifts if adequate sleeping facilities are provided by the employer and the employee has the opportunity to get at least five hours of uninterrupted sleep.” The court found there was an implied agreement between Employer and Employees that Employees would not be compensated for the eight hours of sleep time as long as Employer did not interrupt their sleep. Therefore, the court concluded Employees were entitled to be compensated for four hours of standby time for each 24-hour workday.
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