HR Management & Compliance

Cautionary Tale from California: Don’t Presume State Courts Will Follow Federal Guidance

The California Supreme Court recently made national headlines when it declined to follow—strictly as a matter of policy—70-year-old precedent from the U.S. Supreme Court on the Fair Labor Standards Act (FLSA) in a case interpreting the state’s comparable wage regulations. To be sure, the policy goals and judicial philosophies of California and other parts of the country are not always synchronous. Consequently, the California decision is a reminder that employers everywhere shouldn’t place too much reliance on federal law when confronting state-law issues.

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Troester v. Starbucks: Cutting a New Path on de Minimis Wages

Both the FLSA and the California Labor Code (and its related Wage Order) mandate standards for the payment of wages. One of the issues that arose under the FLSA soon after its passage was the amount of time worked that “counts” for purposes of compensation. The U.S. Supreme Court accepted that the de minimis principle, taken from the Latin phrase De minimis non curat lex (“The law does not concern itself with trifles”), is applicable to certain FLSA claims, ruling in a 1946 case, Anderson v. Mt. Clemens Pottery Co.: “When the matter in issue concerns only a few seconds or minutes of work beyond the scheduled working hours, such trifles may be disregarded. Split-second absurdities are not justified by the actualities of working conditions or by the policy of the [FLSA].”

Many state courts have subsequently relied on the de minimis approach when interpreting their state wage laws. (See, for instance, the Illinois Appellate Court’s 1995 decision in Bartoszewski v. Vill. of Fox Lake and the Wisconsin Supreme Court’s 2016 ruling in United Food & Commercial Workers Union, Local 1473 v. Hormel Foods Corp.). However, the California Supreme Court recently held that the de minimis rule should not be incorporated into the California Labor Code, at least with respect to allegedly uncompensated time of between four and 10 minutes each day.

According to the California court, “An employer that requires its employees to work minutes off the clock on a regular basis or as a regular feature of the job may not evade the obligation to compensate the employee for that time by invoking the de minimis doctrine.” The court was very careful to note that its ruling wouldn’t necessarily apply to all future cases in which employers seek to invoke the de minimis exception: “We leave open whether there are wage claims involving employee activities that are so irregular or brief in duration that it would not be reasonable to require employers to compensate employees for the time spent on them.” Troester v. Starbucks, No. S234969 (Cal., July 26, 2018).

Indiana Precedent: Deference, but not Blind Deference

On the whole, Indiana courts have been willing to look to federal authorities to interpret state laws on the same subject matter, particularly in the area of employment-related civil rights. For instance, the Indiana Supreme Court stated in Filter Specialists, Inc. v. Brooks, “In construing Indiana civil rights law[,] our courts have often looked to federal law for guidance,” and relied on National Labor Relations Act (NLRA) precedent to interpret state law in Fratus v. Marion Cmty. Sch. Bd. of Trustees.

Indeed, in some cases, Indiana has gone so far as to mandate the application of federal rules to state law. Specifically, Indiana Code Section 22-9-5-27 states that while the Indiana Civil Rights Commission may adopt rules interpreting the state’s disability discrimination statutes, those rules “must not be in conflict with the provisions of the federal rules adopted under the employment discrimination provisions of the federal Americans with Disabilities Act [ADA].” And as recently as July, the Indiana Court of Appeals relied on Section 22-9-5-27 to invalidate Indiana rules it determined were “outdated” compared to their federal counterparts (see Knox Cty. Ass’n for Retarded Citizens, Inc. v. Davis).

However, such deference by Indiana courts is by no means a given. For instance, the Indiana Tax Court declined to recognize a “deliberative process” privilege from disclosure of Indiana state administrative records, stating in Popovich v. Indiana Dep’t of State Revenue that “although the Court may look to federal decisions for guidance when interpreting Indiana’s civil trial rules, the existence of a federal privilege does not necessarily animate a similar state privilege.” Similarly, the Indiana Court of Appeals declined in State v. Roach to recognize the spousal testimonial privilege on state-law grounds, despite determining that Indiana Rule of Evidence 501 was modeled on Federal Rule of Evidence 501, which does permit such a privilege. In short, although Indiana courts have noted areas of deference to federal authority, it’s important to recognize that deference is merely noted and not the courts’ default position.

Bottom Line: Assumptions Are Dangerous

Starbucks probably believed that California would adhere to federal policy and let four minutes of work a day go uncompensated. That didn’t turn out to be true, and the employer now faces untold liability under California law. Other states’ statutes may or may not be subject to the same interpretive question, but the lesson remains valuable: Assuming that state courts will adhere to federal guidance in all cases can have unforeseen and potentially drastic consequences. Employers would do well to consider why federal policy is what it is in any given situation and, relatedly, whether federal policy is consistent with your own state’s legislative and judicial philosophies.

Alex E. Preller is an Associate at Faegre Baker Daniels and a contributing editor at the Indiana Employment Law Letter. You may contact him at alex.preller@faegrebd.com.