Ninth Circuit Revives Nike Labor Spat Over Off-Clock Inspections

SAN FRANCISCO (CN) – The Ninth Circuit Friday revived a class action suit against Nike that will test how much unpaid time workers can challenge under California law. 

Lead plaintiff Isaac Rodriguez sued Nike in 2014, claiming the global sportswear giant cheated him and other employees at 34 retail stores in California out of payments for time spent waiting for and going through inspections before leaving work at shift endings and breaks.

In September 2017, U.S. District Judge Beth Labson Freeman in San Jose granted Nike’s motion for summary judgment, finding that the inspections, which took less than 10 minutes, were “de minimis,” or minimal, under the standard established in the 1984 Ninth Circuit ruling in Lindow v. United States.

The Ninth Circuit reversed Freeman’s ruling Friday, finding that a subsequent state court ruling has changed the legal landscape.

The California Supreme Court held in Troester v. Starbucks in 2018 that the federal de minimis doctrine does not apply to claims for unpaid wages under California law. The state’s highest court found that California law establishes stronger protections than federal law and requires workers be paid for “all hours worked” and “any work beyond eight hours a day.” 

The state court, however, stayed silent on whether a California de minimis principle could ever apply to claims for unpaid wages under California law.

Seizing that opening, Nike told the Ninth Circuit that its security checks are still de minimus under California’s stricter standard. Citing expert testimony based on video and in-person observations, Nike said 69% of exit inspections took less than 15 seconds, 81.4% took less than 30 seconds and only 3.3% took longer than 60 seconds.

The plaintiffs denounced the study as flawed, arguing it covered only a 30-day period and relied on assumptions about which individuals seen in videos were waiting for inspections, among other problems. The plaintiffs also cited testimony by managers who said employees regularly waited at least one minute for supervisors to become available to perform inspections.

A three judge Ninth Circuit panel held that, even if the inspections took less than a minute on average, the case would still require reconsideration under the stricter standard established in Troester v. Starbucks.

Replacing the federal de minimis doctrine’s 10-minute daily threshold with a state law 60-second threshold would go against the state supreme court’s finding that California law requires employees be paid for “all hours worked or any work beyond eight hours a day,” the panel held.

“We doubt that Troester would have been decided differently if the closing tasks at issue had taken only 59 seconds per day,” U.S. District Judge Jed Rakoff said in the ruling.

The panel cited “undisputed facts” that show the exit inspections took between zero seconds and several minutes and that employees frequently exited multiple times a day.

Given that evidence, Rakoff said the panel could not conclude the security checks qualify as “split-second absurdities,” exempt from pay for time worked under state law.

The Ninth Circuit remanded the case back to district court.

Plaintiffs’ attorney Max Gavron, of Diversity Law Group in Los Angeles, welcomed the appeals court’s decision Friday.

“We are pleased with the Ninth Circuit’s ruling, and will continue to prosecute the case in accordance with California law,” Garvon said in an email.

Nike attorneys Michael Afar and Jonathan Meer, of Seyfarth Shaw in Los Angeles, did not immediately return requests for comment Friday.

Circuit Judges Mary Schroeder and Milan Smith joined Rakoff on the panel.

Rakoff was appointed by Bill Clinton. Schroeder was appointed by Jimmy Carter, and Smith was appointed by George W. Bush.

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