Lawyers in California are advising their retailer clients to take a proactive approach to the wage-dispute case Troester v. Starbucks Corp. that goes before the California Supreme Court on Tuesday, May 1.
That means finding out whether they owe employees for off-the-clock work and, if so, paying them for it, and also directing their human resources departments to put policies in place so that workers are paid for all hours they work.
Grant Alexander, a partner at Alston & Bird in Los Angeles where he handles wage-and-hour disputes for employers, told TheStreet that he is advising his clients not to take a "wait-and-see approach" to the case's outcome, which could come 60 to 90 days from now. He has characterized California as a pro-employee state. He is not directly involved in the Starbucks case.
Alexander estimated that if Starbucks Corp. (SBUX) eventually loses and the dispute results in a class action, it could pay some seven figures in back wages and fees for attorneys, court filings and lateness. Another attorney Charley Moore, founder of online legal service Rocket Lawyer, told TheStreet that "the Troester case could potentially add billions of dollars to the already high cost of operating a business in the state of California."
Yet, for the major retailers doing business in the state, a seven-figure cost would hardly faze them. For example, last year, sales for both Starbucks and McDonald's Corp. (MCD) were each $22 billion and Home Depot, Inc. (HD) and Walmart Inc. (WMT) reported sales of $101 billion and $500 million respectively, according to FactSet.
Now is a good time to act, Alexander said. "Waiting and hoping nothing comes of it without modifying policies to comply with the law puts employers at risk," he said.
At issue in the case is whether the federal Fair Labor Standard Act's de minimis doctrine, as stated in the U.S. Supreme Court case from 1946, Anderson v. Mt. Clemens Pottery Co., and Lindow v. United States from 1984, applies to unpaid wages under sections of the California Labor Code. The California Supreme Court hears oral arguments on Tuesday.
In plaintiff Douglas Troester's suit, he alleges that Starbucks required him to clock out before completing tasks at a Los Angeles County store, which were mandated by the company. Those included a store closure procedure to transmit sales, profit and loss and inventory data to Starbucks headquarters. In addition, he alleges that he routinely wasn't paid for the required tasks of locking the store and escorting coworkers to their cars, which he maintains the company required as part of its safety guidelines. The plaintiff alleges that these tasks took four to 10 minutes daily and that during the 17 months he worked for the company, he racked up some 12 hours and 50 minutes of unpaid closing-shift time, which is a full day-and-half in unpaid minimum wages. The period covers mid-2009 to October 2010. The alleged nonpayment owed Troester is some $120.
Troester was a shift supervisor at Starbucks earning minimum wage, around $8 an hour. His attorney, Shaun Setareh, a partner at Setareh Law Group in Beverly Hills, told TheStreet that Troester could very well have been fired had he not performed the off-the-clock tasks outlined in the brief. After Troester left Starbucks employ, the coffee-house retailer changed its policy so that its employees in California are paid for the time and tasks in dispute by Troester. Starbucks declined to comment on the case when contacted by TheStreet.
"The case is definitely being watched in California legal circles," retail consultant Michael J. Berne told TheStreet. "If the California Supreme Court rules that the de minimus doctrine does not apply, it would add to the ever-escalating labor costs in the state, which have skyrocketed in expensive coastal metros in particular, owing to low unemployment levels, skyrocketing housing costs and progressive social policies."
Berne added that regardless of the outcome of the Troester case, he doubted that Starbucks would reduce its presence in California. With 2,874 Starbucks in California, it has more of the coffee retailer's stores than any state: 2,001 are company-owned and 873 are licensed by Starbucks.
California's retail industry is impressive. Last year's sales from 713,304 retail and food service outlets amounted to $107 billion, a 3.4% increase from 2016, according to the state's Department of Tax and Fee Administration. According to the National Retail Federation in 2014, its most recent, 1 in 4 jobs in California are in retail.
To be clear, a new interpretation of the wage law in California won't happen overnight, even if Troester prevails with the state's high court. The next step would be for Setareh to ask a federal court to certify a class, so that he could file a class action. The lawyer estimated the class to number in the thousands.