Just Pay It: Ninth Circuit Moves Exit Inspection Suit Against Nike Forward

Employment Law

Exit inspections conducted as retail employees of Nike leave the store may need to be compensated, the U.S. Court of Appeals for the Ninth Circuit determined in a class action, applying the California Supreme Court’s recent decision in Troester v. Starbucks Corp.

At each of Nike’s 34 retail stores in California, employees are required to submit to exit inspections each time they leave the store on a break or at the end of the day. The inspections vary in the time involved, based on factors such as whether the employee needs to wait at the exit for someone to check them and whether the employee is carrying a bag or box that must be inspected.

The inspections take place off the clock and are uncompensated, as they occur after the employee punches out.

After working at a Nike store for a few months, Isaac Rodriguez filed a class action lawsuit seeking compensation for the inspection time. A district court certified a class of retail store employees dating back six years.

Nike moved for summary judgment, arguing that Rodriguez’s claims were barred by the federal de minimis doctrine, which precludes recovery for otherwise compensable amounts of time that are small, irregular or administratively difficult to record. The employer put forth expert testimony that 92 percent of the inspections took less than a minute and 97 percent took less than two minutes.

The plaintiff challenged the expert’s conclusions and countered with deposition testimony from Nike store managers who said that exit inspections regularly took several minutes. Rodriguez also noted that the question of whether the federal de minimis doctrine applied to California Labor Code claims was then pending before the state’s highest court in Troester.

Declining to stay the dispute pending the California Supreme Court’s decision, the district court applied the de minimis doctrine and granted Nike’s motion for summary judgment.

Rodriguez appealed to the Ninth Circuit. In the interim, the Troester decision was issued. Based on Troester, summary judgment in favor of Nike had to be reversed, the federal appellate panel found.

“The issue on appeal is straightforward: did the District Court err in granting summary judgment for Nike based on the federal de minimis doctrine?” the court wrote. “The answer, after Troester, is equally clear: the federal de minimis doctrine does not apply to wage and hour claims brought under the California Labor Code. By applying the doctrine to Rodriguez’s claims, the District Court failed—understandably, given the legal landscape at the time—to ‘appl[y] the relevant substantive law.’”

In its decision, the district court relied on several premises that Troester explicitly rejected, the Ninth Circuit said, repeatedly invoking the federal doctrine’s ten-minute daily threshold for determining whether amounts of uncompensated time are de minimis. Troester made clear, however, that the ten-minute threshold is inconsistent with California labor laws, under which “an employee must be paid for ‘all hours worked’ or ‘[a]ny work’ beyond eight hours a day.”

While Nike conceded the district court applied the wrong legal standard, it argued that summary judgment remained appropriate because the exit inspections were de minimis—even under Troester. The California Supreme Court left open “whether there are circumstances where compensable time is so minute or irregular that it is unreasonable to expect the time to be recorded,” Nike pointed out.

While Troester rejected the de minimis defense as applied to a matter of minutes worked off the clock, Nike contended that its expert found most of the exit inspections took seconds.

But the Ninth Circuit was not persuaded.

“To the extent Nike urges us to interpret Troester as replacing the federal de minimis doctrine’s 10-minute daily threshold with a state-law 60-second analogue, we hereby decline to do so,” the court wrote. “Not only would this interpretation read far too much into Troester passing mention of ‘minutes,’ but it would clash with Troester reasoning, which emphasized the requirement under California labor laws that ‘employee[s] must be paid for all hours worked or any work beyond eight hours a day.’”

The Ninth Circuit doubted that Troester would have been decided differently if the closing tasks at issue had taken only 59 seconds per day.

“Instead, we understand the rule in Troester as mandating compensation where employees are regularly required to work off the clock for more than ‘minute’ or ‘brief’ periods of time,” the court said. “This rule does not require employers to ‘account for ‘[s]plit-second absurdities,’ and it might not apply in cases where work is so ‘irregular that it is unreasonable to expect the time to be recorded.’ But where employees are required to work for more than trifling amounts of time ‘on a regular basis or as a regular feature of the job,’ Troester precludes an employer from raising a de minimis defense under California law.”

Applying this understanding to Rodriguez’s claims, the court reversed summary judgment in favor of Nike. The evidence before the court established that the exit inspections took between “zero seconds and several minutes” and that employees frequently exited multiple times per day.

“Given this evidence, we cannot conclude that exit inspections qualify as ‘split-second absurdities,’” the Ninth Circuit wrote. “Nor do they appear so ‘irregular that it is unreasonable to expect the time to be recorded.’ Even according to [Nike’s] study, the vast majority of inspections took measurable amounts of time, and there is a genuine dispute between the parties as to whether these amounts were more than ‘minute,’ ‘brief,’ or ‘trifling.’”

To read the opinion in Rodriguez v. Nike Retail Services, Inc., click here.

Why it matters: The Ninth Circuit’s decision demonstrates the impact of the California Supreme Court’s Troester decision. The federal appellate panel rejected the employer’s attempt to establish a state de minimis analogue, remanding the case for consideration of whether the time spent by Nike employees in exit inspections was “more than trifling.”



pursuant to New York DR 2-101(f)

© 2022 Manatt, Phelps & Phillips, LLP.

All rights reserved