CVS to Settle California Labor Lawsuit for $10.4 Million

Los Angeles, CAThe federal court for the Central District of California has approved a settlement under which CVS Pharmacy will pay retail pharmacists $10.4 million to compensate them for off-the-clock training time. Chalian v. CVS alleges that the retail pharmacy giant failed to credit time actually spent in required training, in violation of California labor law.

The court approved the settlement over the objections of a group of four intervenors who alleged that the deal was inadequate and the product of collusion between CVS and the covered class of workers. Each of the 25,000 individuals covered is expected to receive an average payment in excess of $300.

CVS paid for the time it “expected” training should take, not the actual time

As alleged in the 2016 lawsuit, CVS required all pharmacists to complete training modules as a condition of employment. This training was CVS-specific and not relevant to any state or board certification or professional licensure. Pharmacists were encouraged to complete the training modules during their breaks or remotely from home. CVS reportedly paid the pharmacists for the time it expected the modules to take, not for the time actually spent. 

Widespread practice

The facts of the situation were similar to those described in Cabrera v. CVS, a lawsuit brought against CVS in the Northern District of California, with which Chalian was eventually consolidated for settlement purposes. Underpaying for training time may been a widespread practice at California CVS stores.

But the basic scheme does not appear to be limited to CVS. In July 2021, for example, ABM Industries offered to settle a class action California labor lawsuit brought by 50,000 janitorial employees. The factual basis for the consolidated lawsuits, ABM Industries Overtime Cases is different, but the central payment scheme is similar.

ABM Industries, like CVS, appeared to be attempting to control labor costs by paying for scheduled time, rather than actual time worked. This scheme, whether applied to pharmacists or janitors, does not meet the requirements of the California Labor Code if it results in the underpayment of workers.

Time spent in required training is compensable time

The regulations that implement California Wage Orders  define “hours worked” as all the time the employee is suffered or permitted to work, whether or not required to do so. This includes mandatory training time.

California minimum wage laws require employers to count time spent by employees in training unless all four of the following criteria are met:

• attendance occurs outside regular working hours;
• attendance is voluntary;
• the training is not directly related to the employees’ job; and
• the employee does not perform productive work while training.

Attendance is not considered to be voluntary if employees are led to believe that their absence would lead to their termination or otherwise negatively impact their present working conditions in some other manner. The facts presented in Chalian, do not appear to describe voluntary training.

Nonexempt employees are to be paid their regular rate of pay, provided the training time is scheduled during the first 8 hours of the workday. If the mandatory training time pushes employees past those parameters, they are entitled to overtime pay.

California labor law requires that employers offer rest breaks to nonexempt employees who work three-and-a-half or more hours in a day. Employees are entitled to ten minutes of rest period for each four hours, or a substantial fraction thereof, that they work in a day. Employers generally may not  require employees to continue working or remain “on-call” during rest breaks. The same applies to mandatory training, as well.

Hours “rounding”

The issue of paying for “hours scheduled” rather than “hours worked” is generally discussed as part of a larger discussion of time rounding. California law refers to “hours worked,” but disputes may arise when it gets down to the issue of minutes or seconds. In general, both California and federal labor law permit time rounding, unless the scheme routinely results in employees being underpaid. That was among the allegations in Chalian.

Collusion?

As noted above, certain of the workers covered by the settlement were dissatisfied with the amount offered and alleged that the inadequacy was evidence of collusion between CVS and those willing to accept the settlement. The court dismissed these allegations summarily, opining that the objectors had not offered evidence of collusion beyond the bare allegation. It is a fairly incendiary charge, but it does not seem to have been sufficiently supported for the court to consider.