Nov 11

Mystery Shoppers: Me, Myself, and Private Eye?

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Nobody can deny that an employer can fire an employee after a mystery shopper spots him spitting in a customer’s food or stealing cash out of the cash register. The employer just better make sure the mystery shopper is a licensed private investigator. That’s because California’s Private Investigator Act (PIA) generally requires a mystery shopper to be a licensed private investigator if his questionnaire is “a” basis for disciplining or firing an employee or conducting an interview that might lead to his termination. Similarly, Labor Code section 2930 requires a mystery shopper to be a licensed private investigator if he writes an investigative “report” for an employer.

I. When Must a Mystery Shopper Be a Licensed Private Eye?

The PIA generally prohibits anyone from acting as or holding himself out as a private investigator unless he holds a private investigator’s license from the Bureau of Security and Investigative Services (BSIS).[1] Unlicensed private investigators who act as or hold themselves out as private investigators are guilty of a misdemeanor punishable by up to one year in jail and a $5,000 fine. [2] Likewise, an employer who conspires to use an unlicensed person to act as a private investigator or who knowingly engages an unlicensed private investigator is guilty of a misdemeanor punishable by up to one year in jail and a $5,000 fine.[3]

Two kinds of mystery shoppers are exempt from the PIA’s licensing requirements: (1) traditional mystery shoppers; and (2) loss prevention agents. The first kind of mystery shopper is one who uses a “pre-established questionnaire” to “objectively” observe “consumer purchases” in the “public environments of a business establishment.”[4] But an employer can’t rely on the questionnaire as the “sole basis” for “evaluating” an employee’s work performance if the mystery shopper isn’t a licensed private eye.[5] In other words, even if a mystery shopper doesn’t do anything to become non-exempt, the employer can still cause him to lose his exempt status.

The second kind of mystery shopper is a loss prevention agent who works “exclusively and regularly” for an employer, doesn’t provide “contract security services” to anyone else, and doesn’t carry a “deadly weapon” to do his job.[6] But not all lethal weapons are “deadly weapons” under the PIA. For example, a knife with a blade length of five inches or less isn’t a “deadly weapon” under the PIA, though a “sandbag” (a leather cudgel that 19th century criminals used to slap people) is. Thus, an unlicensed loss prevention agent might not lose his exempt status if he stabs, but doesn’t slap, a department store clerk in self-defense.

But Labor Code section 2930 adds a wrinkle by requiring a mystery shopper to be a licensed private investigator if: (1) he engages in certain activities (e.g., he buys merchandise, orders food, or uses services to evaluate sales technique and employee courtesy; carries merchandise to the check stand or sales counter to observe employees to detect irregularities in handling cash; etc.); and (2) he writes a “report” about his investigation for the employer.[7] That means a mystery shopper can be exempt from the PIA’s licensing requirements, but unless he has a private investigator’s license, he can’t write a report.[8]

II. When Must an Employer Disclose a Mystery Shopper’s Questionnaire or Report?

Even if a mystery shopper is exempt from the PIA, an employer must give the employee a copy of the questionnaire if the employer uses it as “a” basis for disciplining or firing him or for conducting an interview that “might” result in his firing. The employer must give him a copy before the employer disciplines or fires him or before the end of the interview.[9] Conversely, the employer doesn’t have to turn over a copy if it’s the “sole basis” for his actions – perhaps because the questionnaire can’t be the “sole basis” to begin with unless the secret shopper is a licensed private eye, which presumably makes him so credible that the employee shouldn’t question his findings.[10]

Like the PIA, Section 2930 requires an employer to give an employee a copy of the “report” if: (1) it’s about his “conduct, performance, or honesty”; and (2) the employer uses the report as “the” basis for disciplining or firing him or for conducting an interview that might result in his “termination for dishonesty.” The employer must give the employee a copy of the latest investigation report before the employer disciplines or fires him or before the end of the interview. In contrast, the PIA requires the employer to disclose the questionnaire unless it’s the “sole basis” for disciplining or firing him or for conducting an interview that might result in his termination.

Unfortunately, Section 2930 doesn’t require the employer to give the employee a copy of the secret shopper’s report if: (1) the mystery shopper works “exclusively and regularly” for the employer “in connection with the affairs of only that employer” (e.g., he’s a loss prevention agent); and (2) the entire investigation is solely for such employer.[11] Section 2930 thus creates an odd result: the mystery shopper must be a licensed private investigator to write the report, but if he’s exempt from the PIA’s licensing requirements because he’s a loss prevention agent, the employer doesn’t have to hand over a copy of the report to the employee.

III. What Can an Employee Get for a Violation of the “Mystery Shopper” Laws? 

If an employee does not timely receive a copy of a mystery shopper’s report, he might be able to sue his employer for civil penalties. The Labor Code Private Attorneys General Act (PAGA) authorizes an employee may recover civil penalties on behalf of himself and aggrieved current and former employees for the violation of any Labor Code provision.[12] The default penalty for violating a Labor Code provision is $100 per employee for an initial violation and $200 per employee per pay period for each further violation. (The failure to provide a copy of the questionnaire only violates the PIA, which is not part of the Labor Code, and thus may not be the basis for a PAGA action.).

Of course, an employee who loses his job because a mystery shopper saw him spit in a customer’s food might not care if his employer gives him a copy after, rather than before, the end of the interview that results in his firing. He might be more interested in suing for wrongful termination. The Division of Labor Standards Enforcement (DLSE) states that Section 2930 “prohibits either discipline or discharge” based on a mystery shopper’s report unless the employer gives the employee a copy of the report before the end of the interview.[13] But Section 2930 doesn’t actually say that, and no case appears to have discussed California’s “mystery shopper” laws at all.

References

[1] Bus. & Prof. Code §7523(a).

[2] Bus. & Prof. Code §7523(b).

[3] Id.

[4] Bus. & Prof. Code §7522(n)(1).

[5] Bus. & Prof. Code §7522(n)(2).

[6] Bus. & Prof. Code §7522(a).

[7] Lab. Code §2930(b).

[8] In an old law review article, two commentators opined that Section 2930 didn’t apply to an unlicensed investigator’s report. See William F. Adams and Cynthia L. Remmer, Drugs and Alcohol in the Workplace: Technology, Law and Policy, 2 Santa Clara High Tech L. J. 305 at n. 143 (1986). Their opinion seems incorrect, however, because a person can’t act as a private investigator without a private investigator’s license, unless he’s exempt, and he can’t be exempt if he writes a report. Section 2930 refers to a report-writing mystery shopper who meets the criteria for the PIA’s “in-house” exemption as a “licensee.”

[9] Id.

[10] But see Lab. Code §1198.5. The employer must still let the employee inspect and receive a copy of his personnel file within 30 days of a written request for same.

[11] Lab. Code §2930(a).

[12] Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal.4th 348, 387 (2014).

[13] DLSE Enforcement Policies and Interpretations Manual, §17.6 (2002).

Ben Rothman, Esq.

Ben Rothman is a Los Angeles-based attorney practicing in the areas of personal injury, employment, and workers’ compensation on a “no recovery, no fee” basis. Call him at (424) 465-2948 for a free, no-obligation consultation.