Rounding Policies Called Further Into Question

In California, it has long been the rule that an employer is entitled to use a rounding policy “if the rounding policy is fair and neutral on its face and ‘it is used in such a manner that it will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked.’” (See’s Candy Shops, Inc. v. Superior Court (2012) 210 Cal.App.4th 889, 907 (See’s Candy I), quoting 29 C.F.R. § 785.48(b) and citing Division of Labor Standards Enforcement (DLSE) Enforcement Policies and Interpretations Manual (2002 rev.) §§ 47.1, 47.2 (DLSE Manual). However, since that ruling in 2012, California courts have slowly chipped away at that rule. Most recently, the California Supreme Court held that rounding is not permitted for purposes of meal breaks. (See Donohue v. AMN Services, LLC, 11 Cal. 5th 58.) Now, a California Court of Appeal has determined a rounding policy that was otherwise neutral on both its face, and in application, to be unlawful. This ruling calls into question whether California employers may continue rounding employees time under any circumstance.

The Facts:

Plaintiffs Delmer Camp and Adriana Correa were employed by Home Depot as hourly, non-exempt employees. At the time of their employment, Home Depot used the “Kronos” electronic time keeping system, which tracked all time worked by the employees from punch-in to punch-out. Even though the timekeeping system tracked each minute worked by employees, a quarter-hour rounding policy was applied at the end of each shift.

A class action complaint was filed against Home Depot on the grounds that the policy resulted in employees being underpaid. During discovery, it was revealed that while Correa was actually overpaid due to the rounding policy, Camp had been underpaid by 470 minutes over the previous four and a half years. Home Depot moved for summary judgment, arguing that the policy was neutral on its face and in application, meaning that neither the employees nor Home Depot were favored by the policy. The trial court granted the summary judgment motion. The plaintiffs’ appealed the trial court’s decision.

The Holding:

The Court of Appeal reversed. First, it thoroughly reviewed recent California Supreme Court decisions holding policies that failed to pay employees for all time worked to be unlawful. The Court considered the Troester decision, which disallowed the application of the federal de minimis rule to California wage and hour claims. (Troester v. Starbucks Corp. (2018) 5 Cal.5th 829.) It then looked at the Donohue holding wherein the rounding of meal breaks was determined to be unlawful. In reviewing these decisions, the Camp Court noted that “the California Supreme Court appears to have called into question the efficiencies historically attributed to time rounding given that advances in technology have enabled employers to more easily and more precisely capture time worked by employees.” It further observed the statement by the California Supreme Court in the Donohue ruling that it “has never decided the validity of the rounding standard articulated in See’s Candy.” Apparently swayed by these recent rulings, and the fact that Home Depot’s timekeeping system was capable of tracking the actual time worked by the employees, the Court found Home Depot’s rounding policy to be unlawful. It held that “if an employer . . . can capture and has captured the exact amount of time an employee has worked during a shift, the employer must pay the employee for ‘all the time’ worked.”

The Take-Away:

In light of Donohue, and now Camp, what should a prudent employer do? The Camp Court was clear that its ruling was specific to the facts before it and that it was not overruling rounding of time under all circumstances, including where the actual time worked cannot be accurately captured by the employer. That said, the Court acknowledged its ruling calls into question rounding policies and “invite[d]” the California Supreme Court to “provide guidance on the propriety of time rounding by employers.” Given its recent rulings, I have no doubt that the California Supreme Court will be inclined to provide such guidance, if provided the opportunity. Accordingly, California employers currently utilizing rounding policies should determine whether their time keeping systems can capture all time worked.  If all time can be captured, employers should seriously consider eliminating its rounding policies altogether.

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