Why it matters

The Ninth Circuit Court of Appeals rejected an employee's argument that by rounding his time stamps to the nearest quarter hour his employer deprived him of overtime pay, affirming summary judgment for the employer. The employer used an online timekeeping system for its call center that linked a worker's time stamps to a phone system that needed activation before employees could begin taking customer calls. Time was rounded to the nearest quarter hour. One employee filed suit challenging the rounding policy, alleging that although he gained or broke even in 58 percent of his shifts, he lost a total of $15.02 in compensation during his employment, in violation of the Fair Labor Standards Act and California state law. Finding the rounding system neutral on its face and in practice, a district court granted summary judgment in favor of the employer. The Ninth Circuit agreed, noting that federal regulations have endorsed the use of rounding practices for more than 50 years, and a 2012 California appellate court decision confirmed the same recognition under state law. Further, the employee failed to demonstrate that the policy was not neutral either facially or as applied to him, the unanimous three-judge panel wrote.

Detailed discussion

Time Warner Entertainment-Advance/Newhouse Partnership (TWEAN) operates a call center in San Diego, California, where workers field telephone calls from customers. The company used an online timekeeping platform that linked an employee's time stamps to the phone system that must be activated before employees can begin taking customer phone calls.

The employer incorporated a rounding procedure into its compensation policies with regard to the system, rounding each time stamp recorded to the nearest quarter hour. So where an employee clocks in at 8:07 a.m. and clocks out at 5:11 p.m., her wage statement would reflect a clock-in time of 8:00 a.m. and a clock-out time of 5:15 p.m.

Andre Corbin worked for TWEAN from July 2007 to June 2011 as a technical support agent. During that time, he worked 269 shifts subject to the rounding policy and gained compensation or broke even in 58 percent of them. In total, however, he lost $15.02 in aggregate compensation. Corbin filed suit alleging the rounding policy violated both California state law and the Fair Labor Standards Act (FLSA) because it deprived him of the full amount of his earned wages, specifically overtime compensation.

A federal court judge granted summary judgment in favor of TWEAN and a unanimous panel of the Ninth Circuit Court of Appeals affirmed.

For more than fifty years, federal regulations have endorsed the use of "rounding" practices, the court said, which permit employers "to efficiently calculate hours worked without imposing any burden on employees" as well as offering "a neutral calculation tool" and "a practical method for calculating work time."

That federal recognition was extended to California in a 2012 opinion from the California Court of Appeal that held "the federal rounding rule also applies to California state labor claims, so long as a company's 'rounding-over-time policy is neutral, both facially and as applied.' "

"Here, Corbin alleges that if an employee loses any compensation due to the operation of a company's rounding policy, that policy should be found to violate the federal rounding regulation," the court said. "In other words, Corbin argues that unless every employee gains or breaks even overevery pay period or set of pay periods analyzed, an employer's rounding policy violates the federal rounding regulation, a contention that would serve to wholly invalidate the rounding method as an acceptable form of timekeeping. The district court was right to reject such a claim."

The plaintiff's interpretation would read an additional requirement of an "individual employee" into the federal regulations that does not exist, the panel noted. "If the rounding policy was meant to be applied individually to each employee to ensure that no employee ever lost a single cent over a pay period, the regulation would have said as much."

Corbin also "completely misunderstands" the purpose of a rounding policy, the court added. "Employers use rounding policies to calculate wages efficiently; sometimes, in any given pay period, employees come out ahead and sometimes they come out behind, but the policy is meant to average out in the long-term," the court explained. "Corbin's preferred interpretation would require employers to engage in the very mathematical calculations that the federal rounding regulation serves to avoid."

If employers had to "un-round" every employee's time stamps for every pay period to verify that the rounding policy had benefitted every employee, why would an employer bother to implement a rounding policy at all, the court asked. Accepting the plaintiff's argument would also encourage strategic pleading, the panel said, permitting employees to selectively edit their relevant employment windows to include pay periods they came out behind.

The court disagreed with the plaintiff that overtime minutes presented a different proposition. Corbin argued that not all rounded time is created equal because employees are entitled to one and one-half times the regular rate of pay. For example, if an employee clocked out at 5:03 p.m., he would lose three minutes of compensable time at a higher rate due to an overtime premium under the plaintiff's argument.

Not only did the plaintiff fail to cite any precedent endorsing this perspective, the court could "discern no reason to analyze overtime minutes any differently than regular-time minutes," reiterating that in a neutral rounding system, "employees stand to gain as well as lose time. The rounding rule simply presumes that, over time, it will all even out."

Having established the legality of rounding generally, the panel said TWEAN's rounding system was neutral on its face and as applied to Corbin.

"TWEAN's policy is facially neutral, as TWEAN rounds all employee time punches to the nearest quarter-hour without an eye towards whether the employer or the employee is benefitting from the rounding," the Ninth Circuit said. "Corbin can just as easily bank unworked minutes as he can lose worked minutes." The system operated without managerial oversight and was fully walled off from supervisory editing, the court noted.

Further, Corbin's own compensation records demonstrated the policy was neutral in application. "Sometimes Corbin gained minutes and compensation and sometimes Corbin lost minutes and compensation," the panel wrote, with the numbers of unworked time fluctuating from pay period to pay period. "TWEAN's rounding policy operated exactly as the federal rounding regulation intended, and Corbin has not shown the existence of a material fact as to whether or not, 'over a period of time,' he was not properly compensated for his work."

A second claim that TWEAN failed to properly compensate Corbin for one minute when he accidentally logged into the wrong system before clocking into the phone timekeeping system also failed as the time at issue was de minimis, the panel found, "a miniscule amount of time when considered over Corbin's multi-year employment tenure."

To read the opinion in Corbin v. Time Warner Entertainment, click here.