Time Warner Entertainment-Advance/Newhouse Partnership (TWEAN) employed Andre Corbin as a technical support agent at its call center in San Diego. In 2010, TWEAN implemented an online timekeeping platform for employee work time called Kronos Connect. Kronos Connect directly links an employee's time stamps to a program called Avaya, which must be activated before call center employees can begin taking calls. Logging into or out of Avaya automatically clocks employees into or out of Kronos Connect.
TWEAN's policies applied a rounding procedure using the time stamps from the Avaya/Kronos Connect system. The rounding procedure rounds each time stamp recorded to the nearest quarter-hour. This would result in either deducting work time when rounding down or paying an employee for time during which he or she did not work when rounding up. Corbin worked 269 shifts subject to the rounding policy. Of those, he gained compensation or broke even in 58% of his shifts. However, as a result of the rounding policy, Corbin lost $15.02 in aggregate compensation over the period from May 5, 2010, to June 15, 2011.
Corbin filed a collective action complaint alleging violations of the Fair Labor Standards Act (FLSA) and claims for violations of various California employment laws. Later, Corbin moved to file a second amended complaint to add several new claims, including one based on the rounding procedure. The court denied the motion as well as Corbin's motion to certify his class action. The court then granted TWEAN's motion for summary judgment and entered judgment in favor of the company. Corbin appealed the decision, claiming that TWEAN's rounding practices deprived him of his full earned wages and that TWEAN permitted employees to load certain computer programs before clocking in, which denied them full compensation for time spent actually working.
Federal regulations permit employers to record starting and stopping time to the nearest five minutes, one-tenth or one quarter of an hour. That practice is referred to as "rounding." Employers may use rounding provided that it does not result in failure to properly compensate employees over a period of time. While the appellate courts had not previously analyzed the rounding rules, several federal district courts had applied the rounding rules to claims under the FLSA and California state law, and had regularly upheld the practice.
Corbin argued that the TWEAN rounding practice violates the FLSA-sanctioned rounding regulations whenever an employee loses any compensation due to the employer's use of a rounding policy. In Corbin's theory, every employee must gain or break even over every pay period analyzed in order to comply with the rounding regulations.
The Court rejected Corbin's interpretation for two reasons. First, Corbin's interpretation read into the regulations a non-existent "individual employee" requirement. The regulations do not say that rounding policies must be applied individually to each employee to ensure that no employees lose any compensation over a pay period.
Second, the Court noted that rounding policies are intended to allow employers to calculate wages efficiently. To ensure neutral rounding, the policy must allow employers to round up and down. Rounding policies are meant to average out over the long-term, not necessarily any given pay period. Corbin's argument would require employers to calculate time precisely for each employee for each payroll period—a calculation the regulations seek to avoid—to ensure the rounding policy benefits each employee for the payroll period in question.
The Court also rejected Corbin's final argument that not all rounded time is equal since some time is paid at an overtime rate. The Court stated that Corbin had failed to offer any case law to support his argument. Indeed, the only case addressing that argument, See's Candy Shops Inc. v. Superior Court (2012) 210 Cal. App.4th 889, 905-906, explicitly rejected it. In TWEAN's case, the Court found it important that the company's policy allowed employees to gain overtime compensation just as easily as they could lose it, which meant it was a neutral policy.
The Court determined that TWEAN's rounding policy was neutral on its face because it rounded all employee time to the nearest quarter-hour without considering whether the employee would benefit from rounding. Therefore, sometimes TWEAN would round up and sometimes TWEAN would round down. The Court held the rounding policy was neutral as applied to Corbin. A review of his time showed that sometimes he gained compensation and sometimes he lost depending on the pay period. The rounding policy therefore functioned as the regulations intended.
Regarding Corbin's argument that TWEAN failed to compensate him for the one minute he spent logging into a computer program before clocking in, the Court agreed with TWEAN's assertion that this time was de minimis. The de minimis doctrine allows employers to disregard insubstantial periods of time beyond scheduled working hours. The Court determined that TWEAN did not need to affirmatively plead the de minimis doctrine as a defense in initial responsive pleadings to avail itself of the doctrine.
This case is instructive regarding considerations to determine whether a rounding policy is neutral. Employers with rounding policies should review their policies to ensure they are neutral, which means the policy should allow the employer to round up and down. In the long run, the time gained and lost should even out. Employers do not need to individually analyze each employee's time to determine whether the policy is benefiting the employee.
Corbin v. Time Warner Entertainment-Advance/Newhouse Partnership (9th Cir. 2016) ___ F.3d ___ [2016 WL 1730403].