The California Court of Appeal sitting in San Diego has ruled that employers in California are permitted to round their employees' time to the nearest tenth of an hour "if the rounding policy is fair and neutral 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." The decision in See's Candy Shops, Inc. v. Superior Court of San Diego, No. D060710 (Cal. App. Oct. 29, 2012) is the first one on the subject by a state court in California, and clears up some uncertainty in California's employment law. An earlier federal court judge sitting in California had assumed that California law would allow for rounding policies, but the California state court judge in See's Candy disagreed, before being overruled by the Court of Appeal.

The Fair Labor Standards Act (FLSA) of 1938 sets the wage and hour rules across the United States for employers who do business in or between multiple states. The FLSA requires employers to pay overtime to most workers once workers have worked more than 40 hours per week. However, for the past 50 years, the federal regulators who enforce FLSA have allowed employers to round workers' time to "the nearest 5 minutes, or to the nearest one-tenth or quarter of an hour." California's statutes and regulations also impose wage and hour standards, and require employers to pay workers overtime on a daily as well as weekly basis. However, California's laws do not address whether employers can round their workers' time on the job. Even so, California's Division of Labor Standards and Enforcement (DLSE) has followed the federal standard in its enforcement manual for over a decade. The Court of Appeal in See's Candy did not feel bound by the DLSE's interpretation, but did agree with DLSE that California employers should be permitted to rely on the same rounding standards that apply throughout the rest of the country.

The Court of Appeal's decision in See's Candy means that employees who claim to have been underpaid because of their employers' time rounding policies must also demonstrate that the policy has led to underpayment over the long term and that the policy is biased in favor of the employer. Although this new burden in California wage and hour lawsuits benefits employers, employers should still be careful when using rounding policies to ensure that their policies are not biased and actually do pay for all work performed over the long term.