Under California law, employers’ timekeeping policy that rounds employee punch-in and -out times to the nearest one-tenth of an hour is permissible, the California Court of Appeal has ruled. See’s Candy Shops, Inc. v. Superior Court, No. D060710 (Cal. Ct. App. Oct. 29, 2012). Previously, no California statute or case law expressly permitted this common employer practice, though the practice is permissible under federal law, which is followed by the California Division of Labor Standards Enforcement (DLSE). The Court reversed summary judgment for the plaintiff in the certified wage and hour class action. Jackson Lewis’ David S. Bradshaw, James T. Jones, and Paul F. Sorrentino represented the employer in this case.

Background

The employer used a timekeeping software system to keep track of its employees’ working hours. The system required employees to punch in at the beginning and at the end of their shifts. Two company policies provided for adjustments to the timecards. Under the first, punches in and out would be round up or down to the nearest tenth of an hour (“rounding policy”). Under the second, if an employee voluntarily punched in or out up to 10 minutes prior to or after his or her scheduled work time, the employee was not permitted to work or paid during that grace period; but if the employee performed work during the grace period, a manager would be required make the timecard adjustment so the employee would be paid (“grace period policy”).

A former employee, representing a certified class of current and former employees, challenged the company’s timekeeping policy of rounding to the nearest tenth of an hour. She alleged loss of compensation in violation of employees’ rights under the California Labor Code to full compensation for work performed.

The company denied the allegations and asserted affirmative defenses, including the following: (1) any unpaid amounts are de minimis; (2) the rounding policy is consistent with federal and state law; and (3) the grace period policy is lawful under federal and state law. The trial court granted summary judgment to the plaintiff and the company appealed.

Rounding Policy Approved

The appellate court reversed. Relying on the federal Department of Labor’s rounding standard and California DLSE’s adherence to the federal standard, the Court held that a rounding policy is permissible if the policy is “fair and neutral on its face” and, over time, fully compensated employees for time that they actually worked. 

As to the grace period policy, the Court determined that the plaintiff did not move for summary adjudication based on the grace period defense, and instead sought only to eliminate the company’s affirmative defense based on its nearest-tenth rounding policy. Therefore, summary judgment for the plaintiff on these two policies was reversed.

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The Court’s approval of the practice of rounding to the nearest one-tenth of an hour where the practice is neutral both facially and as applied brings much-need clarity on an issue of concern for California employers. Employers should recognize, however, that rounding practices remain subject to challenge if they result in a consistent failure to pay employees for time worked. Therefore, legal counsel should be consulted before implementing any rounding policy and employers may wish to consider analyzing their rounding practices with the assistance of counsel to ensure they are legally compliant. Any rounding policy should be written clearly, communicated to employees and be fair and neutral.