This month’s key California employment law cases involve wage and hour issues.

Donohue v. AMN Servs., 29 Cal. App. 5th 1068, 241 Cal. Rptr. 3d 111 (2018)

Summary: Policy rounding employees’ time worked is legal if fair and neutral and if, on average, it favors neither overpayment nor underpayment.

Facts: Defendant AMN, a service and staffing company, employed plaintiff Donohue as a nonexempt nurse recruiter between 2012 and 2014. Defendant used a computer-based timekeeping system which would round punch times—both punch in and punch out—to the nearest ten-minute increment. To calculate a recruiter’s compensation, defendant would convert each ten-minute increment to a decimal (nearest hundredth of a minute), total the hours (to the nearest hundredth of a minute), and multiply the total hours by the recruiter’s hourly rate. Recruiters like plaintiff would need to notify their manager if their punch time was inaccurate. The manager would then unlock the recruiter’s timecard, and the recruiter would have an opportunity to fix the error. Plaintiff brought a class action against defendant alleging, among other things, that defendant failed to pay overtime and to provide compliant meal periods. Central to these two allegations was plaintiff’s claim that the rounding policy was illegal under California law. The trial court granted summary judgment in favor of defendant.

Court’s Decision: The California Court of Appeal affirmed, holding that defendant’s rounding policy was legal under California law. The court leaned heavily on its prior decision in See’s Candy Shops, Inc. v. Superior Court, 210 Cal. App. 4th 889, 148 Cal. Rptr. 3d 690 (2012). In that case, the court held 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 will not result, over a period of time, in failure to compensate the employees properly for all the time they have worked. Under See’s Candy, a rounding policy is fair and neutral if on average it favors neither overpayment nor underpayment. A rounding policy will be illegal if it systematically rounds time down. In this case, expert testimony showed that defendant’s rounding policy was fair and neutral. In fact, the policy led to a net surplus of 1,929 hours in paid time for the putative class. Plaintiff’s expert did not establish a triable issue of fact as to whether the rounding was unlawful because the expert considered only the class member’s potential uncompensated time due to short or delayed lunches, but did not consider whether class members gained compensable work time through the rounding policy.

Practical Implications: When enacting a rounding policy, employers should take special care to follow the guidelines outlined in See’s Candy Shops. The policy should be neutral and allow for hours to be rounded in a way so that employees are not disadvantaged.

Furry v. East Bay Publ’g, LLC, 30 Cal. App. 5th 1072, 242 Cal. Rptr. 3d 144 (2018)

Summary: When employer fails to keep accurate records of employee’s work hours, employee’s imprecise evidence of hours worked may provide sufficient basis for damages.

Facts: In 2007, plaintiff Furry began as a senior account executive for defendant East Bay Express, a weekly newspaper based in Oakland. Two years later, plaintiff was promoted to the position of sales and marketing director. Typically, plaintiff worked from 8:30 a.m. or 9:00 a.m. until 5:30 p.m. or 6:30 p.m. from Monday to Friday. Plaintiff also worked in the evenings and weekends at various events sponsored by defendant. In 2014, plaintiff sued defendant for failure to pay minimum and overtime wages, failure to provide meal and rest periods, knowing and intentional failure to comply with itemized wage statement requirements, breach of contract, breach of implied covenant of good faith and fair dealing, violation of the Unfair Competition Law, and related claims. The trial court found that defendant failed to keep detailed records of the hours plaintiff worked necessary to meet its burden of proof that he was an exempt worker. Nevertheless, the trial court concluded that plaintiff was not entitled to overtime pay because he did not present enough evidence showing the amount and extent he worked to allow the court to draw a reasonable inference that he worked hours for which he was not paid. The court said plaintiff appeared to be guessing.

Court’s Decision: The California Court of Appeal reversed, holding that the superior court erred as a matter of law by refusing to award plaintiff damages on his overtime claim. The assertion of an exemption from overtime laws is an affirmative defense, and the employer has the burden to prove the employee is exempt. When the employer fails to keep records required by statute, the employer, not the employee, bears the burden for the lack of employment records. As such, an employee may prove damages by using imprecise evidence when the employer has inadequate records. Because it was undisputed that plaintiff worked hours for which he was not paid, the only remaining issue was damages which he could provide with this imprecise evidence.

Practical Implications: This case highlights the importance of properly classifying employees as exempt or nonexempt. If an employee is misclassified as exempt, the employer may not have records of hours worked, enabling the employee to prove damages with estimates and an imprecise recollection.