A thorny and confusing issue under the Fair Labor Standards Act is that of when and how an employer can “round” employee work time down (or up) to accurately record employee work time and pay (or not pay) for that time. In a significant case, a federal judge has dismissed a proposed nationwide class action in which factory workers sued H.J. Heinz Company on a theory that their hours were improperly rounded down and they were not paid for all hours worked. The case is entitled Mendez v. H J Heinz Company LP and was filed in the Central District of California.
The Court ruled that the charges, i.e. that employees were compelled to report for work early, but this extra time was rounded down and not paid for, had no basis in fact but the Court is allowing the lead plaintiff the opportunity to amend the Complaint and get another bite at the apple or, more aptly, the ketchup bottle.
The Court concluded that, in order for a valid class action to lie, there must exist a pattern of systematic rounding down, or a showing that the rounding policies were applied/implemented in a manner that manifestly favored management. In other words, if the rounding principles worked as they should (as envisioned by the FLSA) there would be evidence of rounding up as well as rounding down. The Court found no evidence that this rounding procedure was a one-way street in favor of the Company. The Court stated that “plaintiff alleges only that defendants have an unspecified 'rounding policy' that, together with defendants’ disciplinary policy, results in the nonpayment of wages for all hours worked, because the disciplinary policy incentivizes employees to arrive at work early.” However, “plaintiff has not plausibly showed that the alleged policies result in a systematic underpayment of wages.”
The Court also rejected the contention that the matter was appropriate for a class certification, finding that, at worst, the alleged policy applied only to one facility, not to the entire State of California, much less the whole country. The Court also give some guidance to the plaintiff on what he should “include” in the Amended Complaint (which will undoubtedly be filed).
The takeaway here is for employers to ensure that any rounding policy must be fair, i.e. if time is rounded down, there must/should be examples where time is rounded up, so that employees are fairly compensated over a representative period of time. Through careful drafting of a policy and watchful and diligent oversight of its implementation, this can be accomplished.