Seyfarth Synopsis: In Donohue v. AMN Services, LLC, a class action seeking meal period premium pay, the California Supreme Court reversed the Court of Appeal and held that employers cannot engage in the practice of rounding time punches in the meal period context, and that time records showing noncompliant meal periods raise a rebuttable presumption of meal period violations.

The Facts

Kennedy Donohue was a nurse recruiter for AMN Services in its San Diego office from September 2012 to February 2014. AMN used a timekeeping system called Team Time, which rounded punch-in and punch-out times to the nearest 10-minute increment. Punch times between 7:55 a.m. and 8:04 a.m. would thus be recorded as 8:00 a.m. Donohue alleged she was discouraged from taking meal and rest breaks, and often had to take short breaks.

AMN’s written policy stated that recruiters were provided meal and rest breaks in accordance with California law, and were to accurately report their meal breaks. The policy also stated that recruiters were paid premium meal period wages whenever their time records indicated that they had not taken a 30-minute meal within the time frames established by the California Wage Order. When Donohue joined AMN in September 2012, AMN had a policy of automatically paying a premium for meals that were not taken within these time frames. AMN later changed its practice: whenever a recruiter had a meal period that appeared to be late or short based on the time that the employee reported for the meal period, a drop-down menu would appear and ask the recruiter to indicate whether there had been an opportunity to take a timely meal period. The recruiter would get premium pay if the recruiter had not received that opportunity.

The Trial Court Decision

Donohue asserted claims against AMN for meal and rest period violations, unpaid overtime, inadequate wage statements, unreimbursed business expenses, unpaid waiting-time penalties, and unfair business practices. Donohue also sued under the Private Attorneys General Act. In October 2015, the trial court certified five classes of non-exempt employees. Thereafter, the parties filed cross-motions for summary judgment or adjudication. The trial court granted AMN’s motion and denied Donohue’s. Donohue appealed.

The Appellate Court Decision

The Court of Appeal affirmed the judgment for AMN. As to rounding, the Court of Appeal relied on See’s Candy Shops, Inc. v. Superior Court in holding that AMN’s practice did not result in a failure to pay employees over time. The Court of Appeal relied on AMN’s expert, who analyzed time records and concluded that AMN’s rounding resulted in a net surplus of paid work hours. Although Donohue’s expert had found that AMN’s rounding policy led to a failure to pay employees for hours worked, the expert had failed to consider evidence that class members may have gained more compensated work time under the rounding policy than they had lost.

As to meal periods, the Court of Appeal rejected Donohue’s argument that rounding could not be applied to meal period punches. The Court of Appeal reasoned that the standard set forth in See’s Candy should extend to meal periods, and that a trial court need only consider how often a policy results in rounding up and rounding down, not the number of meal-period violations that are assessed or avoided. Finally, relying on the signed attestations of meal period compliance that accompanied every timesheet reflecting what appeared to be a late or short meal period, the Court of Appeal rejected Donohue’s argument that she was often provided with short meal breaks and was generally discouraged from taking meal breaks.

The Supreme Court Decision

The Supreme Court reversed the Court of Appeal. As to rounding, the Supreme Court held that employers cannot round meal period time punches, even if the rounding results in the employee being overpaid. The Supreme Court reasoned that “even relatively minor infringements on meal periods can cause substantial burdens to the employee” and “rounding is incompatible with promoting strict adherence to the safeguards for workers’ health, safety, and well-being that meal periods are intended to provide.”

The Supreme Court also held that time records showing noncompliant meal periods raise a rebuttable presumption of meal period violations. Thus, the Supreme Court held that an employer’s assertion that an employee waived the opportunity to have a compliant work-free break is an affirmative defense and the burden is on the employer to plead and prove it. The Supreme Court also clarified that this presumption does not apply only to records showing missed meal periods; rather, the presumption also applies to records showing short and delayed meal periods.

Thus, the Supreme Court reversed the Court of Appeal and remanded the matter to the trial court, allowing either party to file a new summary adjudication motion as to the meal period claim.

What Donohue Means For Employers

The reversal by the Supreme Court cautions employers against the use of rounding and emphasizes the importance of maintaining accurate time records. It also emphasizes the need to develop a procedure that permits the employer to prove that a meal period that was short, delayed, or not taken, was timely “provided” and that the employee voluntarily chose not to take a 30-minute meal period beginning prior to the end of the fifth hour of work. Many employers have adopted electronic means of doing this that do not contain the infirmities that the Court found in the Team Time system.