February 5, 2023

Volume XIII, Number 36

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California Court of Appeal Limits the Permissibility of Time Rounding

Rounding is the practice of capturing time entries on a time clock and converting them to the closest five, ten, or fifteen minute equivalent. For example, both entries at 8:58 and 9:04 may be converted to 9:00 a.m. A recent California Court of Appeal decision, Camp v. Home Depot U.S.A., Inc., calls into question the continued viability of time-rounding policies in California. In 2012, the Court of Appeal held in See’s Candy Shops, Inc. v. Superior Court, 210 Cal. App. 4th 889 (2012), that an employer’s time rounding policy is lawful under California law when the policy is “fair and neutral on its face” and is used in a way that will not result, over a period of time, “in failure to compensate the employees properly for all the time they have actually worked.” As generally applied, the See’s Candy test permitted time clock rounding systems so long as the rounding was to the nearest set increment as opposed to always rounding against the employee. Multiple appellate decisions after See’s Candy cited it favorably in granting summary judgment to the employer.

However, the California Supreme Court has never formally adopted See’s Candy as an accurate statement of California law. Furthermore, in a decision on a related matter in 2021 the Court expressly noted that it had never adopted the See’s Candy standard but that none of the parties had asked for the holding of the case to be reviewed. Although this new Camp decision is merely an appellate decision, and it does not ban time rounding outright, it does call into question See’s Candy’s broader holding that time rounding systems are generally lawful if applied evenhandedly.

The Troester and Donohue Cases Undermined See’s Candy’s Time Rounding Rule

Six years after See’s Candy, the California Supreme Court held in Troester that the federal de minimis doctrine does not apply to California wage and hour claims involving the failure to pay employees for small amounts of otherwise compensable time like closing up the store and locking the door after clocking out. Under the federal de minimis doctrine, “insubstantial or insignificant periods of time beyond the scheduled working hours, which cannot as a practical administrative matter be precisely recorded for payroll purposes, may be disregarded.” But, Troester rejected the federal de minimis doctrine because California wage and hour laws generally provide greater protections than federal law. And, although California has a common law de minimis standard that may be applied in more limited circumstances than the federal standard, it generally does not apply when the activity at issue recurs on a regular basis (e.g., spending a minute each evening activating an alarm after clocking out). Notably, the federal de minimis doctrine does not arise from the same regulation addressing rounding of time clock entries, so the rejection of the de minimis doctrine does not necessarily address the separate question of whether an employer may keep time by rounding specific punch entries to the nearest 5, 10 or 15-minute increment.

In 2021, in Donohue,the California Supreme Court held that employers cannot meet the obligation to provide 30-minute off-duty meal periods by rounding time entries such that the rounded entries amount to 30 minutes when the actual break time was less than 30 minutes. The Court stated that, even assuming rounding time is proper for calculating hours worked, different policies come into play with regard to providing meal periods. The Court explained that California’s “meal break provisions are designed to prevent minor infringements on meal period requirements, and rounding is incompatible with that objective.” Thus, the opinion rejected rounding time for meal period purposes, but avoided addressing the larger question of whether rounding remained a lawful practice for calculating hours worked.

The Camp Employer Rounded Time Records Even Though It Collected Exact Time Punches

Plaintiff Delmer Camp filed a class action against his employer, Home Depot. The employer uses an electronic timekeeping system that captured the exact time of punch entries, such that if it were assumed the employee began working immediately upon punching in and stopped working only when the employee punched out, the employer knew the exact time the employee was working. Nonetheless, Home Depot rounded each punch to the nearest quarter-hour (as See’s Candy had indicated was lawful). During the relevant four and-a-half years, the records showed that rounding Camp’s time resulted in it being reduced by 470 minutes in the aggregate, which was less than a minute per work day. Based on See’s Candy,the trial court granted summary judgment in favor of Home Depot. The employee appealed.

The Court of Appeal Reversed the Summary Judgment Ruling and Called See’s Candy Into Question

The Court of Appeal reversed the trial court and, in doing so, called into question the continued viability of See’s Candy rounding rules. The court reasoned that based upon the general principles mentioned in Troester and Donohue about the necessity of paying for all an employee’s time worked when such time is known that “if an employer, as in this case, can capture and has captured the exact amount of time an employee has worked during a shift, the employer must pay the employee for ‘all the time’ worked.”

The court was unpersuaded by the employer’s arguments and instead relied on some general principles to support the view that all captured work time must be paid. First, the Court noted that the California Labor Code requires employers to pay their employees “for all time worked.” Second, the Court noted that the regulatory scheme in California is concerned with the “small things” and looks unfavorably on the de minimis principle, requiring compensation wherever the “worktime is regularly occurring.” Third, the Court noted that California courts have repeatedly departed from federal standards that provide less protection. Fourth, the Court doubted that rounding any longer provides any added efficiency given the progress of technology and the ready ability to capture and calculate wages owed down to the minute. 

The Camp decision, however, limited the scope of its holding. It did not outright bar the use of rounding. The decision stressed that the particular facts of this case – in which the employer used a timekeeping system that could track the exact amount of time the plaintiff worked – warranted finding that rounding was inappropriate because by rounding, the employer deprived Camp of nearly eight hours of pay. Finally, the Camp decisionclosed by taking the unusual step of inviting the California Supreme Court to decide the validity of See’s Candy when the employer can capture and has captured all the minutes an employee has worked, but nevertheless applies a rounding policy. It remains to be seen if the California Supreme Court will take up the invitation.

Key Takeaways

Based on the Camp decision, employers who continue to round do so at heightened risk and employers that round and use an automatic timekeeping system should reevaluate the use of a rounding policy and pay employees for all time worked and recorded. If an employer wants to continue rounding time, it may want to limit the circumstances in which it does so based upon the unique facts and circumstances of the situation. Employers with questions about the viability of their current timekeeping systems should consult their legal counsel to ensure compliance going forward.

Maggie Sheerin also contributed to this article.

Copyright © 2023, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume XII, Number 333
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About this Author

Associate

Raymond Nhan is an associate in the Labor and Employment Practice Group in the firm's Century City office.  

Areas of Practice

Ray represents clients in employment and labor law matters in state and federal courts, and before administrative agencies. Ray also counsels employers on various labor and employment issues—including complying with federal and state laws. Ray is experienced in representing employers in class actions and single-plaintiff matters. Ray also has extensive experience defending California employers against suits under the Private Attorneys...

424.288.5354
Michael T. Campbell Labor and Employment Attorney Sheppard Mullin Century City, CA
Associate

Michael Campbell is an associate in the Labor and Employment Practice Group in the firm's Century City office.

Areas of Practice

Michael represents employers in all aspects of labor and employment litigation in defense of complaints for class action, collective action, representative PAGA actions, and single-plaintiff matters in both court and arbitration. He has successfully litigated and obtained complete defense awards in a multi-plaintiff arbitration, a single-plaintiff discrimination and wage-and-hour arbitration, obtained summary judgment in court, as...

310-228-3726
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