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Ninth Circuit Expounds the Meaning of Compensable Time

When is time compensable under California law? In a recent decision by the Ninth Circuit Court of Appeals, Sali v. Corona Regional Medical Center, the court explained that there are two categories of compensable time: (1) the time when an employee is “under the control” of the employer, whether or not the employee is actually engaging in work activities, and (2) the time when an employee “is suffered or permitted to work, whether or not required to do so.”       

Background

The case involved registered nurses (RNs) who brought a putative class action against their employer, alleging, among other claims, that the employer’s rounding time policy failed to pay them for all compensable time. The company used an electronic timekeeping system that tracked when employees clocked in and out from work, and rounded the time to the nearest quarter hour. For example, if an RN clocked in at 6:53 a.m. or 7:07 a.m., the time was rounded to 7:00 a.m. This system is also known as “7/8 rounding,” meaning that clock ins made up to seven minutes before or after the hour are rounded to the hour, but clock ins made eight minutes or more before the hour are rounded back to the prior quarter hour and those made eight minutes or more after the hour are rounded up to the next quarter hour. 

The district court denied class certification on the rounding time claim, concluding that individualized issues would predominate in determining the employer’s liability. The district court noted that “time records are not a reliable indicator of the time RNs actually spent working because RNs frequently clock in for work and perform non-compensable activities, such as waiting in the break room, getting coffee, or chatting with their co-workers, until the start of their scheduled shift.”

The Ninth Circuit’s Decision

The Ninth Circuit reversed the district court’s decision. First, the Ninth Circuit recognized that a rounding time policy is permissible under California law if it is “fair and neutral on its face and ‘it is used in such a manner that it will not result, over a period of time, in failure to compensate the employees properly for all the time they actually worked.’” The Ninth Circuit also said that the district court abused its discretion by incorrectly interpreting “actually worked” to mean “only time spent engaging in work-related activities.”

The court noted that compensable time in California includes “the time during which an employee is subject to the control of an employer, and includes all the time the employee is suffered or permitted to work, whether or not required to do so.” Time is compensable when an employee is working or under the control of his or her employer. For example, time could be compensable if an employee is working but is not subject to the employer’s control, such as when an employee works unauthorized overtime. And time may be compensable if an employee is not working but is under the control of the employer, for example, when the employee is required to remain on the company’s premises or the employee is restricted from engaging in certain personal activities.   

For the purposes of class certification, the court said that the question of whether the rounding policy was unfair required a focus on the company’s policies and practices, and whether they “restricted RNs in a manner that amounted to employer control during the period between their clock-in and clock-out times and the rounded shift-start and shift-end times.” Since the Ninth Circuit concluded that the determination of this issue did not depend on individualized factual questions and was capable of class-wide resolution, the district court’s denial of class certification was reversed.      

Key Takeaways

What can employers do?

  • If a company uses a rounding system, it may want to take caution to ensure that its system is fair and neutral, and that, on average, the amount of employee time that is deducted is the same or less than the amount added to time records as time worked. Further, a company can perform routine audits to ensure a neutral system.

  • Consider whether to use a smaller rounding interval to limit risk, like moving from a 7/8 system to a five-minute rounding system. 

  • If an employer uses a rounding policy, it may want to consider providing employees with a grace period for clocking in late up to the rounding interval.

  • Employers may want to review their written policies and ensure that the policies clearly prohibit off-the-clock work and require employees to record all time worked. They can also clarify that employees are prohibited from working outside of their regular shift without management approval. 

  • The policy can also clearly state that employees are not required to arrive at the workplace before the start of their shifts or to remain on the premises after their shifts end. 

  • Consider adding more time clocks in the workplace to reduce any pressure on the employees to feel that they must arrive early to clock in.

  • Consider providing training for management on both categories of compensable time and explaining that if a manager requires employees to arrive at the workplace before their shifts or remain after their shifts, the employees’ time spent at the workplace before and after the shift may qualify as compensable time.

  • Employers can ensure that their meal period policies provide time that is duty free and allow employees to come and go as they please, including leaving the premises.

  • Consider providing a complaint procedure for employees to report any complaints about their schedules, meal and rest breaks, records of time worked, and pay. 

© 2018, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.

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About this Author

Nader, Ogletree, Sacramento
Shareholder

Michael Nader is a shareholder in the firm’s Sacramento office.  A highly skilled litigator, advisor, counselor, and trainer, Mr. Nader represents employers in employment-related litigation in federal and state courts, and before administrative agencies.  He focuses his practice on wage and hour class action litigation, and on defending wrongful termination, discrimination, harassment, and retaliation claims. 

Mr. Nader regularly provides practical legal advice for employers on how to best achieve their business goals while managing risk under California’s employment laws.  His...

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