A recent decision from the California Court of Appeal has upheld the entitlement of employers to “round off” the amount of employee work time to a set fraction of an hour as long as the net impact on employee compensation is neutral and there is over time an equal amount of “rounding up” and “rounding down.” This decision means time records of employee work hours do not need to be kept to the exact minute as long as the rounding off policy has a neutral effect.
Both California and federal law require that employers keep accurate time records of hours worked by hourly nonexempt employees. In earlier years time sheets or time clocks were used for this purpose. Now, in the digital, age computerized systems have come into vogue and are used to record employee work time.
See’s Candy stores used such a system, named Kronos, to keep track of employee work hours. The system used by See’s “rounded” employee work time to the nearest 1/10th of an hour. For example, if an employee scheduled to begin work at 9:00 a.m. clocked in at 9:02 a.m., the employee would be given credit as if he or she had clocked in at 9:00 a.m. However, if the employee did not clock in until 9:04 a.m. the system would treat that employee as having arrived at 9:06 a.m., 1/10th of an hour late.
The system also provided what was called a “grace period” which allowed employees to clock in up to 10 minutes early or clock out up to 10 minutes late as long as they did not actually work during those additional 10 minutes at either end of their work shift.
An employee named Silva brought a class action against See’s for unpaid wages on behalf of herself and all employees similarly situated. In this lawsuit she alleged that the “rounding” policy resulted in an inaccurate reflection of the amount of work she and her colleagues had performed and thereby deprived them of some compensation to which they were entitled. She also alleged that the rounding policy by definition was inaccurate, as the recorded times by definition were not necessarily true to the exact numbers of minutes employees had worked. Indeed, See’s admitted as such. This admission, Silva alleged, demonstrated that See’s was violating the law by not keeping accurate time records.
See’s attempted to defend itself by alleging that the rounding policy over the course of time produced a neutral affect and therefore was a permissible method of time keeping. Silva sought to prevent See’s from defending itself on this basis and actually convinced a trial judge in San Diego that See’s should not be permitted to do so. The Court of Appeal disagreed with the lower court judge and upheld See’s ability to defend itself on this basis. (See’s Candy Shops, Inc. v. The Superior Court of San Diego County (2012) 210 Cal.App.4th 88 [148 Cal.Rptr.3d 690].) See’s had actually retained an expert witness who analyzed the impact of the rounding policy and concluded that, to the contrary, the policy over time resulted in more pay to the employees than they would have been entitled to receive had the company not used the rounding policy.
The regulations of the United States Department of Labor implementing the Fair Labor Standards Act have for years allowed a rounding policy utilizing a fixed fraction of an hour up to one quarter (15 minutes) as long as there is equal rounding up and rounding down so that over the course of time the impact on the employees is neutralized. The California Division of Labor Standards Enforcement, which implements this state’s wage and hour laws, has routinely followed the federal standard although there is nothing in California statute, regulation or case law which specifically adopts the federal rounding rule. The See’s Candy decision is the first authoritative ruling in California which validates a private company’s use of a rounding policy in this state. With more and more employers using computerized time keeping systems for keeping track of employee work hours, this ruling is welcome news.