Potential Pitfalls of Rounding Employee Timesheets
Posted by GibbsGiden Under California Law
It is common practice for an employer to round employer timesheets, usually in 5, 10, or 15-minute increments, to help simplify payroll. In 2012, the California Supreme Court approved the use of rounding in See’s Candy Shops, Inv. v. Superior Court. The Court held that rounding was appropriate so longer as the process was neutrally applied. For example, if an employer rounds time in 10-minute increments, the employer can round down for any time less than five minutes and round up for any time over five minutes. In theory, therefore, the employer and employee should equally benefit from the rounding over time.
California courts, however, recently issued decisions concerning time rounding, creating potential pitfalls, and calling into question the viability of time rounding moving forward. In 2021, the Supreme Court decided the Donohue v. AMN Services, LLC case (discussed more fully here) regarding the rounding of meal breaks. In California, non-exempt employees must be provided a 30-minute meal period for a normal full-time shift. If an employee does not receive the full break, they are entitled to a premium payment equal to one hour of pay at their regular rate of pay. In Donohue, AMN used a rounding policy that would, for example, round a 28-minute meal break to 30-minutes. AMN deemed this to be a compliant meal break and did not pay employees a premium wage. The Donohue Court held that AMN’s policy violated California law because it denied employees premium wages for non-compliant meal breaks when meals breaks were less than the required 30 minutes.
More recently, the California Court of Appeal issued an opinion in Camp v. Home Depot that could put an end to time rounding for many businesses. In Camp, the plaintiffs in a class action lawsuit challenged Home Depot’s neutral rounding policy. The lower court granted summary judgment in Home Depot’s favor, saying the neutral time policy was permitted as it complied with the See’s Candy Shop ruling.
The Court of Appeal, however, disagreed and reversed. The court first noted that, while the See’s Candy Shop decision permitted the use of rounding, it did not address the validity of rounding standards. The court next addressed California law concerning payment of employee wages, which clearly states that employees must be paid for all hours worked. Home Depot’s timecard system tracked employee time “to the minute.” Because of the accuracy of the timekeeping system, the court held that it should be left to a jury to determine if Home Depot’s time rounding policy denied employees’ wages based on the actual hours worked.
The Camp court noted that its ruling was specific to the facts of the case and acknowledged that it left some unanswered questions. For example, can employers continue to round time if they are unable to accurately capture employee time to the minute? Also, are employers required to update timekeeping systems to accurately capture employee time to the minute?
Considering these rulings, employers may want to adopt policies to eliminate time rounding and potentially updating timekeeping systems to accurately track employee time. Employers who wish to continue using rounding time policies may want to review those policies to ensure they are neutral.
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Matthew Wallin is a senior associate in the Los Angeles office where he practices labor and employment law. He has extensive experience defending private business and public entities in litigation and advising clients on labor compliance issues.
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