Rounding Policy Falls Flat in California

Employment Law

An employer’s quarter-hour rounding policy did not comply with California law because the company could and did track the exact time in minutes that employees worked each shift—but did not pay them for it, according to a California appellate panel.

Delmer Camp sued Home Depot for unpaid wages. He alleged that Home Depot’s electronic timekeeping system, which rounded an hourly employee’s total daily worktime to the nearest quarter hour, rather than using the actual worktime captured by the minute, resulted in the failure to pay wages for all of an employee’s time worked, in violation of the state’s Labor Code and Wage Order 7.

The parties stipulated to the analysis of certain time and pay records that covered a total of 13,387 hourly employees, 4,282,517 shifts and 516,193 pay periods. The results were that employees were paid for a number of minutes that was the same as or greater than their actual work time in 56.6 percent of the total shifts, with an average gain of 3.6 minutes and, for those who lost minutes, an average loss of 3.5 minutes.

Camp’s time and pay records showed that between March 30, 2015, and October 20, 2020, he worked 1,240 shifts and gained or lost minutes due to rounding at various points in time. During the entire period, however, he suffered a total net loss of 470 minutes, or approximately 7.83 hours, due to rounding.

Home Depot responded with a motion for summary judgment, relying on See’s Candy Shops, Inc. v. Superior Court, a 2012 decision where a California appellate court held that rounding policies are permissible under state law if they are neutral on their face, neutral as applied and otherwise lawful.

The trial court granted the motion, and Camp appealed. Based on the particular facts of the case—and in light of recent California Supreme Court decisions building on See’s Candy—the panel reversed.

In 2018, the state’s highest court decided Troester v. Starbucks Corp. Considering an employee’s claim for unpaid wages where the employer required employees to work off the clock for several minutes per shift, the court held that the federal de minimis doctrine did not apply to California wage and hour claims.

The court emphasized that California is free to offer greater protection to employees and that the wage orders are to be read with a liberal construction to compensate employees for all time worked.

Three years later, in Donohue v. AMN Services, LLC, the California Supreme Court addressed the issue of time rounding in the specific context of meal periods, holding that employers cannot engage in rounding in the context of meal periods.

In view of “the guidance and direction” provided by these opinions, the panel concluded that Home Depot did not meet its burden to show that there was no triable issue of material fact regarding Camp’s claims for unpaid wages, where the employer could and did track the exact time in minutes that an employee worked each shift and those records showed that Camp was not paid for all the time he worked.

The panel cited four reasons for its decision. First, the California Supreme Court has emphasized that the Labor Code and relevant wage order require that “employees will be paid for all work performed,” and Camp presented evidence that he was not paid for all work performed.

Further, the regulatory scheme is concerned with “small things,” the panel said. The state’s highest court “has indicated that even small amounts of worktime—indeed amounts measured in minutes—are compensable where the worktime is regularly occurring,” the court wrote. “[A]s evidenced in this case, a few extra minutes of worktime periodically lost due to a purportedly neutral time rounding policy can add up over time. Here, the evidence reflects that [Camp] lost more than seven hours of worktime due to Home Depot’s quarter-hour rounding policy.”

As a third reason, the panel pointed out that California has not adopted the federal standard, and while time rounding has been incorporated into federal regulations for over 50 years, neither the Labor Code statutes nor any wage order has been amended to recognize a time-rounding exception to the requirement that an employee be paid for all time worked.

Finally, both Donohue and Troester called into question the efficiencies historically attributed to time rounding given the advances in technology that have enabled employers to more easily and precisely capture time worked by employees.

“We are not persuaded by Home Depot’s argument that the calculation of wages is ‘easier’ with rounded time,” the court wrote. “More importantly, Home Depot cites no provision in California law that privileges arithmetic simplicity over paying employees for all time worked.”

The judgment against Camp was reversed and the case remanded.

To read the decision in Camp v. Home Depot U.S.A., Inc., click here.

Why it matters: The panel was clear that its analysis was limited to the specific facts of the case and did not reach the issue of whether employer time-rounding practices in other contexts comply with California law. However, the court took the opportunity to “respectfully invite” the California Supreme Court to decide the validity of the rounding standard articulated in See’s Candy, both in the circumstances presented (where the employer can and has captured all the minutes an employee has worked and then applies a quarter-hour rounding policy) and with regard to the issue of neutral time rounding by employers, particularly in view of the technological advances that now exist to enable employers to track time more precisely.



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