Rounding Permissible Under California Wage and Hour Law

A January 2012 post described a case pending in the California Court of Appeal that involved the legality of rounding time worked to the nearest tenth of an hour for purposes of computing wages. In See's Candy Shops, Inc. v. Superior Court, Case No. D060710 (Oct. 29, 2012), the San Diego division of the Fourth District Court of Appeal has upheld the practice, provided that it does not result over a period of time into compensate the employees properly for all time actually worked.

The Kronos timekeeping system that See's Candy used recorded the actual time to the minute that employees punched into and out of the system, but the employer rounded the actual time up or down to the nearest tenth of an hour. The class action plaintiff claimed the practice violated California Labor Code section 204, which requires "all wages" to be paid twice each month on designated days. The court rejected the argument, stating that the reference "pertains to the timing of wage payments and not the manner in which an employer ascertains each employee's work time."

Because state law did not bar the practice, it was appropriate to follow the federal Department of Labor's regulation at 29 C.F.R. § 785.48(b), which states: "It has been found that in some industries, particularly where time clocks are used, there has been the practice for many years of recording the employees' starting time and stopping time to the nearest 5 minutes, or to the nearest one-tenth or quarter of an hour. Presumably, this arrangement averages out so that the employees are fully compensated for all the time they actually work. For enforcement purposes this practice of computing working time will be accepted, provided that 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 have actually worked." The California Labor Commissioner’s enforcement policy follows the federal practice. See DLSE Enforcement Policies and Interpretations Manual, sections 47.1 and 47.2.

For an example of a rounding practice that did not comply with the regulation, see Eyles v. Uline, Inc., Case No. 4:08-CV-577-A (N.D. Tex. Sep. 4, 2009), which states that a policy of only rounding down would not compensate an employee for all time worked.

Rounding

Kronos InTouch

Employers routinely round off the number of minutes worked to fit the needs of their payroll systems. Recently, class action lawyers who believe that the practice shortchanges employees have filed class actions challenging the practice. For example, a lawsuit under review in the California Court of Appeal for the Fourth District challenges the use by See's Candy of a Kronos timekeeping device that rounded to the nearest tenth of an hour. See's Candy Shops Inc. v. Superior Court, Case No. D060710 (4th Dist.). On January 18, 2012, the California Supreme Court granted review and directed the Court of Appeal to hear a challenge to a trial court ruling that rounding could violate the wage and hour laws.

Such actions would appear to face long odds, because both federal and state regulators have said that the practice is legal. Department of Labor regulation 29 C.F.R. § 785.48(b) states: "It has been found that in some industries, particularly where time clocks are used, there has been the practice for many years of recording the employees' starting time and stopping time to the nearest 5 minutes, or to the nearest one-tenth or quarter of an hour. Presumably, this arrangement averages out so that the employees are fully compensated for all the time they actually work. For enforcement purposes this practice of computing working time will be accepted, provided that 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 have actually worked."

The California Labor Commissioner’s enforcement policy follows the federal practice. See DLSE Enforcement Policies and Interpretations Manual, sections 47.1 and 47.2.

Until the question is clarified in a judicial decision, California employers should be careful to record employees work time as accurately as possible.