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November 2012

Time-Rounding Policies Are Not A Per Se Violation Of California's Wage and Hour Laws

In See’s Candy Shops, Inc. v. Superior Court (Silva), the California Court of Appeal for the Fourth Appellate District held that California employers are entitled to use an employee time-keeping policy that adjusts the time an employee punches in/out to “the nearest-tenth . . . if the rounding policy 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 have actually worked.’”

In so holding, the Court of Appeal reversed the San Diego County Superior Court’s controversial order granting summary adjudication in favor of the plaintiff on two of See’s Candy’s rounding affirmative defenses, which was based upon the lower court’s finding that the defenses were inconsistent with California Labor Code section 204, which requires the payment of all wages every two weeks.  The lower court’s ruling directly conflicted with the time-rounding standard endorsed by both the United States Department of Labor (“DOL”) and the California Department of Fair Labor Standards Enforcement (“DLSE”), creating uncertainty for California employers who utilize time-rounding policies and threatening a proliferation of wage and hour class actions predicated upon rounding as an improper practice.

The specific rounding policies at issue in See’s Candy included rounding employee punch in/out times to the nearest one-tenth of an hour, and a “grace period” policy, which allowed employees to clock in up to 10 minutes before their scheduled start time and clock out up to 10 minutes after their scheduled end time.  At deposition, See’s Candy’s witness testified that given the grace period, and the rounding practice, the timekeeping records standing alone did not accurately reflect time worked.  On summary judgment Plaintiff’s counsel argued that this was an admission that See’s Candy’s timekeeping records were inaccurate and contended that rounding was valid only insofar as an employer performed a "mini actuarial process" every two weeks to ensure that every employee properly received compensation for his or her unrounded time.  The lower court agreed, granting summary adjudication as to See’s Candy’s rounding affirmative defenses.  Thereafter, See’s Candy filed a writ of mandate, which was summarily denied by the Court of Appeal.  However, its subsequent petition for review with the California Supreme Court resulted in an order that the Court of Appeal show cause on the issue.

In its review, the Court of Appeal adopted the DOL/DLSE rounding standard and upheld as permissible an employer’s practice of rounding to the nearest-tenth, where the rounding is fair and neutral on its face and is used in such a manner that will not result, over time, in underpayment of wages.  However, the Court did not hold that rounding practices are always acceptable, and as See’s Candy illustrates, extensive litigation to defend a rounding practice can result. Accordingly, employers who do use time-rounding should review their timekeeping policies to ensure that they are facially neutral and do not favor the employer.

Employment Law

Sat Sang S. Khalsa

Employment Law