California Court Allows Rounding of Time Entries

Winter 2012Articles California Update

Employers have been rounding off workers’ time entries for years without any guidance from California courts on proper practices. Now, California employers finally have a published appellate decision permitting the practice. According to See's Candy Shops, Inc. v. Superior Court, filed October 29, 2012, rounding is allowed as long as the policy is not designed to benefit only the employer.

See's Candy used a timekeeping system that rounded employees' time to the nearest six minute (or tenth of an hour) increment. An employee sued arguing the practice unlawfully deprived employees of wages earned. Noting that federal law permits rounding, the Court of Appeal held that the practice is also proper under California law, as long as the "policy is neutral, both facially and as applied." In other words, if an employer is going to engage in a rounding practice, it must round up and down, so that over time the policy does not result in a loss to employees. The Court of Appeal did not rule on whether See’s Candy’s rounding practices are lawful; that is now an issue the trial court must consider. A federal court recently dismissed a class action alleging that the employer conducted improper rounding practices on the basis that the plaintiffs did not allege that the rounding policies could result in a systematic underpayment of wages or were implemented to clearly favor management. That case is Mendez v. H. J. Heinz Co. L.P., et al. Case No. 2:12-cv-05652 (C.D. Cal. 2012).

While these cases are good news for employers, they do not eliminate the risk of exposure from rounding practices. Employers are advised to evaluate whether their rounding practices, on average and over time, properly compensate employees for hours worked. If rounding practices result in a net underpayment to employees, they may be considered unlawful.