Rounding and Grace-Period Policies Comply with California Wage and Hour Laws

No proof that employees lost compensation as a result of the policies, state court concluded

By Joanne Deschenaux, J.D. February 10, 2017

Two policies used by See's Candy shops to calculate employee work time are lawful, the California Court of Appeal ruled. The policies in question were a rounding policy, which calculates time clock punches to the nearest 10th of an hour, and a grace-period policy, which permits employees to clock in 10 minutes before and after a shift. Neither policy violates state wage and hour laws, the court held.           

Pamela Silva filed an action against See's Candy, her former employer, alleging that the use of the two policies results in employees failing to receive all the compensation due them under wage and hour laws. See's Candy moved for summary judgment on the claims, seeking a dismissal before trial.

How the System Works

According to its motion, See's Candy uses a timekeeping software system to record its employee work hours. Employees are required to punch into the system at the beginning and end of their shifts, as well as for lunch breaks. A punch shows the actual time (to the minute) when the employee clocked into the system. See's Candy calculates an employee's pay based on the punch times, subject to adjustment under its rounding and grace-period policies.

Under the rounding policy, in and out punches are rounded (up or down) to record the time based on the nearest tenth of an hour (every six minutes beginning with the hour mark). The time punches themselves are rounded to the nearest three-minute mark. For example, if an employee clocks in at 7:58 a.m., the system rounds up the time to 8:00 a.m. If the employee clocks in at 8:02 a.m., the system rounds down the entry to 8:00 a.m. Both times are indicated on the punch card.

Under the separate grace-period policy, employees whose schedules have been programmed into the system may voluntarily punch into the system up to 10 minutes before their scheduled start time and 10 minutes after their scheduled end time. This grace period option is voluntary and is offered to employees to provide flexibility in the manner and times that workers clock in and out of the shifts. See's Candy's rules prohibit employees from working during the grace period.

If an employee is asked to work during this time, the manager is required to make a timekeeping adjustment to ensure the employee is paid for that work. Managers at See's Candy shops closely monitor employee start and stop times to ensure they are not working outside their scheduled work times.

The trial court granted See's Candy's motion, ruling that the company sufficiently demonstrated that use of the policies does not result in wage and hour violations.

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California's Rules

The appellate court noted that the rule in California is that an employer is entitled to use the nearest-10th rounding policy if the policy is fair and neutral and if "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 court concluded that the trial court correctly found the policy legal under this test.

As to the grace-period policy, the court noted that the general rule in California is that employees must be paid for the time they are working or for when they are "subject to the control of" an employer. In this case, See's Candy presented evidence that it has a policy of prohibiting employees from working during the grace period and submitted numerous employee declarations supporting that See's Candy exercised no control over the employees during the grace period. The appellate court, therefore, ruled that the grace-period policy is legal as well.

Silva v. See's Candy Shops, Cal. Ct. App., No. D068136 (Jan. 5, 2017).

Professional Pointer: The court in this case ruled that the policies themselves are legal. This does not, however, preclude an individual employee from filing a lawsuit challenging the way that the policies were applied, arguing, for example, that he or she was asked to work during the grace period and was not compensated.

Joanne Deschenaux, J.D., is a freelance writer in Annapolis, Md.


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