Home Depot's Rounding Policy for Payroll Is OK

Home Depot's policy of rounding employees' time punched in and out to the nearest quarter hour does not violate California's wage and hour laws, according to the U.S. District Court for the Northern District of California.

John Utne brought a class-action suit against his employer, Home Depot, arguing that the company's timekeeping system prevents him and other employees from being paid for all time worked. Home Depot uses a timekeeping software system to track time worked by hourly employees and rounds employees' time punched in at the beginning of a shift and time punched out at the end of a shift to the nearest quarter of an hour.

Utne said this practice causes him to lose out on pay for time rounded off. Home Depot responded that its rounding practice is neutral as it was applied to Utne. The company further argued that employees end up getting overpaid because of rounding just as often as they are underpaid.

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The district court agreed with Home Depot and held that as long as the rounding policy averages out and is neutral, it does not violate California wage and hour law. The court granted summary judgment on this issue in Home Depot's favor.

The court noted that the California Court of Appeal had previously held that the federal rounding rule also applied to California state wage claims. The federal rule is that rounding is acceptable as long as the policy is neutral, and the practice averages out and will not result in undercompensation over the long term. The court made it clear that policies that only round down and therefore result in systematic undercompensation do violate the law.

Home Depot presented expert testimony that 57 percent of the shifts analyzed (10 percent of the class over a five-year period) were either overpaid or unaffected by the rounding practice, leaving 43 percent of shifts underpaid. An average potential class member was paid an additional 11.3 minutes per pay period.

Home Depot conceded that Utne was underpaid by an average of 36 seconds per shift during the relevant time period because of the rounding. Utne argued that fact alone should be enough to defeat summary judgment.

Utne presented his own expert testimony, which indicated that more people were negatively impacted by the policy than Home Depot's expert concluded. However, the court found that Home Depot's expert adequately addressed the issues raised by Utne's expert. Even if Utne's expert was correct, the policy was still neutral and valid because it rounds both up and down. The court ultimately disagreed with Utne and held that the overall rounding policy was neutral, so summary judgment for Home Depot was appropriate.

Utne tried to persuade the court to certify a class of only those individuals who were negatively impacted by the rounding policy, but the court said that he could not ignore the comparable number of employees who were unaffected or overcompensated by the rounding policy. Moreover, the court held that Utne's claim requires an analysis of how the rounding policy affects all employees.

Utne v. Home Depot U.S.A., Inc., N.D. Cal., No. 16-1854 (Dec. 4, 2017).

Professional Pointer: This case reinforces the importance of looking at the long-term fairness when implementing a rounding policy. Whole numbers and quarter hours are easier to deal with but employers must round both up and down to avoid underpaying employees.

Meagan E. Mariano is an attorney with Carmagnola & Ritardi LLC, the Worklaw® Network member firm in Morristown, N.J.

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