California Court Limits Permissibility of Time Rounding

​Rounding is the practice of capturing time entries and converting them to the closest five, 10, or 15-minute equivalent. A recent California Court of Appeal decision, Camp v. Home Depot U.S.A., calls into question the continued viability of time-rounding policies in California.

In 2012, the state Court of Appeal held in See's Candy Shops v. Superior Court that an employer's time-rounding policy is lawful when the policy is "fair and neutral on its face" and is used in a way that will not result, over a period of time, "in failure to compensate the employees properly for all the time they have actually worked." The See's Candy test permitted timeclock rounding systems, so long as the rounding was to the nearest set increment, as opposed to always rounding against the employee. Multiple appellate decisions after See's Candy cited it favorably in granting summary judgment to the employer.

However, the California Supreme Court has never formally adopted See's Candy as an accurate statement of California law. Furthermore, in a decision on a related matter in 2021, the state Supreme Court noted that it had never adopted the See's Candy standard, but that none of the parties had asked for the holding of the case to be reviewed. Although this new Camp decision is merely an appellate decision, and it does not ban time-rounding outright, it does call into question See's Candy's broader holding that time-rounding systems are lawful if applied evenhandedly.

Cases Undermined Time Rounding Rule

Six years after See's Candy, the California Supreme Court held that the federal de minimis doctrine does not apply to California wage and hour claims involving the failure to pay employees for small amounts of otherwise compensable time, like closing up the store and locking the door after clocking out. Under the federal de minimis doctrine, "insubstantial or insignificant periods of time beyond the scheduled working hours, which cannot as a practical administrative matter be precisely recorded for payroll purposes, may be disregarded." But the court rejected the federal de minimis doctrine because California wage and hour laws provide greater protections than federal law.

Although California has a common law de minimis standard that may be applied in more limited circumstances than the federal standard, it generally does not apply when the activity recurs on a regular basis, such as spending a minute each evening activating an alarm after clocking out.

In 2021, the California Supreme Court held that employers cannot meet the obligation to provide 30-minute off-duty meal periods by rounding time entries such that the rounded entries amount to 30 minutes when the actual break time was less than 30 minutes. The court stated that, even assuming rounding time is proper for calculating hours worked, different policies come into play with regard to providing meal periods. The court explained that California's "meal break provisions are designed to prevent minor infringements on meal period requirements, and rounding is incompatible with that objective." The opinion rejected rounding time for meal period purposes, but avoided addressing the larger question of whether rounding remained a lawful practice for calculating hours worked.

Class Action

Plaintiff Delmer Camp filed a class action against his employer, The Home Depot. The employer uses an electronic timekeeping system that captures the exact time of punch entries, but rounds each punch to the nearest quarter-hour. The records showed that rounding Camp's time resulted in it being reduced by 470 minutes in the aggregate, which was less than a minute per workday. Based on See's Candy, the trial court granted summary judgment in favor of The Home Depot. The employee appealed.

The state Court of Appeal reversed the trial court and called into question the continued viability of See's Candy rounding rules. The court reasoned that if an employer "can capture and has captured the exact amount of time an employee has worked during a shift, the employer must pay the employee for all the time worked." The court was unpersuaded by the employer's arguments and instead relied on some general principles to support the view that all captured work time must be paid.

First, the court noted that the California Labor Code requires employers to pay their employees "for all time worked." Second, the court noted that the regulatory scheme in California is concerned with the "small things" and looks unfavorably on the de minimis principle, requiring compensation wherever the "worktime is regularly occurring." Third, the court noted that California courts have repeatedly departed from federal standards that provide less protection. Fourth, the court doubted that rounding provides any added efficiency, given the progress of technology and the ability to capture and calculate wages owed down to the minute.

The Camp decision limited the scope of its holding. It did not outright bar the use of rounding. The decision stressed that the particular facts of this case – in which the employer used a timekeeping system that could track the exact amount of time the plaintiff worked – warranted finding that rounding was inappropriate because by rounding, the employer deprived Camp of nearly eight hours of pay. Finally, the Camp decision closed by taking the unusual step of inviting the California Supreme Court to decide the validity of See's Candy when the employer can capture and has captured all the minutes an employee has worked, but nevertheless applies a rounding policy. It remains to be seen if the California Supreme Court will take up the invitation.

Key Takeaways

Employers that continue to round time do so at heightened risk, and employers that round time and use an automatic timekeeping system should reevaluate the use of a rounding policy and pay employees for all time worked and recorded. If an employer wants to continue rounding time, it may want to limit the circumstances in which it does so, based upon the unique facts and circumstances of the situation.

Raymond Nhan, Michael Campbell and Maggie Sheerin are attorneys with Sheppard Mullin in Los Angeles. © 2022. All rights reserved. Reprinted with permission.