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By: Laura Flynn
The Second District of the California Court of Appeal has ruled that calculating payroll by automatically rounding workers’ hours either up or down to the nearest quarter-hour is legal as long as it does not result in workers being systematically underpaid over time. In a published opinion, the three-judge panel found the payroll system implemented by a Southern California hospital system was neutral both on its face and in the way it was applied.
Under the employer’s payroll system, an hourly worker who clocked in between 6:53 and 7:07, was paid as if they clocked in at 7:00. Meal breaks that lasted between 23 and 37 minutes were rounded to 30 minutes. The legality of the calculation method was challenged by two former employees who alleged they weren’t paid properly or given adequate meal breaks or rest periods. The primary allegation was that the rounding system did not comply with the California Labor Code because it did not use employees’ exact clock-in and clock-out times.
A statistical expert analyzed the time records for all of the hospital employees over a four-year period. Although some employees lost work time, the remainder either gained time or broke even. Overall, the calculation method resulted in the employer over compensating employees. The Appellate Court held a rounding system is valid if it “average[s] out sufficiently,” rejecting claims that minor discrepancies in an individual employee’s wage calculations establish that the employee is entitled to assert a claim for underpayment.
The Court relied on Section 785.48 of title 29 of the Code of Federal Regulations which allows employers to round work time as long as it doesn’t result in workers being underpaid over statistically significant periods of time. California’s Division of Labor Standards Enforcement has adopted the federal regulation as part of its enforcement standards. The Court’s opinion confirms Section 785.48 and the policies underlying it “apply equally to the employee-protective policies embodied in California labor law.”
AHMC Healthcare, Inc. v. Superior Court, filed 6/25/18, Los Angeles Superior Court Case No. B285655.
If you have any questions or would like more information, please contact Laura Flynn at [email protected].