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By: Craig Tomlins
For years, state and federal courts, as well as administrative agencies, have allowed California employers to use time rounding policies so long as they are neutral on their face and neutral as applied. Because of this, many California employers have taken advantage of time rounding policies for various reasons. Recently, however, the Sixth District Court of Appeal departed from prior precedent, ruling that even a neutral rounding policy that slightly favors employees over the long run still could expose employers to an unpaid wage claim if an employee can demonstrate that the rounding policy disadvantaged and deprived that employee of compensable time.
The ruling stems from Camp v. Home Depot U.S.A., Inc. (Cal. Ct. App., Oct. 24, 2022, No. H049033), in which two employees brought a putative class action for unpaid wages. Plaintiffs alleged that Home Depot’s “Kronos” timekeeping system recorded each minute worked by the employees but because of Home Depot’s quarter-hour time rounding policy, employees were paid for less time than they actually worked and reported. Home Depot moved for summary judgment, arguing that its rounding policy was neutral on its face, neutral as applied, and lawful under See’s Candy Shops, Inc. v. Superior Court (2012) 210 Cal.App.4th 889 (“See’s Candy”). The trial court agreed.
Home-Depot’s rounding policy was straightforward: if the total shift time fell between the quarter hour, a time increment of seven minutes or less was rounded down to the nearest quarter hour, while a time increment of eight minutes or more was rounded up to the next quarter hour (i.e., a seven hour and thirty-four minute shift was rounded down to 7.50 hours, while a seven hour and thirty-nine minute shift was rounded up to 7.75 hours). Moreover, the parties stipulated to a 10% sample size of time and pay records of the putative class (13,387 hourly employees; 4,282,517 shifts; and 516,193 pay periods), which showed:
(1) Employees were paid for the same or greater number of minutes than their actual work time on 56.6% of shifts;
(2) Employees lost minutes on 43.6% of shifts;
(3) Employees gained minutes in 49.2% of pay periods, lost minutes in 47.1% of pay periods, and had no gain/loss in 3.7% of pay periods;
(4) Overall, employees in the 10% sample size were paid for 339,331 more minutes (5,656) because of the rounding policy.
The Sixth District Court of Appeal reversed as to Plaintiff Camp, finding that a question of fact existed as to whether Home Depot’s rounding policy resulted in Camp not being paid for all of the time he worked, particularly because he lost a total of 470 minutes over four and a half years and Home Depot could and did track the exact time in minutes that an employee worked each shift. In reaching this conclusion, the Court focused on See’s Candy’s observation that while employers have long engaged in time rounding, there is no California statute or case law specifically authorizing or prohibiting this practice. The Court also examined both the Labor Code and applicable Wage Order, reasoning that nothing in these sources permit rounding and in fact, both require employees to be paid for “all time worked” and “all the time the employee is suffered or permitted to work.” Further, the Court took guidance and direction from the California Supreme Court’s recent decisions in Troester v. Starbucks (2018) 5 Cal.5th 829 [holding that the federal de minimis rule did not apply to California wage and hour claims] and Donohue v. AMN Services, LLC (2021) 11 Cal.5th 58 [holding that employers cannot engage in the practice of rounding time punches in the meal period context].
Importantly, the Court limited its holding to the specific facts of the case – i.e., where an employer can and did track the exact time in minutes that an employee works each shift. It did not purport to prohibit all time rounding practices or address the application of See’s Candy to other circumstances, such as when a neutral rounding policy is used due to the inability to capture actual minutes worked. It also declined to address whether an employer who can capture an employee’s exact minutes worked must do so. The Court’s holding, however, and its reversal, raises the issue of whether rounding claims can even be pursued as a class action, since Home Depot’s policy resulted in no liability to some employees (Plaintiff Correa, who conceded on appeal she did not lose wages) and potential liability to other employees (Plaintiff Camp), which will result in confusion as to which category any particular employee falls into without examining that particular employee’s individual pay and time records.
Although the case was remanded back to the trial court, this decision will no doubt be used to challenge any rounding practice by any employer in California. Troester and Donohue both highlighted that the Labor Code and Wage Orders are designed to “prevent even minor infringements,” “no matter how minor,” even if only “a few minutes.” The California Supreme Court has stated these sources are concerned with “small things” and contemplate employees get paid for all work performed, “even a few extra minutes.” If this is any indication where the California Supreme Court is headed, California employers should re-evaluate any rounding policies and practices to determine whether Camp presents new compliance considerations going forward. Employers might not have to wait too long to re-evaluate; not only did the Sixth District Court of Appeal invite the California Supreme Court to decide the validity of the rounding standard articulated in See’s Candy to the circumstance where the employer can capture and has captured all the minutes an employee has worked, but the Court respectfully invited the California Supreme Court to review the issue of neutral time rounding by employers and to provide guidance on the propriety of all time rounding policies and practices by employers.
This decision should not impact employers with operations outside of California.
For more information, please contact Craig Tomlins at [email protected] or your local FMG attorney.