Timekeeper rounding practices may be running out of time

Following its decision in Adolph v. Uber Technologies, Inc., the employment law spotlight on the California Supreme Court has now shifted to Camp v. Home Depot U.S.A., Inc. wherein the high court will review whether, under California law, employers are permitted to use neutral time-rounding practices to calculate employees' work time for payroll purposes.

The argument over whether neutral-rounding time policies comport with California law has been at the core of a multitude of class and representative action cases across the state. For years, California courts have allowed timecard rounding that meets certain criteria. The seminal ruling came in See's Candy Shops, Inc. v. Superior Court 210 Cal. App.4th 889 (2012). ("See's Candy"). The appellate court in See's Candy observed that "[a]lthough California employers have long engaged in employee time-rounding, there is no California statute or case law specifically authorizing or prohibiting this practice." The See's Candy court deferred to federal regulations that permitted neutral or employee beneficial rounding time practices. Multiple subsequent courts followed the precedent enunciated in See's Candy. See David v. Queen of Valley Medical Center 51 Cal.App.5th 653 (2020); AHMC Healthcare, Inc. v. Superior Court 24 Cal.App.5th 1014 (2018).

In reviewing cases dealing with rounding time policies, appellate courts up until recently stood behind the ruling in See's Candy, opining that a rounding policy is lawful if it is facially neutral and applied "'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." See's Candy is aligned with the guidelines for federal regulations, and to date, California has not made any laws or regulations regarding the practice of rounding - therefore, the guidelines have developed only through case law. It would now appear, however, that See's Candy is on the verge of being rejected entirely, thereby ending permissible rounding of time punches.

Last fall, the Sixth District of the California Court of Appeal in Camp v. Home Depot U.S.A., Inc., 84 Cal.App.5th 638 (2022), sided with Camp and found Home Depot's rounding policy for time entered by its hourly, non-exempt employees was unlawful. The court held, "if an employer, as in this case, 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."

Focusing on the holdings in Troester v. Starbucks, 5 Cal.5th 829 (2018) and Donohue v. AMN Services, LLC 11 Cal.5th 58 (2021), the Court of Appeal declined to follow at least five prior appellate court decisions finding that rounding time was permissible under various sets of scenarios. The California Supreme Court commenced its review of the decision earlier this year.

The fact pattern in Camp is notable in that the clocked and rounded time comparison showed a discrepancy of roughly seven hours over an approximately five-year period, while a timekeeping sample showed that the policy benefited employees more than half of the time. Specifically, an expert report found that:

● In 49.2% of the applicable pay periods, employees gained an average of 3.6 additional minutes per shift;

● In 47.1% of the applicable pay periods, employees lost an average of 3.5 minutes per shift; and

● In 3.7% of the applicable pay periods, employees were paid for actual time worked.

There are several considerations involving rounding time policies, including whether the policy impacts actual time worked; the relevance of a collective bargaining agreement on the practice; whether there are other timekeeping or productivity modules that show whether there is actual time worked between clock in time and the commencement of actual work; and the fundamental neutrality of the policy.

Challenges to a rounding time practice lose the core of the argument when it can be shown that there is no ability to document time electronically, or there is an administrative burden to document the time to the minute and/or the practice is neutral and/or results in the employee(s) benefiting from the practice. Moreover, if it can be demonstrated that an employee did not work during the time period where the time was rounded, it again supports the argument that rounding time practices should be permitted in at least limited circumstances.

The almost complete elimination of the de minimis rule in Troester does not support the elimination of rounding time practices based on the above principles. Best practices may require an employer to eliminate a rounding time practice based upon the risk of the practice not favoring employees, but from a legal standpoint, there should be the ability to ease the administrative burden if it results in either a benefit or no detriment to an employee.

Understanding that there has been almost two decades of consistent guidance from the California Department of Labor Standards Enforcement (DLSE) and appellate courts on the issue, to the extent the California Supreme Court limits the permissibility of rounding time practices on a retroactive basis, it should be mindful of insight into similar limitations on retroactive penalties due to the good-faith belief that employers were relying on administrative and judicial guidance. Limitations may have significant impacts on small business, particularly, who cannot invest in electronic timekeeping and rely on more elementary timekeeping systems. Permitting rounding time practices, on a limited basis, is both practical and equitable.