Hunton Employment & Labor Perspectives

A California Court of Appeal recently found that California employers can lawfully apply the federal standard for rounding. This standard is set forth in 29 CFR Sec. 785.48(b), and previously has been adopted by California’s Department of Labor Standards Enforcement (“DLSE”).  29 CFR Sec. 785.48 (b) permits an employer to round an employee’s starting time and stopping time to the nearest 5 minutes, or one-tenth, or quarter of an hour, assuming the rounding will not result in a failure to compensate the employees, over time, for all the time they have actually worked. The DLSE had previously adopted this standard in its Enforcement Manual. In the October 29, 2012 published decision in See’s Candy Shops v. Superior Court of San Diego County, No. D060710, the court concluded that the federal/DLSE standard is legal in California, if the employees are fully compensated over a period of time.  See also Alonzo v. Maximus, Inc. (C.D. Cal. 2011) 832 F.Supp.2d 1122, 1126. (“[t]his ‘regulation permits employers to use a rounding policy for recording and compensating employee time as long the employer’s rounding policy does not ‘consistently result[] in a failure to pay employees for time worked.’ ’ ”). The Court rejected Plaintiff’s argument that the federal regulation is inconsistent with California Labor Code Section 204, which provides that “all wages [other than certain specified exceptions] are due and payable twice during each calendar month.” Plaintiff essentially argued that employers should be required to engaged in a mini actuarial process at the time of payroll. The Court rejected this argument.

This case is a wage and hour class action out of San Diego Superior Court. After certifying the class of current and former employees, the trial court granted Plaintiff’s summary adjudication motion, dismissing four affirmative defenses. See’s challenged the dismissal of two of its defenses in a writ petition, both of which pertained to See’s timekeeping policy that rounds employee punch in/out times to the nearest one-tenth of an hour. After the Appellate Court denied See’s writ, the CA Supreme Court granted See’s petition for review and ordered the Appellate Court vacate its prior order and issue an order to show cause. After extensive briefing, the Appellate Court found that See’s petition had merit, and that the trial court erred in granting summary adjudication on the two affirmative defenses pertaining to See’s rounding policy. 

See’s has implemented both a “nearest tenth” rounding policy (every 6 minutes) and grace period policy (employees whose schedules have been programmed into Kronos may voluntarily punch in up to 10 minutes before scheduled start time and up to 10 minutes after scheduled end time).  Under See’s grace period policy, employees are not allowed to work during the grace period.   Because See’s assumes that the employees are not working during this time, employees using the grace period are not paid punch to punch, but paid from the scheduled start time of their shift, to the scheduled stop time. If the grace period applies, See’s rounding policy becomes redundant.  Although Plaintiff made various arguments related to See’s grace period policy, because the Plaintiff did not move for summary adjudication on See’s affirmative defense concerning the validity of its grace period policy under state and federal law, the Court of Appeal’s decision addressed only See’s affirmative defenses concerning its rounding policies.