Historically, California courts have upheld the legality of time rounding (where, for example, actual time punches are rounded backwards or forwards to the nearest quarter hour) as long as, overall, the rounding policy/practice is neutral on its face and has a neutral effect on employee compensation, meaning that potential wage underpayments in some instances are offset by wage overpayments in other instances.
However, in 2021 the California Supreme Court issued a decision in Donohue v. AMS Services, LLC (discussed here) which held that rounding time entries for meal breaks are not allowed. Although the decision did not disallow rounding in all circumstances, the Supreme Court questioned whether rounding practices continue to be justified given technological advances in timekeeping and payroll.
The Legality of Time Rounding Practices
In October 2022, a panel of the Sixth District Court of Appeal issued a decision in Camp v. Home Depot USA, Inc., which further calls into question the legality of time rounding practices, particularly where a timekeeping system can and does capture an employee’s actual time punches to the minute.
In the Camp case, two plaintiffs filed a putative class action against their employer, Home Depot, for unpaid minimum and overtime wages. Home Depot used Kronos, an electronic timekeeping system that captured employees’ actual work time by the minute, however, Home Depot then rounded its non-exempt employees’ total daily work time to the nearest quarter hour. Although an analysis of the time and payroll records established that, on a class-wide basis, Home Depot’s rounding resulted in wage overpayments in almost half of all pay periods, the analysis reflected that one of the plaintiffs in particular was, over time, underpaid by 470 minutes (the other plaintiff’s appeal was dismissed because the records showed she was overpaid as a result of the rounding policy). Home Depot moved for summary judgment, arguing under prior precedent (See’s Candy Shops, Inc. v. Superior Court) that its time rounding practice was neutral on its face and as applied and therefore lawful.
Unfortunately for Home Depot, based on the facts presented, the Court of Appeal ruled that Home Depot had not met its burden to show that employees were properly compensated for all time worked, explaining “. . . Home Depot captured the exact number of minutes that [plaintiff] worked for every shift but, due to its quarter-hour time rounding policy, he was not paid for all those minutes. Based on this record, we determine that Home Depot, in relying on its quarter-hour time rounding policy, fails to meet its burden to show that there is no triable issue of material fact regarding whether [plaintiff] was paid for all the time he worked.” The court further stated, “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 emphasized that its decision is limited to the particular facts of the case and acknowledged that its decision does not reach other issues, such as whether neutral rounding is permissible due to an inability to capture the actual minutes worked by an employee or whether an employer who has the ability to capture an employee’s actual minutes worked is required to do so. The court invited the Supreme Court to “review the issue of neutral time rounding and to provide guidance on the propriety of time rounding by employers, especially in view of the ‘technological advances’ that now exist which ‘help employers to track time more precisely’.”
While Camp v. Home Depot does not foreclose the use of rounding altogether, it creates a significant risk of exposure for employers whose timekeeping systems can track time to the minute and it signals a growing hostility towards time rounding practices in general. In light of the Camp decision, employers whose timekeeping systems record time worked to the minute should cease any rounding practices, which may result in a potential wage underpayment.
