Round is a great shape for balls, oranges, watches and even tires. “Round” should not be anything associated with your employees’ wages. Don’t round wages to the nearest quarter-hour, 10 minutes or even six minutes. Pay an employee for every minute worked.
Rounding wages is as old as the Fair Labor Standards Act (“FLSA”). The FLSA still permits rounding wages provided that the practice is neutral and that over time employees are paid for all hours worked. Many California employers have used rounding practices for years. A state appellate court approved the practice of rounding a decade ago. See’s Candy Shops, Inc. v Superior Court (2012) 210 Cal.App.4th 889. But in subsequent cases, the California Supreme Court heavily criticized any practice that did not result in payment for each minute worked.
Troester v. Starbucks Corp.
In 2018, the California Supreme Court ruled that the federal de minimis doctrine does not apply to state law claims. This doctrine excuses the nonpayment of wages for small amounts of work that are administratively difficult to administer. The Court ruled that state law requires the payment of wages for all time worked.
Donahue v. AMN Services
In 2021, the Court criticized rounding with respect to meal periods. In this case, the employer rounded time to the nearest 10-minute increment. This rounding practice applied to time punches for meal periods as well as time punches at the beginning and end of the day.
The Court provided two examples. In the first, the employee clocked out for lunch at 11:02 am and clocked in at 11:25. The employer would have adjusted the time punches to 11:00 am and 11:30 am showing a 30-minute meal period. However, in actuality, the meal period was just 23 minutes in duration. This is a violation of California meal period rules because the meal period was less than 30 minutes.
In the second example, the employee clocked in at 6:59 am and went to lunch at 12:04 pm. The employer recorded the punches as 7:00 and 12:00 pm, a period of 5 hours before the start of the meal period. In reality, the meal period started 5 hours and 5 minutes after the start of the workday. This too is a violation of the meal period rules because the meal did not start within the first 5 hours of work.
The employer litigated this case, relying on an expert who claimed the rounding practices resulted in an overpayment of 85 hours of work. But the expert did not take into consideration the meal period premiums that would have been due when the employer provided a short meal period or a late meal period. Because meal period rules are designed to prevent even minor infringements, the Court called rounding “incompatible” with state law.
This should have been enough for every California employer to have abandoned the practice of rounding. But not Home Depot.
Camp v. Home Depot
Home Depot continued to round to the quarter-hour, although it tracked each worker’s exact time to the minute. On average, employees were paid more minutes because Home Depot had rounded the time. Plaintiff, however, lost 470 minutes by the rounding practices over a 5-year period.
The Court of Appeal concluded that if an employer can capture, and has captured, the exact amount of time an employee has worked, the employer must pay the employee for all time worked, as required by the California wage orders. The Court of Appeal then invited the Supreme Court to review the issue of neutral time rounding and to provide guidance especially in light of the technological advances that now exist which help employers tract time more precisely.
This is where we are today – waiting for the Supreme Court to hear oral arguments and provide California employers with better guidance.
My Questions
Of course, I am interested in reading what the Court will ultimately rule. But why did Home Depot take this strategy, particularly after the Troester and Donahue cases? Would it not have been easier to pay employees for the exact time they worked? Especially when the plaintiff in the Home Depot case was underpaid by only 470 minutes. Consider the cost of litigation, and the probability of losing before the Supreme Court. Consider the cost of litigation, even if the company prevails.
What is the lesson to be learned? Don’t be the test case in California. Use safe practices and avoid litigation. Here, had Home Depot paid employees based on their actual time punches, it probably could have avoided litigation. That’s a win in my book.
Do You Need More Information?
Do you need help reviewing and auditing your wage and hour practices? Do you need help quantifying potential liability from prior practices? Do you need help developing a plan to rectify past poor pay practices? We are pleased to work with clients who need assistance complying with the complexity of California wage and hour laws.