SUPREME COURT AGREES TO DECIDE TIME-ROUNDING ISSUES
1. The Camp v. Home Depot Decision
On October 24, 2022, a California Court of Appeal decided a time-rounding decision that could be extremely troublesome. In Camp v. Home Depot USA, Inc., 84 Cal. App. 5th 638 (2022), the court opined that no provision in the Labor Code or Wage Orders expressly allows or prohibits time rounding. It observed that the California Supreme Court had not directly decided the precise rounding issues raised in the case before it and determined that the “total time” rounding practices in issue were not permissible.
The court did not stop there. After stating that the rounding of the plaintiff’s total time was inconsistent with public policy, it urged the Supreme Court to address both the narrow rounding issues raised in the Home Depot case and conduct a broader examination of rounding practices allowed in other decisions.
a. Earlier Cases Approved Specific Rounding Practices
The Home Depot decision is at odds with the 2012 decision in See’s Candy Shops, Inc. v. Superior Court, 210 Cal. App. 4th 889 (2012). In See’s the California Court of Appeal held that time rounding policies are lawful under California law if they are neutral on their face and as applied and meet other specified standards. Federal cases throughout the country have also recognized the validity of time rounding practices that meet these standards. Since 2012, numerous courts have followed the See’s Candy decision and applied it in other contexts to a variety of time rounding policies and practices.
The Home Depot court invited the Supreme Court to consider the validity of the rounding standard articulated in See’s Candy where an employer captured all the minutes an employee has worked before applying a quarter-hour rounding policy. It also invited the Supreme Court to address the legality of neutral time rounding by employers and provide guidance on the general propriety of time rounding in view of the “technological advances” that now “help employers to track time more precisely.”
b. The Supreme Court Will Review Rounding
The Supreme Court agreed in February to review the Home Depot decision because the Supreme Court may express views on rounding that reverberate beyond the Home Depot decision itself and touch upon principles established in other cases, including See’s Candy, the case may have broad-ranging significance to all California employers. Furthermore, because the Supreme Court’s decisions ordinarily apply retroactively, employers who utilize rounding practices would be prudent to examine them with their employment counsel as soon as possible.
It bears noting that Richard J. Simmons, Daniel McQueen and Tyler Johnson of Sheppard Mullin have been asked to file an amicus brief with the Supreme Court laying out the employer-side perspective for the California Employment Law Council (“CELC”) and the Employers Group.
The plaintiffs, Delmer Camp and Adriana Correa, filed a proposed class action for unpaid wages against Home Depot USA, Inc. They alleged that Home Depot’s electronic time-keeping system captured each minute worked by employees; however, due to Home Depot’s quarter-hour rounding policy, some employees were paid for less time than reflected in the timekeeping system. In actuality, employees had different personal experiences. For example, Correa was overpaid under Home Depot’s practices while Camp was underpaid.
a. The Rounding System Resulted In Overpayment Of One Plaintiff And Underpayment Of The Other
One of the plaintiffs, Correa, agreed that Home Depot’s rounding system did not cause her to be underpaid. Rather, because it resulted in the overpayment of wages in her case, she dropped her claim. In contrast, according to Home Depot’s own evidence, the other plaintiff, Camp, lost a total of 470 minutes over approximately 4 1/2 years due to the rounding policy. Home Depot moved for summary judgment, arguing that its rounding policy was neutral on its face, neutral as applied, and otherwise lawful under the principles set out in See’s Candy. The trial court agreed and granted Home Depot’s summary judgment motion.
b. The Employee’s Appeal
On appeal, Camp contended that notwithstanding See’s Candy, neither the Labor Code nor the relevant Wage Order authorizes time rounding that results in an individual employee failing to receive compensation for all time worked. Based on the particular facts of the case and in view of the guidance provided by more recent Supreme Court opinions in Troester v. Starbucks Corp., 5 Cal. 5th 829 (2018), and Donohue v. AMN Services, LLC, 11 Cal. 5th 58 (2021), the court of appeal reversed the judgment and directed the trial court to enter a new order denying summary judgment. It concluded that, in relying on its quarter-hour rounding policy, Home Depot did not meet its burden by showing that there was no triable issue of material fact regarding Camp’s claims for unpaid wages where Home Depot tracked the exact time in minutes the employee worked each shift and its records showed that Camp was not paid for all the time he worked. Disregarding principles embraced in other cases, the court looked at Camp’s individual claim and disregarded the fact that his co-plaintiff, Correa, had been overpaid based on the same rounding policy.
c. The Court Limited Its Opinion
The court was careful to limit its analysis and holding to the specific facts before it. It made clear that it did not reach the issue of whether employer time rounding practices in other contexts comply with California law. For example, it did not address the application of See’s Candy and its progeny to other circumstances, such as when an employer uses a neutral rounding policy due to the inability to capture the actual minutes worked by an employee. The court emphasized that it did not reach the issue of whether an employer who has the actual ability to capture an employee’s minutes worked is required to do so.
In order to understand the scope of the court’s decision, it is important to consider the rounding practices that were in dispute, a practice where the employer recorded time to the minute and then rounded total time. Yet, despite the court’s attempt to underscore the limitations on its holding, it can be anticipated that the case will generate uncertainty in the area that will persist until the Supreme Court speaks on the topic.
3. Home Depot’s Rounding Policy
Home Depot presented evidence describing its time-keeping and rounding practices. It utilized an electronic software system, “Kronos,” to record hourly employees’ time punches. Hourly employees punched in and out at the beginning and end of their work shifts, as well as for meal breaks. The Kronos system then captured the punch time through the minute.
Unlike a rounding system that looked at each time punch individually, Home Depot rounded total shift time. Specifically, each employee’s total shift time was rounded to the nearest quarter-hour to calculate his or her pay for that period. When total shift time falls between the quarter hour, a time increment of seven minutes or less is rounded down to the nearest quarter hour, while a time increment of eight minutes or more is rounded up to the next quarter hour. For example, if the total shift time was recorded as six hours and three minutes, the time was rounded down to a total of 6.00 hours. If the total shift time was six hours and eight minutes, the shift time was rounded up to 6.25 hours, i.e., 6 1/4 hours.
Camp worked for Home Depot as a non-exempt employee since March 2015. His time and pay records showed that between March 30, 2015 and October 20, 2020, he worked 1,240 shifts. At various points in time, he gained minutes or lost minutes due to rounding. During the entire period, however, the evidence submitted by Home Depot with its summary judgment motion showed he personally suffered a total net loss of 470 minutes, or approximately 7.83 hours over the 4 1/2 year period, due to rounding.
4. The Court’s Description Of The 2012 See’s Candy Decision
In See’s Candy, the appellate court concluded that employer time rounding policies may be lawful in California. The employer’s timekeeping software system required employees to punch into the system at the beginning and end of their shifts, as well as for lunch breaks. The Kronos punch showed the actual time (to the minute) when the employee punched into the system. Pursuant to the time rounding policy, in and out punches were rounded (up or down) to the nearest 10th of an hour (every six minutes beginning with the hour mark). The time punches were thus rounded to the nearest three-minute mark.
The court of appeal observed that although California employers had long engaged in time rounding, there was no California statute or case law specifically authorizing or prohibiting the practice. It then examined the federal regulations promulgated under the federal Fair Labor Standards Act. Notably, the federal standards had been adopted by the California Division of Labor Standards Enforcement.
The See’s Candy court ultimately held that “the rule in California is that an employer is entitled to use the nearest-tenth rounding policy if the rounding policy is fair and neutral on its face” and “it is used 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.” In the decade since the See’s Candy opinion was filed in 2012, numerous other courts have found time rounding lawful under California law. (It bears noting that the employer in See’s Candy rounded individual time punches. In contrast, Home Depot rounded total shift time.)
5. The Discussion Of Troester v. Starbucks Corp.
Troester was decided in 2018, six years after See’s. The Supreme Court considered an employee’s claim for unpaid wages where the employer required employees to work off the clock several minutes per shift. The Supreme Court held that the federal de minimis doctrine did not apply to state law claims for unpaid wages in the circumstances addressed. The de minimis doctrine may in some circumstances excuse the payment of wages for small amounts of otherwise compensable time upon a showing that the bits of time are administratively difficult to record. The Supreme Court referenced the See’s Candy case in Troester, but did not directly analyze the propriety of employer time rounding.
Even though Troester did not reject the principle of time rounding, the Home Depot court found it probative as to several points. For example, Troester did discuss the aggregate effect of failing to pay an employee for a few extra minutes of work each day because the time can add up. In Troester, for instance, the plaintiff sought payment for 12 hours and 50 minutes of compensable work over a 17-month period, which amounted to $102.67 at a wage of $8 per hour. The Supreme Court also commented that employers are in a better position than employees to devise means to track small amounts of regularly occurring worktime. Further, Starbucks had restructured the work so that employees would no longer have to work before or after clocking out. Finally, the Supreme Court observed that “technological advances” may help with tracking small amounts of time.
6. The Discussion Of Donohue v. AMN Services, LLC
In Donohue, the Supreme Court addressed the issue of time rounding in the specific context of meal periods. It explained that California’s meal period provisions are designed to prevent even minor infringements on meal period requirements, and rounding individual meal punches is incompatible with that objective. In fact, small rounding errors can amount to a significant infringement on an employee’s right to a 30-minute meal period. The court in Home Depot carefully selected passages in Donohue that it believed supported a new view on the permissibility of time rounding, even outside of the meal period context.
7. The Court’s Analysis
After reviewing the caselaw in the area, the Home Depot court began its analysis. It noted that Home Depot chose to pay nonexempt employees, such as Camp, by the hour. Where an employer has agreed to pay compensation, as measured by a unit of time, none of the authorities cited by Home Depot indicates that an employer may round captured work minutes where it results in the failure to pay an employee for all minutes worked. Under the guidance and direction of Troester and Donohue, “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.” Because Home Depot did not show there was no triable issue of material fact regarding the claim for unpaid wages, it should not have been granted summary judgment.
The court observed that it had been well settled for nearly a decade that neutral time rounding is lawful under California law. However, it noted that the Supreme Court has never decided the validity of the rounding standard articulated in See’s Candy. It thus reasoned that the application of See’s Candy should be re-examined in circumstances “where employee worktime in minutes can be captured and has been captured by the employer and, as a result of a quarter-hour rounding system, the employee is not compensated for all actual worktime.
8. Additional Resources
The Supreme Court has agreed to review the Home Depot decision and the question: “Under California law, are employers permitted to use neutral time-rounding practices to calculate employees’ work time for payroll purposes?” It is not yet clear whether it will confine its review to the narrow issues resolved in Home Depot or whether it will examine rounding principles on a broader basis.
Employers that use rounding practices should understand and discuss the significance of the Home Depot decision with their employment attorneys. For more information regarding state and federal laws relating to timekeeping and rounding practices, readers can consult Section 7.18 of the Wage and Hour Manual for California Employers (26th Edition) by Richard J. Simmons of Sheppard Mullin. The new edition of the publication is available from Castle Publications, LLC.To read more articles like this one, subscribe to the ALERT Newsletter today!
About The Author
Richard J. Simmons is a Partner in the law firm of Sheppard, Mullin, Richter & Hampton LLP in Los Angeles. He represents employers in various employment law matters involving litigation throughout the country and general advice regarding state and federal wage and hour laws, employment discrimination, wrongful discharge, employee discipline and termination, employee benefits, affirmative action, union representation proceedings, and arbitrations. Mr. Simmons received his B.A., summa cum laude, from the University of Massachusetts, where he was a Commonwealth Scholar and graduated in the Phi Kappa Phi Honor Society. He received his J.D. from Berkeley Law at the University of California at Berkeley where he was the Editor-in-Chief of the Industrial Relations Law Journal, now the Berkeley Journal of Employment and Labor Law.
Mr. Simmons argued the only case before the California Supreme Court that produced a victory for employers and business in 2018. He was recently recognized as the Labor and Employment Attorney of the Year by the Los Angeles Business Journal and was inducted into the Employment Lawyers Hall of Fame. He has lectured nationally on wage and hour, employment discrimination, wrongful termination, and other employment and labor relations matters. He is a member of the National Advisory Board to the Berkeley Journal of Employment and Labor Law, published by Berkeley Law at the University of California at Berkeley. He was also appointed by the California Industrial Welfare Commission as a member of three Minimum Wage Boards for the State of California.