While most employers now use computerized timekeeping and payroll systems, many “round” employees’ time, a practice originating in olden days when time and pay calculations were done by hand.  But is this practice legal?  According to a recent California Court of Appeal decision, See’s Candy Shops, Inc. v. Superior Court, 210 Cal. App. 4th 889 (2012), the answer is an emphatic (and delicious) “yes!” Well, sometimes.

What is Rounding?  Rounding of time comes in various forms. The most common method is to round an employee’s clock-in and clock-out times to a time segment such as one-tenth of an hour or one-quarter of an hour.  For example, under quarter-hour rounding, an 8:57 clock-in time would be rounded to 9:00 (resulting in the loss of 3 minutes of paid work time for the employee), whereas a 9:06 clock-in time would be rounded to 9:00 as well (resulting in a gain of 6 minutes of paid work time for the employee). 

What do the Feds Think?  Federal law has long allowed an employer to use a neutral practice of rounding an employee’s time punches, up or down, as long as the overall effect of the practice doesn’t result in underpaying employees for their time. 29 C.F.R § 785.48(b) states that an employer may round timeclock entries provided that the rounding “will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked.”  Of course, the phrase “over a period of time” adds an element of ambiguity to the regulation, but in practice, thus far, federal courts have held that so long as the rounding system in place is even-handed (i.e., it applies the same rules to adding and subtracting time), it is legal.

Plenty of Candy to go ‘Round  California state law, however, had been silent on rounding until the See’s Candy decision, and employers were frequently sued by employees who contended that they were not being compensated for all of their time worked.  In See’s Candy, the employer used timekeeping software that required employees to clock in at the beginning and out at the end of their shifts.  The timekeeping system used by the company rounded all time entries to the nearest tenth of an hour.

A former retail sales employee sued See’s on behalf of herself and others, claiming that the time-rounding practice failed to pay employees for all hours worked.  The company claimed any unpaid amounts were de minimis (too trivial to matter) and that the rounding policy was in line with federal and state law.  But the trial court granted summary judgment for the employee, leading See’s to seek immediate relief from the Court of Appeal. 

Employees Get Their “Just Desserts”  The appeals court reversed and found the rounding policy to be lawful.  Extensively referencing the federal rounding standard, the court held that a rounding policy is permissible under California law if it is “fair and neutral” on its face and does not result in the underpayment of earned wages over a period of time. 

So what does See’s Candy mean for California employers?  At the most basic level, the case is significant because means that employers finally can rest assured that rounding, at least in theory, is permissible.  As any employer operating in the state is well-aware, California’s laws regulating the workplace are often arbitrary and vague, so to the extent that See’s Candy provides an element of certainty to the playing field, it should be welcomed.  Further, this case specifically addressed a tenth-of-an-hour practice.  This should by no means serve as a guarantee that other rounding practices, such as quarter hours, will be viewed as favorably.

Workplace Solutions:  All employers who engage in rounding should be vigilant in ensuring that their rounding system is evenhanded and does not result in “lost time” for their employees.   An analysis of the round practice is recommended to determine whether there are any discrepancies in practice that would invalidate the evenness of the system.  For example, if employees are constantly clocking in so they lose seven minutes of time every single day but never gain time, this system although appearing to be fair, could be determined improper in your particular workplace.

Further, until the true impact of See’s is known, we recommend utilizing a system that continues to track the exact time-in and time-out entries so you can continuously audit your system to see whether it advantages or disadvantages employees overall.  These punches can also help in case of a legal challenge for your rounding system.

We recommend consulting with counsel before implementing a new rounding system or working with counsel to ensure a current rounding practice is not even accidentally disadvantaging employees.

By Chris Crosman, Nicholas Rosenthal, and Laura Waluch