Pamela Silva brought a wage-and-hour class action against her former employer, See’s Candy Shops, Inc., alleging, in part, that See’s failed to pay her wages for all hours worked because the See’s timekeeping system rounded employee time entries to the nearest tenth of an hour/nearest six minutes. In response to the complaint, See’s alleged that its use of rounding was consistent with state and federal law “permitting employers to use rounding for purposes of computing and paying wages and overtime.”
Silva sought an order that the rounding policy was unlawful because there was no statutory or case authority expressly permitting it. Silva also argued that rounding violates Labor Code Section 204, which generally requires an employer to pay an employee “all wages” every two weeks and Labor Code Section 510, which requires payment for “any work” after eight hours in a work day or 40 hours in a work week.
The Court of Appeal rejected Silva’s contentions and 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.”
The Court noted that Labor Code Sections 204 and 510 do not expressly or implicitly prohibit rounding, the federal regulations permit rounding and the California Division of Labor Standards Enforcement has long recognized rounding as an acceptable industry practice. Accordingly, the Court refused to endorse a rule that conflicts with federal law and industry practice. The Court stated, “[t]he policies underlying the federal regulation — recognizing that time-rounding is a practical method for calculating work time and can be a neutral calculation tool for providing full payment to employees — apply equally to the employee-protective policies embodied in California labor law.”
What this means for California employers is that a timekeeping system cannot always round (up or down) in such a way that benefits only the employer. The rounding policy should round both up and down from a midpoint so that over time, the rounding averages out in such a way that each employee is paid for all time actually worked. According to the Court, “[a]ssuming a rounding-over-time policy is neutral, both facially and as applied, the practice is proper under California law because its net effect is to permit employers to efficiently calculate hours worked without imposing any burden on employees.”