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California Wage and Hour Issues for Employers to Watch in 2023: Is My Time-Rounding System Still Compliant? (US)

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Virtually every employer in California has repeated the mantra of “no off-the-clock work” to its employees. But what about those minutes that are “on-the-clock” but remain unpaid because of rounding practices? Since 2012, when the California appellate court decided See’s Candy Shops, Inc. v. Superior Court, 210 Cal. App. 4th 889 (2012), employers have presumed that so long as their rounding policy was neutral on its face (meaning it rounds time both up and down), and neutral as applied such that over a period of time employees were fairly compensated for all time actually worked, then the system was lawful.

This conclusion was called into question in the recent case of Camp v. Home Depot USA, Inc., No. H049033, 2022 WL 13874360 (Cal. Ct. App., Oct. 24, 2022). Home Depot used a time-tracking system that captured each minute worked, but nonetheless applied a quarter-hour rounding system. Mr. Camp and his co-plaintiff, Adrianna Correa, filed a putative class action for unpaid wages, claiming that the rounding policy resulted in working time that was not paid. However, the statistics presented by the parties in the trial court showed that in the aggregate, employees in the class sample were paid for 5,656 hours more than if Home Depot did not round time. The trial court found the practice facially neutral and neutral as applied, and entered summary judgment for Home Depot based on the test articulated in the See’s case.

Plaintiffs appealed. Notwithstanding the aggregate numbers, Plaintiff Camp had lost a total of approximately eight hours of pay over a more than four-year period as a result of the rounding policy. (Ms. Correa had come out ahead and had no uncompensated time as a result of the rounding policy, so she abandoned her claim for unpaid wages on appeal.) In analyzing the issues, the Court of Appeal began by noting that California wage orders and Labor Code 510 contemplate that employees will be paid for all work performed. The California Supreme Court affirmed this principle in Troester v. Starbucks Corp., 5 Cal. 5th 829 (2018), holding that the “de minimis” rule under the federal Fair Labor Standards Act did not apply in California in cases where employees were required to perform regularly recurring activities without compensation, noting that “small things” add up, and make a difference to many people who work for hourly wages. More recently, in Donohue v. AMN Services, LLC, 11 Cal. 5th 58 (2021), the California Supreme Court concluded that rounding is not appropriate in the meal period context. In Donohue, the court noted that the electronic timekeeping system at issue in that case “actually had to take the extra step of converting the unrounded time punches to rounded ones” and stated that “as technology continues to evolve, the practical advantages of rounding may diminish further.”

Based on this precedent, the Camp court reversed the trial court decision, and concluded that “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.” Having concluded this, the Camp court nonetheless recognized past guidance from the California Supreme Court indicating that in circumstances involving “the practical administrative difficulty of recording small amounts of time for payroll purposes,” and where “neither a restructuring of work nor a technological fix is practical, it may be possible to reasonably estimate worktime,” for example through a fair rounding policy. In view of the technological advances evident in Home Depot’s system, the Court of Appeal explicitly invited the California Supreme Court to weigh in on this issue, and a petition for review has already been filed. In the meantime, unless Camp is reversed, all California employers should be wary of any pay-rounding using time clocks accurate to the minute. Stay tuned for further developments in 2023.

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