Leave it to California courts to deliver another setback to employers right before the holidays. Near decade-old rounding rules were just dealt a hearty blow. Employers should immediately reconsider rounding policies.
Employers have long relied on California court holdings that rounding policies that are neutral on their face and neutral as applied are lawful. The progeny of Case law clarified that as much as quarter-hour rounding is permissible, if it doesn’t unfairly deprive employees of time worked. The first rounding domino fell last year when the California Supreme Court held that employers cannot round meal periods. The California Supreme Court also called all rounding policies into question because employers can track working time to the minute, although it did not make a ruling on the issue.
Most recently, the Court of Appeal rejected an employer’s quarter-hour rounding policy, despite its apparent neutral application. Notably, in the over 2.4 million shifts analyzed, 56.6% of employees were paid their actual work time or more, employees gained more minutes than lost in the aggregate, and employees were paid 339,331 more minutes than if the employer did not round time. Yet the Court of Appeal stuck to the California Labor Code’s requirement that all wages must be paid. The Court of Appeal, like the California Supreme Court, focused on employers’ ability to track working time to the minute vs. the marginal benefit of rounding. The Court of Appeal invited the Supreme Court to provide further guidance on the propriety of time rounding.
What This Means for California Employers:
Rounding policies just got riskier, including for future class and PAGA claims. Even where the rounding is proven to be neutrally applied, courts may hold companies liable for any under compensation. Because there is a split between appellate courts, look for the California Supreme Court to weigh in. If they do, it’s likely that rounding will be dealt a death blow. Proceed with caution.