Timekeeping Issues: Can Employers Round Employees’ Punch In/Out Times by the Nearest Tenth?

Timekeeping...you already know that all California employers are required to keep copious records of an employee's time in and out for purposes of paying wages and overtime, and ensuring that meal periods are taken. A common and long-standing practice in timekeeping is to round to the nearest tenth of an hour. Recently, this practice was called into question in the case of See's Candy Shops, Inc. v. Superior Court, (2012) D060710.

The California Court of Appeal, Fourth District, recently held that employers are entitled to use a timekeeping policy that rounds employee punch in/out times to the nearest one-tenth of an hour if the rounding policy is "fair and neutral on its face," and "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." This is good news for employers.

See's Candy uses a timekeeping software called Kronos to record its employees' work hours. The punch shows the actual time, to the minute, when the employee clocks in. See's uses a nearest-tenth policy, wherein in and out punches are rounded (up or down) to the nearest tenth. For example, if the employee punched in at 7:58 a.m., the punch would be rounded up to 8:00 a.m. If the employee clocks in at 8:02 a.m., the punch would be rounded down to 8:00 a.m.

The plaintiff in the underlying case, Silva, alleged via a class action that she and other employees were not paid for all hours worked because of this nearest one-tenth policy. The Fourth Appellate District disagreed, reasoning that "if the policy is fair and neutral on its face and does not result in a failure to compensate employees for all of the time they have actually worked," then the one-tenth rounding policy is acceptable.

To reach this opinion, the Appellate Court explicitly adopted the standards used by the U.S. Department of Labor (DOL) and California Division of Labor Standards Enforcement (DLSE) to analyze time rounding policies. Based on these state and federal regulatory agencies' recommended policies, the Court explained that "if the employer applies a consistent rounding policy that on average favors neither overpayment nor underpayment, it complies with the DOL regulation. On the other hand, if the policy systematically undercompensates employees by, for example, always rounding down, it does not comply."

It is important to note that all the Appellate Court held in this case is that the one-tenth rounding policy is not a per se violation of California Labor laws. The Court specifically stated that it was not ruling on whether the general blanket use of rounding policies is legal. The take away from this case is that employers need to review their current timekeeping policies to ensure that the policies are "facially fair and neutral" and that the policies adequately compensates employees for all of the time that they have worked.