In an Advisory earlier this year, we reported that a California court had held that rounding times on employee timecards to the nearest six minutes violated state law. The California Supreme Court ordered review of that decision, and the appellate court has just issued a new opinion that reverses the prior decision. As hoped and expected, the court essentially endorsed the rounding practices authorized by federal law and utilized by many employers.
As you know, employers are required to maintain records that reflect the precise times at which their non-exempt employees begin and end work each day, as well as the precise times at which they begin and end their meal periods. In order to comply with their obligation, most employers require non-exempt employees to record the times at which they start and stop work each day. Some employers utilize electronic timekeeping software, while others utilize mechanized time clocks or timecards that are completed by hand. Regardless of the method they utilize to track the time worked by non-exempt employees, however, employers are often confronted with time records that reflect employees working slightly more or less than they actually worked. An employee scheduled to work from 8:00 a.m. to 4:30 p.m. may clock in at 7:57 a.m., for example, and clock out at 4:29 p.m.
According to the new court decision in See’s Candy Shops, Inc. v. Superior Court, employers may round employee timecards to the nearest tenth of an hour if the rounding policy (a) is fair and neutral on its face and (b) “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 time they have actually worked.” Although the court’s decision specifically endorsed only rounding practices that involve rounding to the nearest tenth of an hour, federal law also authorizes employers to round employee timecards to the nearest five minutes or quarter hour, and the court’s opinion suggests strongly that employers may utilize five-minute or 15-minute increments for rounding as well as six minute increments, as long as they use the same increment consistently.
The See’s Candy decision endorses the rounding of employee timecards for payroll purposes, but employers should be careful to assure that they round in an even-handed manner and that, over time, they fully compensate employees for all time they actually spend working. Employers should note that the decision, while intended to endorse rounding practices, could create some unintended complications with its requirement that employees be paid for all time they actually spend working. Employers may not be able to determine with certainty whether employees were paid for all time they worked until well after paychecks have been issued, so it is important to analyze rounding policies carefully at their inception to minimize the risk of underpayment and potential liability in the future.
The See’s Candy decision is welcome news for employers in general, but employers who utilize rounding practices should nevertheless review them carefully to assure that they are consistent with the standards set by the court in its recent opinion. If you have any questions about the rounding of time records or any other issue relating to employment law, please contact one of our attorneys:
Daniel F. Pyne III
Richard M. Noack
Ernest M. Malaspina
Erik P. Khoobyarian