California Employers, a Well-Rounded Time-Keeping Policy is No Longer Good Policy

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Once in a while, the California Supreme Court makes a ruling which declares unlawful an employment practice previously perceived as lawful. Today, the California Supreme Court in Donohue v. AMN Services, LLC held that rounding practices may not be used when recording meal breaks.

Some employers use timekeeping systems that round employees’ work hours to the nearest five minutes, or one-tenth of an hour, which can potentially make it easier for payroll purposes. The California Court of Appeal previously ruled that a rounding practice is generally permitted provided it is used in a fair and neutral manner (meaning, that over time, it did not result in a loss to employees).

Enter today’s decision:

Assuming it could lawfully utilize rounding practices, AMN rounded employee punch times up to the nearest 10-minute increment. AMN also used this practice for recording meal breaks. For example, if an employee clocked out for lunch at 11:02 a.m. and clocked back into work at 11:25 a.m., AMN’s system would record the time punches as 11:00 a.m. and 11:30 a.m. Although the actual meal period was 23 minutes, the system would have recorded the meal period as 30 minutes.

Similarly, if an employee clocked in for work at 6:59 a.m. and clocked out for lunch at 12:04 p.m., the system would round the time punches to 7:00 a.m. and 12:00 p.m. In this case, the actual meal period started after five hours and five minutes of work, but the system would have recorded the meal period as starting after exactly five hours of work.

In April 2014 Plaintiff filed a class action lawsuit alleging, among others, AMN failed to provide compliant meal breaks. Plaintiff filed a motion for summary adjudication as to the meal period claim, arguing AMN’s rounding policy violated the Labor Code with respect to compliant meal breaks and relied on expert evidence which suggested that “the use of Team Time resulted in … 40,110 short lunches and 6,651 delayed lunches during the [relevant time period], which totaled $802,077.08 [in premium wages].”

AMN filed a cross-motion for summary adjudication on the meal period claim and argued there was no evidence of a uniform policy or practice to deny meal breaks and relied, in part, on expert testimony stating AMN’s rounding policy was fair and neutral.

The trial court granted AMN’s motion and the Court of Appeal affirmed. The Supreme Court granted review to address two questions relating to Plaintiff’s meal break claim:

  • whether an employer may properly round time punches for meal periods, and
  • whether time records showing noncompliant meal periods raise a rebuttable presumption of meal period violations.

The Supreme Court held rounding practices violated California’s meal break provisions, and that records showing non-compliant meal breaks give rise to a rebuttable presumption of meal break violations.

Rounding Practices Cannot be Applied to Meal Periods

The California Supreme Court held that “the practice of rounding time punches for meal periods is inconsistent with the purpose of the Labor Code provisions and the IWC wage order.” To illustrate its point, the Court provided the following example:

An employee … is provided with a 21-minute lunch from 12:04 p.m. to 12:25 p.m. Under AMN’s timekeeping system, which rounded time punches to the nearest 10-minute increment, the lunch would have been recorded as a 30-minute lunch from 12:00 p.m. to 12:30 p.m. In that scenario, an employee would have lost nine of the 30 minutes — or almost a third of the time — to which he or she was entitled, and [the timekeeping system] would not have flagged the lunch as a meal period violation. Small rounding errors can amount to a significant infringement on an employee’s right to a 30-minute meal period…”

The Court reasoned that even a relatively minor infringement on meal periods can unduly burden employees:

Forcing employees to work through their meal periods not only causes economic burdens in the form of extra work but also noneconomic burdens on the employees’ health, safety, and well-being… within a 30-minute timeframe, a few minutes can make a significant difference when it comes to eating an unhurried meal, scheduling a doctor’s appointment, giving instructions to a babysitter, refreshing oneself with a cup of coffee, or simply resting before going back to work.

This is why a premium pay is required for any violation, no matter how minor.

Therefore, the Supreme Court held that a policy that permits employers to discount minutes from meal breaks is at odds with California law and the requirement to pay a premium wage for meal period violations.

Time Records Showing Noncompliant Meal Periods Raise a Rebuttable Presumption of Meal Period Violations

The Supreme Court held that when an employee’s time records show a noncompliant meal break a rebuttable presumption of a meal period violation arises. The rebuttable presumption essentially imposes upon the employer the burden of proving no violation occurred. Employers can rebut the presumption by presenting evidence that employees were compensated for noncompliant meal periods or that they had in fact been provided compliant meal periods during which they chose to work.

In a helpful “tip” the Supreme Court held that the “rebuttable presumption does not require employers to police meal periods. Instead, it requires employers to give employees a mechanism for recording their meal periods and to ensure that employees use the mechanism properly.”

Conclusion

Similar to a recent decision concerning Starbucks’ time-recording practices (which we previously wrote about here), the Supreme Court’s holding is a warning to California employers: Accurately record employee work time to the minute!

Employers should review their time keeping practices and consult with legal counsel if the practices do not accurately record actual work hours. These changes may go a long way in defending or even preventing costly wage and hour lawsuits.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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