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Watching the Clock: California Appellate Court Affirms Rounding Rules

By: Kate Gallen

Recently, the California Court of Appeals affirmed employer-timekeeping practices that round employee work hours to the closest quarter hour are lawful when neutrally applied. In AHMC Health Care, Inc. v. Superior Court, the court interpreted a federal regulation, 29 C.F.R. § 785.48, which permits employers to round employee worktime in a “manner that will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked.” The court also relied on a U.S. Ninth Circuit Court of Appeals decision, Corbin v. Time Warner Entertainment-Advance/Newhouse Partnership, which we previously blogged about here.

AHMC Health Care’s expert witness evaluated data over a four year period time period from three perspectives: (1) the percentage of employees who gained time compared to the percentage of employees who lost time when the employer “rounded” their time; (2) the percentage of employee shifts that were rounded down compared to the number of shifts that were rounded up; and (3) whether employees were paid for more or less time overall as a result of the employer’s time rounding practice.  Altogether, the expert’s evidence showed that even though 51% of employees had time taken away because of the employer’s rounding system, the employer ultimately paid employees 5,254 extra hours of work because of the rounding system. 

The court rejected the employees’ arguments that the employer’s rounding system was not neutral since 51% of employees had time taken away.  Instead, it found that only a bare majority of employees had time taken away, and the employer overcompensated employees on the whole. The court also found that a rounding analysis should not be conducted on an employee-by-employee basis.  A rounding system does not become unlawful simply because some employees are undercompensated, but instead, the analysis should be designed to determine overall whether the practice is neutral. 

For employers that use a rounding system, this case provides a helpful roadmap for evaluating whether the rounding system passes muster.  Employers must ensure any rounding system is neutral on its face, meaning (1) it rounds time both up and down and (2) applies to all hourly employees. Any rounding system must also be neutral in practice, meaning it does not always benefit only the employer or the employee.  Employers with questions regarding rounding systems would do well to consult with competent counsel to ensure compliance with state and federal law.