Founder and Managing Shareholder
Time rounding is the practice of adjusting an employee’s hours worked (either up or down) to a certain increment of time. Some employers opt to round time entries for increased administrative ease and efficiency in recording and calculating hours worked. The most conservative approach an employer can adopt is to pay per actual time punches and not round at all, but time rounding can be legally compliant under certain conditions.
The California line of cases on rounding off time entries confirm that rounding can be permissible. In the original 2012 published appellate decision, See’s Candy Shops, Inc. v. Superior Court, the California Court of Appeal held that the practice is permissible as long as the net effect is neutral and does not penalize employees. More recently, in July 2018, the California Court of Appeal in AHMC Healthcare, Inc. v. Superior Court, confirmed and elaborated on the rounding rules as follows:
- California follows the federal rule under the Fair Labor Standards Act (FLSA) 29 C.F.R. § 785.48, which permits rounding to the nearest 5 minutes, or the nearest one-tenth or quarter of an hour, so long as the rounding policy 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.
- As adopted by the California Division of Labor Standards Enforcement (DLSE), a rounding policy must be neutral (i.e., just as likely to round up as to round down so that it favors neither the employee nor employer to a significant degree) and consistently applied.
- The rounding policy does not have to result in a net positive amount for every single employee. Accordingly, under a neutral rounding policy some employees will win and some will lose.
- Plaintiffs cannot establish a claim by limiting the class to employees whose time was rounded down. Rather, they must demonstrate that the rounding policy as a whole is not neutral.
Rounding policies and practices are commonly attacked by the Plaintiffs’ attorneys in the form of class action allegations. So, an employer should evaluate for themselves whether it makes sense for their business to round at all.