A few days ago, the California Supreme Court issued an opinion ruling that employers are not permitted to round an employee’s time punch for meal periods. (Donohue v. AMN Services, LLC, Cal. Supreme Court Case No. S253677.) Prior to this decision, several California appellate courts held that an employer is entitled to use a rounding timekeeping policy if the policy is “fair and neutral” on its face and it is used in a manner that will not result, over time, in failure to compensate employees for all the time they have actually worked.[1] The California Supreme Court, however, narrowed this rule and held that while employers are generally permitted to round an employee’s time punches at the start and end of an employee’s shift, employers are not permitted to round an employee’s time punches for meal periods in the same manner.

Facts

AMN Services, LLC (“AMN”) a healthcare services and staffing company that recruits nurses for temporary contract assignments, and which used an electronic timekeeping system that rounded time punches to the nearest 10-minute increment. For example, if an employee clocked out for lunch at 11:02 a.m. and clocked back in after lunch at 11:26 a.m., each of the employee’s time punches was rounded to the nearest ten minute increment, resulting in official time punches of 11:00 a.m. and 11:30 a.m., respectively. AMN used the rounded time rather than the actual punch time to determine compliance with meal periods. The plaintiff, a former employee, filed a class action lawsuit against AMN alleging various wage and hour violations, including claims for meal period violations. With respect to the meal period claims, plaintiff argued that AMN improperly rounded time punches for meal periods and thereby deprived plaintiff of premium wages for noncompliant meal periods.

Procedural Background

Both plaintiff and AMN filed motions for summary adjudication at the trial court level. The plaintiff argued that AMN’s rounding policy should not be applied to meal periods and that plaintiff was entitled to premium wages for noncompliant meal periods. AMN, relying on See’s Candy Shops, Inc. v. Superior Court, argued that AMN’s rounding policy of meal period times was lawful because it was facially neutral and, over time, resulted in the overcompensation of wages to employees. The trial court sided with AMN and ruled that AMN’s rounding policy complies with California law. The trial court reasoned that AMN’s rounding policy fairly compensated employees over time and that “the rationale behind allowing rounding for work time would be the same for meal break time.”

The Court of Appeal affirmed the trial court decision and agreed with the trial court’s reasoning. The court held that the plain text of Labor Code section 512 and Wage Order No. 4, which govern meal periods, does not prohibit rounding. The court further explained that rounding “is a practical method for calculating worktime and can be a neutral calculation tool for providing full payment to employees” and that no case law suggests rounding does not apply to meal periods.

California Supreme Court Analysis

The California Supreme Court granted review and reversed the Court of Appeal judgment. The court addressed the following two questions: (1) whether an employer may properly round time punches for meal periods; and (2) whether time records showing noncompliant meal periods raise a rebuttable presumption for meal period violations.

As to the first question, the court clarified that the question is not whether AMN’s rounding policy resulted in the proper compensation of employees for all time worked, but whether AMN’s rounding policy resulted in the proper payment of premium wages for meal period violations. The court concluded that it is improper for an employer to round time punches for meal periods.

The court explained that the practice of rounding time punches for meal periods is inconsistent with the purpose of the Labor Code provisions and the applicable IWC wage order because the laws governing meal periods are designed to prevent even minor infringements. The court provided the following example to illustrate that small rounding errors can amount to a significant infringement on an employee’s right to a 30-minute meal period:

“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…”

The court noted that by requiring premium pay for any meal period violation, no matter how minor, the meal period provisions make clear that employers must provide compliant meal periods. As a result, the court decided that rounding is incompatible with the meal period provisions. Further, the court explained that even relatively minor infringements on meal periods can cause substantial burdens to the employee and, within a 30-minute timeframe, a few minutes can make a significant difference.

As to the second question, the California Supreme Court held that time records showing noncompliant meal periods raise a rebuttable presumption of meal period violations at summary judgment. The court explained that the rebuttable presumption derives from an employer’s obligation to maintain accurate meal period records. Thus, the court held that when meal period records are noncompliant on their face, the burden is on the employer to prove that an employee received compliant meal periods.

The court noted that 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.

The court provided helpful guidance to employers holding 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

Although this opinion involved a rounding prohibition as applied to meal period time records, the California Supreme court hinted that in light of advances in technology, rounding policies in general may be considered impractical in the near future. The Court stated in dicta, “As technology continues to evolve, the practical advantages of rounding policies may diminish further.” NavBat encourages employers to review their timekeeping policies and systems to ensure compliance with the recent California Supreme Court opinion. Please do not hesitate to contact NavBat to discuss how your business can accurately record employee work time and prevent costly wage and hour lawsuits.

[1] See’s Candy Shops Inc. v. Superior Court (2012) 210 Cal.App.4th 889, 907