Many employers utilize rounding systems to as a practical means of calculating wages for hourly employees. In fact, the California Court of Appeal upheld a rounding system to the nearest 15 minutes less than one year ago. (David v. Queen of Valley Medical Center (2020) 51 Cal.App.5th 653, 664-665.) Under such a system, a worker clocking in anytime between 7:53 and 8:07 would be considered to have started work at 8:00. These policies can eliminate complicated hourly calculations and, for some of us, appeal to our innate desire to have numbers end in neat 0s and 5s.
Notwithstanding, the benefits of rounding have slowly deteriorated over time. Modern technology makes it convenient for employees to track their start and stop times down to the minute. Additionally, rounding requires the maintenance of multiple time records per worker – the actual time, and the rounded time used for computing payroll. Finally, whenever a rounding policy is challenged, it considerably raises the costs of defense because employers must demonstrate that the policy is neutral on its face and does not regularly result in the underpayment of wages – a factor that is simply non-existent with straight time systems.
The California Supreme Court may have put the final nail in the coffin to kill rounding policies. In Donohue v. AMN Services, LLC (Appellate Number S253677) the Court overturned the Court of Appeal decision and ruled that rounding policies are inapplicable to meal breaks. This applies both to the time spent on a meal break as well as calculations to determine whether the meal break was timely. For example, a worker who starts working at 7:59 a.m. and takes his or her meal break at 1:00 p.m. would be entitled to a meal period premium, regardless of whether the rounding policy considered that worker to have started working at 8:00 a.m. Similarly, if a worker is required to clock back in from a meal period after only 29 minutes, that worker would also be entitled to a meal period premium even if the system rounds to show the worker took a 30-minute break.
The significance of this ruling will likely extend beyond the meal break raised in Donahue. Based on the California Supreme Court’s logic, it stands to follow that meal period waivers would also be construed based on straight time rather than rounded time. Additionally, straight time would likely apply to determine the number of rest breaks a worker is entitled to each day.
While rounding policies can still be legal for wage calculation, today’s decision adds yet another administrative hurdle in computing not only the rounded time for wage purposes, but the straight time to determine proper compliance with rest and meal breaks. Employers must really ask themselves what benefit they receive from their rounding policies and whether that benefit is worth the mounting risks that a rounding policy can create.