In See’s Candy Shops, Inc. v. Superior Court the court addressed whether an employer’s policy of rounding employee’s time clock entries to the nearest tenth of an hour. See’s Candy’s policy rounded employees’ time entries either up or down to the nearest tenth of an hour in its Kronos time keeping system. For example, if an employee clocked in at 7:58 a.m., the system rounds the time to 8:00 a.m., and if the employee clocked in at 8:02 a.m., the system rounds down the entry to 8:00 a.m.
Plaintiffs challenged this rounding policy by arguing that this policy prevented employees from receiving all of their wages twice a month as required by California law. The court noted that even though California employers “have long engaged in employee time-rounding, there is no California statue or case law specifically authorizing or prohibiting this practice.” See’s Candy argued that given this lack of clear authority on the issue, courts should adopt the federal standard, which is also used by California’s Division Labor Standards Enforcement (“DLSE”), which allows rounding.
The court agreed that time entry rounding is permissible under California law:
Relying on the DOL rounding standard, we have concluded that the rule in California is that an employer is entitled to use the nearest-tenth rounding policy if the rounding policy is fair and neutral on its face and ‘it 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.’ (29 C.F.R. § 785.48; see DLSE Manual, supra, §§ 47.1, 47.2.)
See’s Candy presented evidence that across all of its employees the rounding policy actually resulted in a total gain of 2,749 hours for the class of employees involved in the litigation. Therefore, the court held that the rounding policy that rounded both up and down from the midpoint of every six minutes did not result in a loss to the employees.
It is important to note the limitation of this holding. This case involved clear evidence, presented in the form of an expert witness, establishing the effect on the total time paid to the employees did not result in a loss to the employees. Also, the rounding policy would round both up and down. Had the policy only rounded in favor of the employer, that would have violating the rule established in this case. Employers utilizing rounding for payroll must still do so with caution. For example, there should be periodic audits to ensure the effect of rounding does not favor the employer over a period of time. The opinion can be read here: See's Candy Shops, Inc. v. Superior Court.