October 27, 2022 • Shirley A. Gauvin
Category: Legal Updates
On October 24, 2022, the Sixth District issued a decision in in Camp v. Home Depot, handing employees a major win in the wage and hour arena by holding that Home Depot’s practice of rounding hourly employees’ total daily worktime to the nearest quarter hour, rather than using the actual worktime recorded by Home Depot’s timekeeping system “Kronos.” The Court found the rounding resulted in the failure to pay employees for all time worked. Plaintiffs Camp and Correa filed a putative class action for unpaid wages and unfair competition, and Home Depot moved for summary judgment on the basis that the rounding policy was neutral on its face, neutral as applied, and lawful under See’s Candy Shops, Inc. v. Superior Court (2012) 210 Cal.App.4th 889 (See’s). For the past ten years, See’s has been cited in support of the rule that rounding is permissible if it “is neutral on its face and is used in such a manner that it will not result, over a period of time, in failure to compensate employees properly for all the time they have actually worked.” Granting summary judgment, the trial court reasoned that it could not disregard the binding appellate authority of See’s.
On appeal, Plaintiff Correa conceded she did not lose any wages due to the rounding policy, so her appeal was dismissed. Plaintiff Camp argued California law does not permit rounding that results in an employee failing to be paid for all time worked, and that Home Depot could not dispute that it recorded exact time worked in minutes, which showed he was not paid for all time worked - in 5+ years, he suffered a net loss of 470 minutes, or 7.83 hours, due to rounding. (The undisputed time and pay records showed that for over 2.4 million employee shifts, 56.6% of the time employees were paid for the same or a greater number of minutes than they actually worked as a result of rounding, while employees lost minutes due to rounding on 43.4% of shifts; and in the aggregate, in the ten percent class sample analyzed, employees were paid for 339,331 more minutes (5,656 hours) than if Home Depot did not round time.)
The Court reversed the judgment against Camp and directed the trial court to enter a new order denying Home Depot’s motion. The Court did not decide whether employer rounding practices in other contexts comply with California law, such as where an employer uses a neutral rounding policy due to the inability to capture the actual minutes worked, or whether an employer who can capture actual minutes worked must do so, noting that the California Supreme Court has indicated that in circumstances involving “‘the practical administrative difficulty of recording small amounts of time for payroll purposes,’” and where “neither a restructuring of work nor a technological fix is practical, it may be possible to reasonably estimate worktime.” (Troester v. Starbucks Corp. (2018) 5 Cal.5th 829, 848.)
In See’s, the appellate court observed that “(a)lthough California employers have long engaged in employee time-rounding, there is no California statute or case law specifically authorizing or prohibiting this practice”, but a federal regulation adopted under the Fair Labor Standards Act of 1938 (FLSA; 29 U.S.C. § 201 et seq.) permits time-rounding. (See’s Candy, supra, at p. 901.) The rationale in See’s was that in some industries, particularly where time clocks are used, there has been the practice of recording the employees’ starting/stopping time to the nearest 5 minutes, one-tenth or quarter of an hour, the presumption being that this arrangement averages out so employees are fully compensated for all the time worked. It was also a practice that had long been adopted by employers throughout the country so it was reasonable for the court to construe the requirements of the California wage law consistent with the FLSA. Thus, the Court in See’s held that “he rule in California is that an employer may use the nearest-tenth rounding policy if it is fair and neutral on its face and used in such a manner that it will not, over time, fail to compensate the employees for all time worked.
The Court in Camp explained that in the ten years since See’s was decided, other Courts of Appeal have found time rounding lawful under California law. However, in Troester v. Starbucks Corp., the California Supreme held that the federal de minimis doctrine did not apply to state law claims for unpaid wages. (Id. at 834-835.) The Court explained that “(f)ederal regulations provide a level of employee protection that a state may not derogate. Nevertheless, California is free to offer greater protection,” and cautioned against “confounding federal and state labor law”, explaining “that where the language or intent of state and federal labor laws substantially differ, reliance on federal regulations or interpretations to construe state regulations is misplaced.” (Id. at 839-840.) The Court concluded that although California itself “has a de minimis rule that is a background principle of state law,” the rule “is not applicable to the regularly reoccurring activities” and does “not allow employers to require employees to routinely work for minutes off the clock without compensation.” (Id. at 848.) In other words, California is “indeed concerned with ‘small things’” (Id. at 844), and an employer that requires its employees to work minutes off the clock on a regular basis “may not evade the obligation to compensate the employee for that time by invoking the de minimis doctrine.” In fact, what an employer “calls ‘de minimis’ is not de minimis at all to many ordinary people who work for hourly wages.” (Id. at 847.)
Likewise, in Donohue v. AMN Services, LLC (2021) 11 Cal.5th 58, the California Supreme Court addressed the issue of rounding in the context of meal periods, holding that “employers cannot engage in the practice of rounding time punches—that is, adjusting the hours that an employee has actually worked to the nearest preset time increment—in the meal period context.” (Id. at 61.) The court stated, “(s)mall rounding errors can amount to a significant infringement on an employee’s right to a 30-minute meal period.” The court “has never decided the validity of the rounding standard articulated in See’s” and that “even assuming the validity of See’s, a rounding policy in the meal period context does not comport with its neutrality standard.” (Ibid.) Rounding was useful in some industries, particularly where time clocks were used, but technological advances now allow employers to track time more precisely. (Donohue, at 73, observing that the electronic timekeeping system “actually had to take the extra step of converting the unrounded time punches to rounded ones,” that “it (was) not clear what efficiencies were gained from this practice.” (Id. at 74.) The California Supreme Court explained that that “(a)s technology continues to evolve, the practical advantages of rounding policies may diminish further.” (Ibid.)
In Camp, the Court noted that Home Depot used an electronic timekeeping system that recorded the time an employee punched in or out to the minute, including for meals, then Home Depot applied a quarter-hour rounding policy to the employee’s total shift time. In other words, although Home Depot captured the exact number of minutes Camp worked for every shift, due to the rounding policy, he was not paid for all time worked. Home Depot failed to meet its burden to show that there was no triable issue of fact regarding whether Camp was paid for all the time he worked, and the Labor Code and the relevant wage order are designed so that employees are paid for all work performed. (Lab. Code, § 510, subd. (a).)
This decision is supported by California statutes and wage order provisions which are concerned with “small things,” particularly in light “the wage order’s remedial purpose requiring a liberal construction, its directive to compensate employees for all time worked, the evident priority it accorded that mandate notwithstanding customary employment arrangements, and its concern with small amounts of time” (Troester, at 847.) The Court also explained that “(a)bsent convincing evidence of the IWC’s intent to adopt the federal standard for determining whether time . . . is compensable under state law, (the court has) decline(d) to import any federal standard, which expressly eliminates substantial protections to employees, by implication.” (Id. at 839.) Lastly, the Court noted that California Supreme Court has questioned the efficiencies historically attributed to time rounding given technological advancements enabling employers to easily and precisely capture time worked.
Significantly, the Camp Court observed that it has been well settled for nearly a decade that neutral time rounding is lawful under California law in circumstances involving “‘the practical administrative difficulty of recording small amounts of time’” and where “neither a restructuring of work nor a technological fix is practical, it may be possible to reasonably estimate worktime—for example, through … a fair rounding policy—and to compensate employees for that time.” (Troester, at 848.) The Court reversed judgment entered against Camp, and remanded, directing the trial court to vacate the order granting summary judgment and to enter a new order denying the motion as to Camp.
These cases suggest that the application of See’s should be reexamined in circumstances where employee worktime in minutes can and/or has been captured by the employer and, as a result of a quarter-hour rounding system, the employee is not compensated for all actual work time. As an intermediate court, the Court in Camp observed it was bound to apply the law as guided, directed, and interpreted by the California Supreme Court (see Troester and Donohue). Because the California Supreme Court has not directly decided the rounding issue in the particular circumstance of the Camp case, the Sixth District invited the Supreme Court to: (1) decide the validity of the rounding standard articulated in See’s in the circumstances presented in Camp, where the employer can and has captured all time worked and then applies a quarter-hour rounding policy, and (2) to review the issue of neutral time rounding by employers and provide guidance on the propriety of rounding in light of the “technological advances” that assist in accurately tracking time. Until then, cautious employers, to the extent they are able, should utilize a timekeeping system that makes every minute count.
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