October 25, 2022

California Court of Appeal Calls Time Rounding Into Question

The California Court of Appeal issued a decision this week that could spell the end of time rounding in California. In Camp v. Home Depot U.S.A. Inc., No. H049033, 2022 WL 13874360 (Oct. 24, 2022), the court held that, where an employer can and does track the exact time in minutes that its employees work each shift, and those records show that employees were not paid for all the time they worked, neutral time rounding is not a viable defense.

The Facts

Home Depot used the “Kronos” electronic timekeeping system, which recorded, to the minute, the time that employees punched in and out for their shifts. At the end of each shift, Home Depot applied a quarter-hour rounding to each employee’s total shift time.

Plaintiff filed a class action complaint for unpaid wages, alleging that Home Depot’s rounding policy resulted in employees being underpaid. 

Home Depot moved for summary judgment on the ground that its rounding policy was neutral on its face and neutral as applied, the standard set forth in the seminal time rounding case, See’s Candy Shops Inc. v. Superior Court, 210 Cal. App. 4th 889 (2012). The trial court granted the motion, finding that Home Depot satisfied the See’s Candy standard. 

The Decision

The court of appeal reversed. In doing so, it drew heavily from two recent California Supreme Court cases: Troester v. Starbucks Corp., 5 Cal. 5th 829 (2018) and Donohue v. AMN Services, LLC, 11 Cal. 5th 58 (2021). The court explained that in Troester and Donohue, the California Supreme Court made clear that the Labor Code and IWC Wage Orders mandate that employees be paid for “all” worked performed, and that California’s regulatory scheme for employee compensation is concerned with “even small amounts of worktime . . . [A] few extra minutes of worktime periodically lost due to a purportedly neutral time rounding policy can add up over time.”

What seemed to most motivate the court of appeal, however, was that “the California Supreme Court appears to have called into question the efficiencies historically attributed to time rounding given that advances in technology have enabled employers to more easily and more precisely capture time worked by employees.” In other words, given the growing availability and use of electronic timekeeping systems, like Kronos, that capture exact time records and that work directly with payroll systems, the benefits formerly gained by time rounding are less apparent.

Finding itself bound by these observations from Troester and Donohue, the court held that Home Depot failed to meet its burden on summary judgment: “[I]f an employer . . . can capture and has captured the exact amount of time an employee has worked during a shift, the employer must pay the employee for ‘all the time’ worked.”

The court acknowledged that its holding seriously calls into question the continuing validity of See’s Candy, and with it the formerly “well settled” principle that “neutral time rounding is lawful under California law.” In so doing, it “invite[d]” the state supreme court to “decide[] the validity of the rounding standard articulated in See’s Candy” and to “review the issue of neutral time rounding by employers and to provide guidance on the propriety of time rounding by employers.”

What Employers Need to Know

The Camp decision, while disappointing, is not a surprise. We noted when Donohue came out last year that its reasoning could provide fodder for a wholesale challenge of time rounding, and encouraged employers to at least consider eliminating their rounding policies. 

Time rounding in California is not dead, yet. First, Camp is a decision from the court of appeal, so it cannot overrule See’s Candy, which remains valid law. That said, in circumstances where Camp and See’s Candy conflict, a California trial court is now free to choose which decision to follow, at least until the California Supreme Court weighs in.

Second, the decision is tied to the facts. The Camp court was careful to explain that it was “limit[ing] our analysis to the specific facts before us. We do not reach the issue of whether employer time rounding practices in other contexts comply with California law. For example, we do not address the application of See’s Candy and its progeny to other circumstances, such as when an employer uses a neutral rounding policy due to the inability to capture the actual minutes worked by an employee. We also do not reach the issue of whether an employer who has the actual ability to capture an employee’s minutes worked is required to do so.”

It is not common for a court of appeal to “invite” the California Supreme Court to step in, and we expect that it will accept the invitation. We will be watching this case’s progress very closely to see if and when the California Supreme Court accepts review, and when a decision might be expected.

In the meantime, we encourage employers that have time rounding policies to review them in light of Camp, and to speak with their trusted Payne & Fears counsel to discuss the right path forward.