February 26, 2021

California Supreme Court Rejects Use of Rounding Policies for Meal Periods

Today, the California Supreme Court held that employers cannot use the practice of rounding time punches in the meal period context, and that unrounded time records that show noncompliant meal periods raise a rebuttable presumption of meal period violations, including at the summary judgment stage. Donohue v. AMN Services, LLC, No. S253677 (February 25, 2021). 

Until April 2015, AMN Services, LLC, a healthcare services and staffing company that recruits nurses for temporary contract assignments, used an electronic timekeeping system that rounded time punches to the nearest 10-minute increment. This rounding occurred for both the employees time punch at the start/end of their shift and the start/end of any meal period. The plaintiff, a former employee, filed a class action lawsuit alleging that AMN improperly rounded time punches for meal periods and, thus, failed to pay premium wages for noncompliant meal periods, among other claims.

In the trial court, plaintiff and AMN filed cross-motions for summary adjudication of the meal period claim based on the rounding issue. The plaintiff argued, in part, that the rounding policy deprived employees of premium pay pursuant to Labor Code section 226.7 for technically non-compliant meal periods which, after applying the rounding policy, appeared to be complaint.  Relying on the Court of Appeals decision in See’s Candy Shops, Inc. v. Superior Court, 210 Cal. App. 4th 889 (2012), among other cases, AMN argued, in part, that its practice of rounding meal period times was lawful because it was facially neutral and, over time, actually resulted in the overcompensation of wages to the class. The trial court granted AMN’s motion and denied Donohue’s motion, reasoning that though no case has ever applied rounding to meal periods, “the rationale behind allowing rounding for work time would be the same for meal break time.”  The trial court also found that AMN’s rounding policy fairly compensated employees over time. 

The Court of Appeal affirmed, agreeing with the trial court’s reasoning. The court determined that rounding meal period time punches was not prohibited by the plain text of the California Labor Code or the relevant Industrial Welfare Commission Wage Order, and that AMN’s rounding policy was neutral on its face and as applied, as required by California Law. The court rejected the plaintiff’s arguments that rounding meal period time punches would eviscerate employees’ statutory right to full 30-minute meal periods, that the policy did not properly pay premium wages for meal period violations, and that the time records showing missing, short, or delayed meal periods give rise to a rebuttable presumption of meal period violations. In the court’s view, this last argument applied only at the class certification stage, not at the summary judgment stage.

The California Supreme Court granted review and reversed the judgment of the Court of Appeal.  The court considered 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. 

On the first question, the court clarified that the question is not whether the rounding policy resulted in the proper compensation of employees for all time worked, but whether the policy resulted in the proper payment of premium wages for meal period violations. The court concluded that it does not. First, the court explained that the Labor Code and the relevant Wage Order confirm that rounding is inappropriate in the meal period context because the meal period provisions are designed to prevent even minor infringements on meal period requirements, and rounding is incompatible with that objective as demonstrated by the fact that an employee receives the full amount of premium pay regardless of whether the meal period was short, late, or not provided at all. Second, the court noted that even relatively minor infringements on meal periods can cause substantial burdens to the employee and that within a 30-minute timeframe, a few minutes can make a significant difference. Finally, the court rejected AMN’s neutral application argument because, while counting slightly fewer minutes one day can be made up by counting a few more minutes another day for the purposes of regular wages, a shorter or delayed meal period one day cannot be offset by a longer or earlier meal period another day, especially when taking into account the premium pay that is triggered for even minor meal period infractions. Here, the court highlighted that the policy never provides employees with premium pay when such pay is not owed, and does not always trigger premium pay when such pay is owed.

On the second question, the court adopted Justice Werdegar’s concurrence in Brinker Restaurant Corp. v. Superior Court, 53 Cal. 4th 1004 (2012) stating there is a rebuttable presumption of liability at the summary judgment stage if time records show noncompliant meal period violations. In Brinker, Justice Werdegar explained that the presumption derives from an employer’s duty to maintain accurate records of meal periods. The court here agreed, concluding that because time records are required to be accurate, it makes sense to apply a rebuttable presumption of liability when records show noncompliant meal periods. The court noted that employers can rebut this 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 the employee chose to work.  

What Employers Should Know

The Donohue decision may have a significant impact on how employers are expected to document an employee’s meal periods and time worked. 

First, the court made clear that employers may not use rounded time for meal periods, so employers utilizing such practices should adjust their record-keeping practices to eliminate any rounding of meal period punch times. However, considering the court’s  discussion about how, in its view, the advancement of technology has diminished the practical advantages of rounding policies, and its comment highlighting the fact that it has never decided the validity of the facially “fair and neutral” rounding policy standard articulated in prior cases such as the See’s Candy case mentioned above, it would seem that future challenges to rounding policies in the context of regular and overtime wages may find a sympathetic audience in the California Supreme Court. Thus, employers that use both an electronic timekeeping system and have a rounding policy for calculating wages should evaluate whether the rounding policy is necessary at all, and consider eliminating the rounding policy altogether.   

Second, while Donohue explicitly affirmed the Brinker rule that an employer does not have to police meal periods and only has to provide the opportunity to take compliant meal periods, the decision nevertheless places the onus on employers to track when and why an employee’s meal period was missed, short, or late. Employers should evaluate their timekeeping policies and capabilities to see what, if anything, can be done to track this information in order to rebut the “presumption” created by technically non-complaint meal periods.

Disclaimer: Please contact your Payne & Fears attorney for current guidance on the subject matter of this article.