California law requires employers to keep accurate records reflecting the hours their employees work. Sometimes the legality of an employer’s “rounding” of timecard entries comes into question.

In a recent decision, a federal court confirmed that a company can round nonexempt employee time to the nearest quarter-hour as long as the practice is neutral on its face and in practice — meaning that it doesn’t favor either the employer or the employee. Further, one minute of uncompensated time is determined de minimus and, thus, is not compensable time.

The 9th Circuit adopted the earlier analysis of a California court in See’s Candy Shops, Inc. v. Superior Court, 210 Cal. App. 4th 889 (2012). In See’s Candy, the court concluded that, under California law, See’s policy of rounding employee timecard entries to the nearest-tenth of an hour was enforceable. The See’s Candy ruling was particularly important because, at that time, there was no legal precedent that explicitly authorized this common practice, a practice that is permissible under federal law and followed by California’s labor agency.

The 9th Circuit affirmation of See’s Candy is a win for California employers. The Ninth Circuit dismissed the employee’s federal and state law wage and hour claims (Corbin v. Time Warner Entertainment-Advance/Newhouse Partnership, 2016 WL 1730403 (9th Cir. 2016)).

Factual Background

The facts of this litigation are surprising given the small amount of money involved.

Andre Corbin worked at the Time Warner Entertainment-Advance/Newhouse Partnership (TWEAN) customer service call center. To prevent off-the-clock work, TWEAN implemented an online timekeeping platform that restricted an employee’s ability to take customer calls until the employee logged into the timekeeping system and then cut off phone access once the employee has logged out. When employees clocked in and out for work and for meal breaks, the system rounded each time stamp recorded to the nearest quarter-hour. The court provided this example:

  • “An employee who clocks in at 8:07 a.m. to begin his workday would see his wage statement reflect a clock-in of 8:00 a.m., rounding his time to the nearest quarter-hour and crediting him with seven minutes of work time for which he was not actually on the clock. Similarly, an employee who clocks out at 5:05 p.m. to end her workday would see her wage statement reflect a clock-out of 5:00 p.m., again rounding her time to the nearest quarter-hour and deducting five minutes of work time for which she was actually on the clock.”

Corbin sued TWEAN, claiming that he was underpaid, including overtime pay, due to TWEAN’s rounding practices (“rounding claim”). As a result of the rounding, Corbin lost $15.02 over a thirteen month period.

Corbin also says he mistakenly opened a computer program on one occasion for one minute of off the clock work for which he was not paid (“logging in claim”).

Rounding Claim

Federal law has long authorized rounding practices that record employee starting and stopping time to the nearest five minutes, one-tenth or nearest quarter of an hour. The law presumes that, over time, the amount of over- and under-payments of rounded wages will average out so employees are fully compensated.

The See’s Candy court “confirmed that the federal rounding rule also applies to state labor claims so long as a company’s rounding over time is neutral, both facially and as applied.”

Corbin challenged TWEAN’s practice, arguing that the rounding policy is invalid unless every employee gains or breaks even each pay period. The court disposed of this argument, stating that the law does not require an individual analysis of each employee’s pay each pay period.

To do so, according to the court, would serve to “wholly invalidate the rounding method as an acceptable form of timekeeping.” An employer’s rounding policy is meant to average out long term, not per pay period. Indeed, if the practice rounded only up or down instead of rounding up and down, the policy would not be neutral on its face.

The court again deferred to the See’s Candy ruling authorizing employers to avoid the complex, mathematical analysis Corbin states is required. Employers who lawfully use the rounding method are not required to engage in a “mini actuarial process” each time they run payroll, according to the court.

A review of Corbin’s own hours showed that he sometimes gained minutes and compensation and sometimes lost minutes and compensation. Over a 13-month period, Corbin was not compensated for a total of three minutes due to the rounding practice, amounting to $15.02 in lost wages.

The court noted that if Corbin had worked a few more pay periods, the compensation total would likely have tilted back in the other direction since Corbin had gained minutes and compensation in the past as a result of the rounding practice. This, according to the court, is exactly how the rounding rules are meant to work, and Corbin was unable to show that, over a period of time, he was not properly compensated for his work.

The court found TWEAN’s rounding policy, over the long term, to be neutral, favoring neither the employer nor the employee. It was just as easy for employees to earn compensation for time they did not work as it was for them to lose money for time they did work, including overtime pay.

By adopting the analysis in See’s Candy, the court held that TWEAN’s rounding practice to the nearest quarter of an hour is consistent with the federal regulation and, more importantly to California employers, enforceable under California law.

Logging In Claim

Corbin also argued that he should be compensated for working in a computer program for one minute on March 19, 2011, before he logged into the TWEAN timekeeping system, thus losing one minute of compensable time.

The United States Supreme Court has found that a few seconds or minutes of work beyond scheduled working hours may be disregarded. It is only when employees must “give up a substantial measure” of employee time or effort that compensation is required. This is generally referred to as the de minimus rule. Courts must consider the following test found in Lindow v. United States, 738 F.2d 1057, (9th Cir. 1984) to determine whether the time is compensable:

  1. The administrative difficulty of recording the additional time;
  2. The aggregate amount of compensable time; and
  3. The regularity of the additional work.

First, the court found that TWEAN would have to double check four time stamps (in and out for the day and in and out for meal breaks) and cross reference time worked the employer could reasonably ascertain for each employee, every day, just in case an employee worked off the clock in violation of company policy. The court found this to be a high administrative burden.

Second, although there is no specific amount of time courts have defined as de minimus, some courts have found 10 minutes de minimus as compared to one minute in Corbin’s case.

Third, one work period of one minute is not “regular” for purposes of determining compensability. The court dismissed the “logging in” claim as well.

Best Practices

  • If you use a rounding policy for calculating payroll, ensure that your policy is reviewed by legal counsel to ensure it is neutral as written and implemented consistently.
  • Ensure employees are notified of your rounding policy.
  • Train supervisors and managers to verify employees do not work off the clock.

Consult counsel if you choose not to pay an employee, even if it appears to be de minimus.

 

Content courtesy of CalChamber’s HRWatchdog.