Yesterday, the California Court of Appeal issued an unprecedented ruling in See’s Candy Shops, Inc. v. Superior Court. The Court ruled that it was permissible under California law for employers to round employee time when calculating actual hours worked. It is the first published California appellate case to address rounding, which has long been a common practice that fuels frequent employer-employee disputes in California.
In reaching its ruling, the Court said that California should adopt the federal Department of Labor (“DOL”) guidelines on rounding. Those guidelines, which have also been expressly adopted by the state’s Division of Labor Standards Enforcement (“DLSE”), state that rounding to the nearest one-tenth or one-quarter of an hour is permissible so as long as, over a period of time, the rounding does not fail to compensate employees for all hours they have actually worked. See 29 C.F.R. § 784.48(b); DLSE Manual §47.1 and §47.2. According to the Court, an employer’s rounding practice is legal if the employer “applies a consistent rounding policy that, on average, favors neither overpayment nor underpayment.”
Not all rounding will be permissble, however. As the Court explained, any rounding practice that “systematically undercompensates employees” is illegal under California law.
The Court applied this standard to See’s Candy Shops’ practice of rounding employee time up or down to the nearest one-tenth increment. The Court emphasized that the relevant issue is whether, over time, this policy of rounding resulted in the actual under-payment of wages to employees. The Court refused to say that See’s Candy Shops’ practice was legal or illegal under the DOL/DLSE guidelines embraced by the Court. That ultimate determination, the Court concluded, must be left to a jury or trial court to decide.
If you are interested in reading the Court’s opinion, it can be found here.