"Rounding Policy" Wins A Round In The Court Of Appeal
Posted September 7, 2018

Employers may continue to rely on rounding systems that are neutral in policy and in practice. How do you prove neutrality? In AHMC Healthcare, Inc. v. Superior Court (2018), the appellate court gave employers a clue. The court said that the employer may use a time clock that averages to the nearest quarter hour, so long as the employer can show that the rounding policy, over time, results in overcompensation of workers as a whole (even if the employer cannot show that the policy does not undercompensate any particular worker.) The employer was able to show that over a four-year period, the employees benefitted from the rounding policy on an overall basis. Although a slight majority of employees lost a few minutes per shift, the court stated that “where the system is neutral on its face and overcompensates employees overall by a significant amount to the detriment of the employer, the plaintiffs must do more to establish systematic undercompensation.”

As demonstrated in the AHMC case, the California DLSE continues to follow the federal rules, which allow rounding in 5-minute, tenth of an hour, and quarter-hour increments. More specifically, the DLSE Manual says:

  • 47.1 “Rounding.” The Division utilizes the practice of the U.S. Department of Labor of “rounding” employee’s hours to the nearest five minutes, one-tenth or quarter hour for purposes of calculating the number of hours worked pursuant to certain restrictions. (29 CFR § 785.48(b)).
  • 47.2 “Rounding” Practices. As mentioned above, the federal regulations allow rounding of hours to five minute segments. There has been practice in industry for many years to follow this practice, recording the employees’ starting time and stopping time to the nearest 5 minutes, or to the nearest one-tenth or quarter of an hour. Presumably, this arrangement averages out so that the employees are fully compensated for all the time they actually work. For enforcement purposes this practice of computing working time will be accepted by DLSE, provided that it is used in such a manner that it will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked. (See also, 29 CFR § 785.48(b)).

Ultimately, under any rounding practice, to be safest and no matter which lawful increment is selected, the rounding should tend to benefit the employees more often than it benefits the employer. For example, if the employees consistently lose time in favor of the employer, even a facially neutral rounding policy can backfire and expose your company to potential litigation. To avoid this outcome, we suggest doing periodic audits to confirm that the rounding system is working properly under the law.

In addition, make sure that your rounding system does not round meal period time. The employee must get their full 30-minute duty-free and uninterrupted meal period(s). If the meal period time is rounded, it might short the employees, resulting in technical violations of the meal period rules and causing the employer to incur penalties.

If you have any questions regarding rounding policies or practices, or any other employment law matter, please call LightGabler at 805-248-7208 or email at .

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