ELECTRONIC TIME ROUNDING
If an employer can capture the exact amount of time an employee has worked during a shift, the employer must pay for all time worked, even if it uses a purportedly ‘neutral’ rounding system. Camp v. Home Depot U.S.A., Inc., 84 Cal.App.5th 638, 660 (2022) (review granted Feb. 1, 2023); see also Troester v. Starbucks Corp., 5 Cal.5th 829, 840 (2018) (noting that Wage Orders require employees to be paid ‘for all hours worked’).
The court in Camp clarified that when an employer tracks the exact minutes an employee works but fails to compensate them for all of that time, a neutral rounding policy is not a viable defense. Id. at 644. Furthermore, the California Supreme Court has held that the Labor Code and relevant wage orders require employees to be compensated for all work performed. Id. at 657.
The court in Camp expressly adopted the Supreme Court’s language in Troester, stating:
‘Although time rounding has been incorporated into the Code of Federal Regulations for over 50 years, neither the Labor Code nor any wage order has been amended to recognize [a time rounding exception to the requirement that an employee be paid for all time worked].‘
See Camp v. Home Depot U.S.A., Inc., 84 Cal.App.5th 638 (2022) (review granted Feb. 1, 2023).
The Camp court further noted that the primary purpose of rounding policies is efficiency in timekeeping, particularly in certain industries. However, as technology has advanced, this justification has become less relevant. Id. at 658. When timekeeping systems can track time with precision minute by minute, no legitimate efficiency issues exist to justify rounding policies—regardless of whether they are neutral. Id. at 659-60.
Rounding Compliance & Neutrality
An employer’s rounding policy complies with California law if, on average, the policy does not favor either overpayment or underpayment. See’s Candy Shops, Inc. v. Superior Court, 210 Cal.App.4th 889, 901 (2012). A rounding policy may be lawful if it is neutral both on its face and in practice. Id. at 903. However, if the policy systematically undercompensates employees over time, providing a net benefit to the employer, it may be deemed unfair, non-neutral, and unlawful. See AHMC Healthcare, Inc. v. Super. Ct., 24 Cal.App.5th 1014 (2018).
California’s Rejection of the Federal De Minimis Rule
Most importantly, California does not incorporate the federal de minimis rule into its wage and hour laws or general state law. Even small discrepancies in employee compensation may constitute an illegal practice. Troester v. Starbucks Corp., 5 Cal.5th 829, 841 (2018); see also Camp, supra, at 654-55:
‘Nothing in the language of the wage orders or Labor Code shows an intent to incorporate the federal de minimis rule… Although [the United States Supreme Court’s de minimis rule] has been in place for 70 years and incorporated into federal regulations for over 50 years, neither the Labor Code nor any wage order has been amended to recognize a de minimis exception.‘
Thus, any bias or discrepancy—no matter how small—may establish an illegal wage practice. Id. at 841.
California favors compensating employees for all time worked:
[The employee] seeks payment for 12 hours and 50 minutes of compensable work over a 17-month period, totaling $102.67 at a wage of $8 per hour. That amount could cover a utility bill, a week’s worth of groceries, or a month’s bus fares. What [the employer] calls ‘de minimis’ is far from insignificant for many ordinary people who rely on hourly wages.
Troester, supra, at 847-48.
In the 2021 Donohue v. AMN Services, LLC decision, the California Supreme Court overturned the Court of Appeal’s ruling and held that:
“Employers cannot engage in the practice of rounding time punches—that is, adjusting the hours an employee has actually worked to the nearest preset time increment—in the meal period context.”
The Court reasoned that California’s meal period provisions are intended to prevent even minor infringements on meal period requirements, and rounding practices are incompatible with that objective. Additionally, the Court stated:
“Time records showing noncompliant meal periods raise a rebuttable presumption of meal period violations, including at the summary judgment stage.”
How Rounding Affected Meal Periods in Donohue
In Donohue, the employer used an electronic timekeeping system called “Team Time,” which rounded punches to the nearest 10-minute increment. For example:
- If an employee clocked out for lunch at 11:02 AM and back in at 11:25 AM, Team Time would round the recorded punches to 11:00 AM and 11:30 AM, inaccurately reflecting a 30-minute meal period instead of the actual 23 minutes taken.
- If an employee clocked in for work at 6:59 AM and clocked out for lunch at 12:04 PM, Team Time would round the punches to 7:00 AM and 12:00 PM—meaning the actual meal period would have started five minutes after the five-hour work limit required under California law.
The Court determined that the employer relied on Team Time’s rounding system in a way that could obscure meal period violations and prevent employees from receiving their legally required breaks.
Following Donohue, employers should review their timekeeping practices for meal periods and wage payments to ensure compliance with the law. The Court’s decision shifts the burden to employers to prove that meal breaks were lawfully provided when an employee’s timecard indicates otherwise and to ensure that each employee has been paid for all time worked.
For assistance or more information on how this ruling may impact your business, contact the employment attorneys at San Diego Biz Law, APC.
The material in this article, provided by San Diego Biz Law, APC, is designed to provide informative and current information as of the date of the post. It should not be considered, nor is it intended to constitute, legal advice or promise similar outcomes.
ELECTRONIC TIME ROUNDING
If an employer can capture the exact amount of time an employee has worked during a shift, the employer must pay for all time worked, even if it uses a purportedly ‘neutral’ rounding system. Camp v. Home Depot U.S.A., Inc., 84 Cal.App.5th 638, 660 (2022) (review granted Feb. 1, 2023); see also Troester v. Starbucks Corp., 5 Cal.5th 829, 840 (2018) (noting that Wage Orders require employees to be paid ‘for all hours worked’).
The court in Camp clarified that when an employer tracks the exact minutes an employee works but fails to compensate them for all of that time, a neutral rounding policy is not a viable defense. Id. at 644. Furthermore, the California Supreme Court has held that the Labor Code and relevant wage orders require employees to be compensated for all work performed. Id. at 657.
The court in Camp expressly adopted the Supreme Court’s language in Troester, stating:
‘Although time rounding has been incorporated into the Code of Federal Regulations for over 50 years, neither the Labor Code nor any wage order has been amended to recognize [a time rounding exception to the requirement that an employee be paid for all time worked].‘
See Camp v. Home Depot U.S.A., Inc., 84 Cal.App.5th 638 (2022) (review granted Feb. 1, 2023).
The Camp court further noted that the primary purpose of rounding policies is efficiency in timekeeping, particularly in certain industries. However, as technology has advanced, this justification has become less relevant. Id. at 658. When timekeeping systems can track time with precision minute by minute, no legitimate efficiency issues exist to justify rounding policies—regardless of whether they are neutral. Id. at 659-60.
Rounding Compliance & Neutrality
An employer’s rounding policy complies with California law if, on average, the policy does not favor either overpayment or underpayment. See’s Candy Shops, Inc. v. Superior Court, 210 Cal.App.4th 889, 901 (2012). A rounding policy may be lawful if it is neutral both on its face and in practice. Id. at 903. However, if the policy systematically undercompensates employees over time, providing a net benefit to the employer, it may be deemed unfair, non-neutral, and unlawful. See AHMC Healthcare, Inc. v. Super. Ct., 24 Cal.App.5th 1014 (2018).
California’s Rejection of the Federal De Minimis Rule
Most importantly, California does not incorporate the federal de minimis rule into its wage and hour laws or general state law. Even small discrepancies in employee compensation may constitute an illegal practice. Troester v. Starbucks Corp., 5 Cal.5th 829, 841 (2018); see also Camp, supra, at 654-55:
‘Nothing in the language of the wage orders or Labor Code shows an intent to incorporate the federal de minimis rule… Although [the United States Supreme Court’s de minimis rule] has been in place for 70 years and incorporated into federal regulations for over 50 years, neither the Labor Code nor any wage order has been amended to recognize a de minimis exception.‘
Thus, any bias or discrepancy—no matter how small—may establish an illegal wage practice. Id. at 841.
California favors compensating employees for all time worked:
[The employee] seeks payment for 12 hours and 50 minutes of compensable work over a 17-month period, totaling $102.67 at a wage of $8 per hour. That amount could cover a utility bill, a week’s worth of groceries, or a month’s bus fares. What [the employer] calls ‘de minimis’ is far from insignificant for many ordinary people who rely on hourly wages.
Troester, supra, at 847-48.
In the 2021 Donohue v. AMN Services, LLC decision, the California Supreme Court overturned the Court of Appeal’s ruling and held that:
“Employers cannot engage in the practice of rounding time punches—that is, adjusting the hours an employee has actually worked to the nearest preset time increment—in the meal period context.”
The Court reasoned that California’s meal period provisions are intended to prevent even minor infringements on meal period requirements, and rounding practices are incompatible with that objective. Additionally, the Court stated:
“Time records showing noncompliant meal periods raise a rebuttable presumption of meal period violations, including at the summary judgment stage.”
How Rounding Affected Meal Periods in Donohue
In Donohue, the employer used an electronic timekeeping system called “Team Time,” which rounded punches to the nearest 10-minute increment. For example:
- If an employee clocked out for lunch at 11:02 AM and back in at 11:25 AM, Team Time would round the recorded punches to 11:00 AM and 11:30 AM, inaccurately reflecting a 30-minute meal period instead of the actual 23 minutes taken.
- If an employee clocked in for work at 6:59 AM and clocked out for lunch at 12:04 PM, Team Time would round the punches to 7:00 AM and 12:00 PM—meaning the actual meal period would have started five minutes after the five-hour work limit required under California law.
The Court determined that the employer relied on Team Time’s rounding system in a way that could obscure meal period violations and prevent employees from receiving their legally required breaks.
Following Donohue, employers should review their timekeeping practices for meal periods and wage payments to ensure compliance with the law. The Court’s decision shifts the burden to employers to prove that meal breaks were lawfully provided when an employee’s timecard indicates otherwise and to ensure that each employee has been paid for all time worked.
For assistance or more information on how this ruling may impact your business, contact the employment attorneys at San Diego Biz Law, APC.
The material in this article, provided by San Diego Biz Law, APC, is designed to provide informative and current information as of the date of the post. It should not be considered, nor is it intended to constitute, legal advice or promise similar outcomes.