When Rounding the Time Clock Clicks California Overtime

Sacramento, CAIf you’ve been wondering if your employer is violating the California overtime law when your time clock punches are rounded to calculate hours worked, here is the answer, which favors the employer.

The California Court of Appeals recently held that rounding is lawful under California labor laws, but it has to meet certain conditions. The issue stems from a class-action overtime complaint filed in 2009 by Pamela Silva, an employee of See’s Candy Shops (Candy Shops, Inc. v. Super. Ct., Calif. Court of Appeals No. D060710, 2012). Silva alleged that See’s failed to pay its employees for all time worked, including overtime pay.

Silva and See’s employees had their schedules programmed into a software system called Kronos, which records employee’s work hours. Employees punch in to Kronos at the beginning and end of their shifts, and they are required to record lunch breaks. The Kronos punch records time to the actual minute, and therein lies the issue.

See's, like countless other employers, calculated their workers’ pay based on Kronos punch times, subject to adjustment under the nearest-tenth rounding policy and the grace period policy.

Under these two separate policies, Silva alleged that See’s owed its employees overtime compensation. The nearest-tenth rounding policy means that Kronos rounded in and out punches up or down to the nearest tenth of an hour (every six minutes beginning with the hour mark). For instance, if Silva clocked in a 7.58 am Kronos rounded her time to 8.00 am. And if she clocked in at 8.02 am, the system entered it as 8.00 am. Those two minutes could add up over time…

Under the grace period policy, Kronos had employees’ schedules programmed so they could voluntarily punch in and out up to 10 minutes before or after their scheduled start and end time. They could use this grace period for personal activities but weren’t allowed to work.

The class was certified on two issues:

1. Whether class members suffered a loss of compensation when they clocked in and out on the Kronos time-keeping system used by See’s (the nearest-tenth rounding policy)

2. Whether class members suffered a loss of compensation when they clocked in and out on the Kronos time-keeping system during the “grace period” (the grace period policy).

The trial court dismissed See’s defense that its nearest-tenth rounding policy was consistent with federal and state law. See’s appealed.

The Court of Appeals found that there was no California law that specifically authorizes the practice of time-rounding policies. The Department of Labor, however, has a regulation under the Fair Labor Standards Act (FLSA) permitting employers to use these policies under certain circumstances, as follows:

“For enforcement purposes this practice of computing working time will be accepted, 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.” The court noted that the California Division of Labor Standards Enforcement (DLSE) has long adopted the DOL rounding regulation in its “Enforcement Policies and Interpretations Manual.”

Employers should note that if you practice such time-rounding policies, be sure that your policies are fair and neutral and that your employees’ start and stop times should average out. Visit the DOL for more information on rounding hours.