Is Employee Time “Rounding” Allowed in San Diego?

In simple terms, “yes,” employee clock-in-clock-out time rounding is allowed under California law as long as the rounding is “neutral” in its application and does not benefit the employer substantially more than it benefits the workers. This is the holding of a recent California Court of Appeals decision. See Ferra v. Lowes Hollywood Hotel, LLC, Case No. B283218 (Cal. App. 2nd Dist. October 9, 2019).

In that case, the plaintiff, Jessica Ferra, worked for Lowes Hollywood Hotel (“LHH”) as a bartender from June 16, 2012, to May 12, 2014. She sued LHH for various claims including failure to give proper rest and meal breaks and for allegedly underpaying her because LHH rounded worker clock-in-clock-out time to the nearest quarter hour. Ferra’s case was a class action lawsuit where she was attempting to represent all of the workers at LHH for the same alleged violations of the California Labor Code.

With respect to the time rounding issue, LHH used an electronic timekeeping system which automatically rounded clocked time entries either up or down to the nearest quarter-hour. The trial court held that this policy was legal in California since it was facially neutral. That is, the policy did not on its face benefit the workers or LHH. Any worker routinely clocking in at seven minutes past the quarter hour would automatically be rounded down and be paid for slightly more work than actually worked. In practice, summary judgment evidence showed that, for a sample group of LHH employees, paid time was reduced in 54.6% of shifts, paid time was added in 26.4% of shifts, and the remaining shifts were not affected by rounding. A similar breakdown was found in analyzing Ferra’s time records: She lost time by rounding in 55.1% of her shifts, gained time in 22.8%, and the remaining shifts were not affected by rounding. The trial court held this to be permissible and the Court of Appeal agreed.

In so holding, the court explained that, in California, an employer is entitled to use a rounding policy if two conditions are met:

• The rounding policy is fair and neutral on its face and
• If, over time, the rounding policy as used does not result in a significant failure to compensate the employees properly for all the time they have actually worked

In practice, the first part requires that the rounding policy must permit both upward and downward rounding. Otherwise, the rounding policy is not facially neutral. The second part requires that there not be a significant loss to the employees over time for work actually worked. In the Ferra case, even though Ferra lost time on 55.1% of her shifts and gained time on only 22.8% of her shifts, the court held that such was not significant and did not result in a systematic undercompensation for time worked.

The court buttressed its decision by pointing out that the facially neutral policy was coupled with a separate LHH tardiness policy that provided a grace period for workers. Workers were expected to be “on-time” for their shifts and tardiness was a measure for job retention. However, LHH allowed a six-minute grace period whereby an employee was not deemed “tardy” if he or she clocked in within six minutes of the shift start. That is, the time would be rounded down. This was an additional benefit to the workers which was considered by the court in evaluating LHH’s rounding policy.

As can be seen by the Ferra case, having sound employee policies are important to ensure that your San Diego business is in compliance with California’s labor laws. An experienced San Diego corporate attorney can help.

Call San Diego Corporate Law Today

For more information, call corporate attorney Michael Leonard, Esq., of San Diego Corporate Law.  Mr. Leonard has been named as “Best of the Bar” by the San Diego Business Journal for the last four years. Mr. Leonard has extensive experience in drafting employee policies, employee handbooks, employment contracts, and all other contracts and agreements necessary for running your business. Mr. Leonard can be reached at (858) 483-9200 or via email. Like us on Facebook.

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