By Lucina Rios-Garcia, Attorney
Noland, Hamerly, Etienne & Hoss
Employers round employee time to calculate hours worked and wages due. Time rounding streamlines the payroll process especially among employers who do not process payroll with sophisticated time-keeping software. Rounding can turn seven hours and thirty-three minutes of time worked time into seven hours and thirty minutes, making it mathematically simpler to calculate the wages due. A recent California Supreme Court case provides new guidance on how time rounding violates California’s meal period requirements for non-exempt employees.
California law generally requires employers to authorize and permit non-exempt employees to take an uninterrupted meal period of not less than 30-minutes after a work period not more than five hours in a workday. Employees may waive their meal period if the workday is less than six hours. Also, employees may waive the second meal period if the workday is no longer than 12 hours. The penalty for not providing compliant meal periods is one hour of wages (“meal premium”) for each workday a compliant meal period is not provided. Employers must record meal periods time in/out and employer's time-keeping policies and practices must prove the employees receive compliant meal periods.
In Donohue v. AMN Services, LLC. (2021) 11 Cal.5th 58, the California Supreme Court looked at whether an employer’s time rounding policy was consistent with California’s meal break law. In Donohue, the employer used payroll software that rounded employees' clock-in and clock-out time, including meal break time. For example, a 21-minute lunch from 12:04 p.m. to 12:25 p.m. was recorded as a 30-minute lunch from 12:00 p.m. to 12:30 p.m. The software recorded meal breaks less than 30-minutes as compliant 30-minute meal breaks and did not trigger meal premium pay for those meals. Furthermore, the software recorded meal breaks received after the fifth hour of work time as compliant. For instance, if an employee's start time of 6:57 a.m. was rounded to 7:00 a.m. and the employee took his meal break at 12:00 p.m., the meal break was non-compliant because it was taken after the fifth hour of work time. However, the meal break was recorded as a compliant meal break taken no later than the fifth hour of work time. The Court found the rounding policy unlawful for failure to pay premiums for non-compliant meal periods (i.e. when meal periods were less than 30-minutes and or taken after the fifth hour of work time).
California law is more protective of employees than federal labor law. Because California does not have a rounding statute or regulation, California applies the federal standard on time rounding. (29 C.F.R. § 785.48) Federal law allows neutral time rounding policies that favor neither underpayment nor overpayment of wages. However, rounding policies that consistently underpay wages and that only round down are unlawful.
Before Donohue, employee actions against employers involving rounding policies focused on whether the rounding policy failed to compensate employees for all hours worked. Often, the employer avoided liability by proving that its rounding policy was neutral. With Donohue, the California Supreme Court essentially makes rounding meal break time unlawful. Employers rounding meal break time should modify their time-keeping and payroll practices to stop rounding meal break time and ensure employees receive 30-minute meal breaks at the required time intervals based on actual work time.
This article is intended to address topics of general interest and should not be construed as legal advice. © 2021 Noland, Hamerly, Etienne & Hoss