California employers may soon need to rethink and revise their time-rounding policies–even if they’re neutral. In Camp v. Home Depot, USA, the California Supreme Court is set to weigh in on whether, under California law, employers may use neutral time-rounding practices to calculate employees’ work time for purposes of paying wages. A decision limiting or prohibiting the practice could require major changes to common timekeeping practices for payroll purposes, so employers–especially those engaging in time rounding–will want to keep a close eye on developments.
Here’s what’s happened so far, and what employers should do now.
In Camp v. Home Depot USA, Inc., 84 Cal. App. 5th 638 (2022), two non-exempt employees filed a putative class action against their employer Home Depot, asserting claims for unpaid minimum and overtime wages. Home Depot used an electronic timekeeping system that captured the employee’s actual worktime by the minute. Yet, in paying out employees’ wages, Home Depot rounded its hourly employees’ total daily worktime to the nearest quarter hour. As a result of this time-rounding policy, Plaintiff Delmer Camp’s timekeeping records showed that he had lost a total of 470 minutes over approximately four and a half years. Home Depot moved for summary judgment, arguing that its time-rounding practice was neutral “both facially and as applied,” and therefore lawful under the standard in See’s Candy Shops, Inc. v. Superior Court, 210 Cal. App. 4th 889 (2012). The trial court agreed with Home Depot and granted its motion for summary judgment. Camp appealed.
The Court of Appeal reversed, and the California Supreme Court granted review
On October 24, 2022, the California Sixth District Court of Appeal reversed the trial court’s summary judgment order. The appellate court relied on two recent California Supreme Court opinions in its analysis: Troester v. Starbucks Corp., 5 Cal. 5th 829 (2018) and Donohue v. AMN Servs., LLC, 11 Cal. 5th 58 (2021). In Troester, the California Supreme Court held that the California Labor Code and applicable wage order provisions clearly indicate that employees must be paid for all hours worked, including for small increments of time that occur regularly. Troester effectively did away with the “de minimis” doctrine in California, which doctrine previously had allowed employers to disregard small time increments that might otherwise be compensable, such as the time it takes an employee to lock the front doors when leaving work for the day. In Donohue, the California Supreme Court rejected rounding of meal period start / end times, noting that technological advances in timekeeping have assisted employers with tracking time more precisely and that California law requires non-exempt employees to be able to take a minimum of thirty minutes for each meal period.
The Camp appellate court concluded that Home Depot did not meet its burden to show that there was no triable issue of material fact regarding Camp’s claims for unpaid wages. Particularly, Home Depot tracked the exact time an employee clocked in and out each day, and those records revealed Home Depot had not paid Camp for all time worked. However, the appellate court emphasized that it limited its holding to the facts of the case. Thus, it is unclear whether a California employer that uses a neutral rounding policy due to timekeeping system limitations or another inability to capture an employee’s actual work minutes can continue to follow an otherwise neutral rounding policy. It is also unclear whether an employer that has the ability to capture an employee’s actual minutes worked is required to do so.
The appellate court invited the California Supreme Court to weigh in on the validity of the time-rounding standard in See’s Candy–both in the context of Camp, as well as generally–and on February 1, 2023, the California Supreme Court granted a petition to review. The California Supreme Court will assess whether, under California law, employers are permitted to use neutral time-rounding practices to calculate employees’ work time for payroll purposes.
Given its recent decisions on time rounding, de minimis time increments, and payment of wages, employers can anticipate that the California Supreme Court will critically assess time-rounding practices. California employers who use time-rounding practices should:
- Work with counsel now to consider implications of the California Supreme Court’s upcoming decision and determine and implement possible safeguards for their business as they await the decision. For instance, a decision prohibiting or limiting the use of time-rounding practices could apply retroactively, opening employers up to liability. Therefore, California employers with the ability to accurately track an employee’s worktime by the minute may want to pause the use of time-rounding practices until the California Supreme Court issues its decision.
- Keep a close eye on developments, and be prepared to quickly pivot how employee time is calculated if the decision requires it.
For help determining how the California Supreme Court’s pending decision could impact your business, contact your Baker McKenzie employment attorney.