Time Rounding Policies Are Dangerous

A recent California appellate decision and reports about it might give employers the wrong idea. In Donohue v. AMN Services, LLC. 29 Cal.App.5th 1068 (2018) the court ruled that the employer’s policy of rounding employees’ actual clock time was not a violation of law. The plaintiff in Donohue claimed, among other things, that the employer’s policy of rounding the actual clock time resulted in meal period violations. The plaintiff claimed that meal period compliance should be based upon the actual times clocked by the employees and that it was unlawful to use the rounded time.

The court disagreed. It noted that “California law requires that rounding policies be fair and neutral on their face and in practice, meaning that the policy can’t result in a failure to pay employees for all the hours they work.” According to the court, a policy meeting this standard may be used not only for lawful payment of wages, but also in determining compliance with meal break law.

Unfortunately, reports of result in Donohue might cause employers to believe that a neutral rounding policy, i.e. up 5 minutes and down 5 minutes, is lawful. It is, however, only lawful if the policy in practice results in no underpayment of wages to the employee. The policy in Donohue was only lawful because expert witnesses testified that after analyzing the plaintiff’s actual time records, the employer’s policy of rounding resulted in a net surplus (overpayment) to the plaintiff. In most cases, the opposite will be true. Policies that are neutral on their face, more often than not result in an underpayment of wages. This is true because most employees are diligent and do not want to be viewed as the employee who arrives late to work and leaves early. Thus, employees generally clock in a few minutes before the start of their shift and clock out a few minutes after the shift ends. This demonstration of diligence results in a net underpayment of wages over time.

With modern technology there is little reason for most employers to utilize rounding. For those that do, it is critically important to audit the records carefully to ensure that employees are not underpaid by the practice. Do not rely on the result in Donohue as confirmation that rounding policies are fine.