Employers Beware: Time Rounding Policies May Result in Legal Violations

Time-rounding policies have been subject to increasing scrutiny under California law. In 2012 the court in See’s Candy Shops, Inc. v. Superior Court held that the rounding of employee work time may be allowed only if the employees are fully compensated over a period of time, assuming the time-rounding policy is neutral both facially and as applied. The employer must apply a consistent time-rounding policy that, on average, favors neither overpayment nor underpayment. However, a time-rounding policy violates the law if it systematically undercompensates employees, such as where the employer's rounding policy encompasses only rounding down. As such, the time-rounding policy must be 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.

This issue has been addressed by subsequent court opinions in a more restrictive manner. In 2018, the court in Troester v. Starbucks held that an employer must pay its employees for small amounts of time spent regularly performing off-the-clock tasks. In that case, the off-the-clock tasks took 4 to 10 minutes on average. Employers cannot require employees to routinely work for minutes off-the-clock without compensation. For employers that implement time rounding policies, this means that employees must be compensated for any work performed during the time between when they clock in and the rounded up time reflected on their time records, as that constitutes off the clock work.

The most recent major court decision on this issue was in 2022, in the case of Camp v. Home Depot U.S.A., Inc. In that case, Home Depot used a timekeeping system that captured all time clocked by employees, down to the exact minute. The system rounded each employee’s total shift times to the nearest quarter-hour. The rule from this case is as follows: if an employer can capture and has captured the exact amount of time an employee has worked during a shift, the employer must pay the employee for all the time worked, without time-rounding. This rule has been supported by subsequent court decisions.

In summary, time-rounding policies are not encouraged. Pursuant to the See’s Candy Shops case in 2012, time-rounding is only allowed if it can be shown that it does not result in a detriment to the employee over time. However, pursuant to the more recent ruling in Camp v. Home Depot, if an employer’s timekeeping system can capture the exact amount of time an employee works, down to the minute, time-rounding is prohibited.

If your business currently uses a time rounding policy, you should consult with an experienced employment attorney to determine whether that policy is permissible.