Silva v. See’s Candy Shops, Inc., Cal. Ct. App. Case No. D060710 (filed Oct. 29, 2012), marks the first published California Court of Appeal decision approving employers’ use of rounding policies in calculating employees’ total hours worked.

In this case, See’s Candy had used a timekeeping software system to record its employees’ hours worked; employees punched in and out to reflect the beginning and end of their shifts, including time off for meal breaks.  See’s Candy then utilized a “nearest-tenth rounding policy,” in which “in and out punches are rounded (up or down) to the nearest tenth of an hour (every six minutes beginning with the hour mark).  The [] time punches are thus rounded to the nearest three-minute mark.  For example, if an employee clocks in at 7:58 a.m., the system rounds up the time to 8:00 a.m. If the employee clocks in at 8:02 a.m., the system rounds down the entry to 8:00 a.m.”  Slip Op. at 3-4.  The plaintiff, Pamela Silva, brought a wage-and-hour class action complaint against See’s Candy alleging that this rounding policy prevented her from being paid for all the time that she worked for See’s Candy.

In reaching its conclusion that the rounding policy is consistent with California law, the Court looked to both federal law and to guidance issued by the California Department of Labor Standards Enforcement (DLSE).  Specifically, the Court stated that under federal law, a United States Department of Labor (DOL) regulation adopted under the federal Fair Labor Standards Act (FLSA) permits employers to use time rounding policies under certain circumstances.  The regulation states: “It has been found that in some industries, particularly where time clocks are used, there has been the practice for many years of recording the employees’ starting time and stopping time to the nearest 5 minutes, or to the nearest one- tenth or quarter of an hour.  Presumably, this arrangement averages out so that the employees are fully compensated for all the time they actually work.  For enforcement purposes this practice of computing working time will be accepted, provided that it is 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.” Slip Op. at 17-18 (citing 29 C.F.R. § 785.48(b), italics added.)

Similarly, the DLSE’s Enforcement Policies and Interpretations Manual states: “The Division utilizes the practice of the [DOL] of ’rounding’ employee’s hours to the nearest five minutes, one-tenth or quarter hour for purposes of calculating the number of hours worked pursuant to certain restrictions . . . . There has been [a] practice in industry for many years to follow this practice, recording the employees’ starting time and stopping time to the nearest 5 minutes, or to the nearest one-tenth or quarter of an hour.  Presumably, this arrangement averages out so that the employees are fully compensated for all the time they actually work.  For enforcement purposes this practice of computing working time will be accepted by DLSE, provided that it is 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.”  Slip Op. at 19 (citing DLSE Manual, §§ 47.1, 47.2.)

The Court stated that “[i]n the absence of controlling or conflicting California law, California courts generally look to federal regulations under the FLSA for guidance. . . . Relying on the DOL rounding standard, we have concluded that the rule in California is that an employer is entitled to use the nearest-tenth rounding policy if the rounding policy is fair and neutral on its face and ‘it is 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.’”  Slip Op. 20-21, 27 (citing 29 C.F.R. § 785.48; see DLSE Manual, supra, §§ 47.1, 47.2.)

Applying this analysis to the plaintiff’s case, See’s Candy presented evidence suggesting that its rounding policy complied with California law.  Namely, See’s Candy’s expert prepared a report demonstrating that See’s Candy’s policy “actually resulted in a total gain of 2,749 hours for the class members as a whole.  Under this analysis, most of the class members, including Silva, were fully compensated for every minute of their time (including for overtime pay) and the majority was paid for more time than their actual working time.”  Slip Op. 27-28.

The opinion is available here.

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Bernstein & Friedland, P.C. is a boutique employment law firm in Los Angeles specializing in wrongful termination, discrimination, harassment, retaliation, and unpaid wage and overtime matters.  Please visit our website at www.laemploymentcounsel.com to learn more about us.

Polina Bernstein

Polina Bernstein

Polina Bernstein founded Bernstein & Friedland, P.C. in 2009 and is lead litigation counsel at the firm.

Diana Friedland

Diana Friedland

Diana Friedland is a partner at Bernstein & Friedland, P.C. Her practice focuses on employment litigation and counseling.

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