Many employers, especially in California, are targeted by wage and hour class actions.   A recent decision by the California Court of Appeal may provide employers with some much-needed relief (and certainty) about a common practice: rounding time clock entries.

Both the U.S. Department of Labor and California’s Division of Labor Standards Enforcement permit employers to round time clock entries to the nearest tenth of an hour or even the nearest quarter of an hour. Nevertheless, in See’s Candy Shops, Inc. v. Silva (pdf), plaintiff Pamela Silva, a long-time hourly employee, sued See’s, claiming that See’s practice of rounding recorded time entries to the nearest tenth of an hour violated Sections 204 and 510 of the California Labor Code, which require timely payment of all wages due and payment of overtime after 8 hours of work in a day, respectively.

The trial court accepted Plaintiff’s arguments, not only certifying a class but then granting Silva’s motion for summary adjudication on defendants’ affirmative defenses, which were based on the fact that the federal and state agencies authorize the rounding practices See’s had adopted.

The California Court of Appeal originally denied review, but the California Supreme Court granted review and sent the case back to the Court of Appeal.

The appellate court concluded that the trial court was mistaken.  The key holdings are:

  1. Rounding to the nearest tenth of an hour is permitted in California, provided that the practice has a neutral or non-detrimental impact on employees;
  2. California Labor Code sections 204 and 510 are not violated by impact-neutral rounding practices; and
  3. Employers are not required to “perform a mini-actuarial process” every two weeks to ensure that each employee whose time is rounded is fairly compensated during that time period.

The Court of Appeal’s ruling in Silva is a welcome one, as the trial court’s earlier ruling had caused considerable consternation among California employers, who commonly (and understandably) make use of agency-approved rounding practices.  Had Silva come out the other way, employers likely would have faced a new wave of wage-and-hour class actions.