California Court Reaffirms And Extends Rounding Rules

In AHMC Healthcare, Inc. v. Superior Court, the California Court of Appeal, Second Appellate District, Division Four, extended a prior line of California cases holding that California law follows federal law with respect to evaluating the lawfulness of time clock rounding systems. You can read our prior article about See's Candy Shops I here. Specifically, California follows 29 C.F.R. § 785.48, which permits employers to compute employee worktime by rounding "to the nearest 5 minutes, or the nearest one-tenth or quarter of an hour," so long as the rounding system adopted by the employer "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."

In AHMC Healthcare, the hospital's rounding system rounded up or down to the nearest quarter hour. Despite the neutral rounding policy, the two named Plaintiffs' records showed that rounding their time caused them to be minimally undercompensated as compared to unrounded time. Specifically, Plaintiff Letona, who was employed as a part-time respiratory care technician had a net loss of 3.7 hours, which translated to less than a minute of lost time per shift. Plaintiff Abeyta, who was employed as a registered nurse had a net loss of 1.6 hours, which translated to fewer than two minutes of lost time per shift.

However, the putative class numbers demonstrated that the effects of the rounding policy were even-handed. Specifically, an expert analyzed the putative class' time records for three data points: (1) the percentage of employees who gained by having minutes added to their time, compared to the percentage who lost by having minutes deducted; (2) the percentage of employee shifts in which time was rounded up, compared to the percentage in which time was rounded down; and (3) whether the employees as a whole benefitted by being paid for minutes or hours they did not work, or the employer benefitted by paying for fewer minutes or hours than actually worked. These numbers were critical to the Court of Appeal's decision.

In the trial court, the Parties agreed to a set of stipulated facts (including the expert's analysis of time records) and filed cross motions for summary adjudication (prior to class certification) concerning the legality of the rounding system. The trial court denied both Parties' summary adjudication motions. However, the employer sought a writ of mandate. The Court of Appeal...