Employers usually rely on electronic timekeeping systems to record when employees begin and end their shifts. Some systems round those times to the nearest set interval before calculating wages. Although time rounding is not inherently unlawful in California, problems can arise when the practice results in an employee receiving less pay than they earned.
Even a small difference in recorded time can become major when the same payroll practice affects many workers. California wage laws require employees to be paid for all compensable time worked. When an employer’s timekeeping method consistently reduces paid hours, affected employees may have grounds to investigate whether their wages were properly calculated.
When can rounding become wage theft?
California courts have recognized that a neutral rounding policy may be lawful when it is designed and applied in a way that does not consistently disadvantage employees. In See’s Candy Shops, Inc. v. Superior Court, the court examined whether an employer’s rounding system was neutral and properly accounted for employees’ working time.
However, employers should not assume that having a written rounding policy makes the practice lawful. In Camp v. Home Depot U.S.A., Inc., the court examined a system that could result in employees being paid for less time than they actually worked. The case shows why employers should examine the actual results of their timekeeping practices.
How can employers reduce class action risk?
Employers should periodically audit time records to identify patterns showing that employees are consistently losing compensable minutes. Payroll and timekeeping systems should also be reviewed to make sure they accurately capture working time.
If an employer discovers that their rounding practice may have resulted in underpayment, addressing the issue promptly can help limit the potential impact. Because a company-wide policy can affect numerous employees, employers facing concerns about their timekeeping practices should obtain legal guidance before the issue develops into a broader or escalating wage dispute.