The practice of rounding an employee’s time up or down to the nearest interval is widespread. It offers employers the convenience of using round numbers to determine the number of hours worked, simplifying the calculation of how much an employee is owed. It is also, per a recent California Court of Appeal decision, illegal. See Woodworth v. Loma Linda Univ. Med. Ctr., 93 Cal. App. 5th 1038, 1058 (2023). Woodworth is not the first word on the legality of rounding time in California, and it will not be the last. But it is yet another cautionary tale for Golden State employers. Woodworth not onlydeclares rounding unlawful if an employer can and does capture the exact amount of time an employee worked but also imposes this rule retroactively despite California law previously allowing such rounding. In California, rounding is likely on borrowed time.
California Courts Previously Endorsed Rounding…
For the better part of a decade, rounding was generally understood to be lawful under the Court of Appeal’s decision in See’s Candy Shops, Inc. v. Superior Court, 210 Cal. App. 4th 889, 901 (2012). Borrowing from rules interpreting the federal Fair Labor Standards Act, the See’s Candy Court held that rounding employees’ time is permissible so long as it does not, in the aggregate, result in employees being undercompensated. Most commonly, this can occur when an employer only rounds time down. Outside of those circumstances, however, California law did not forbid an employer’s facially neutral rounding policy.
The California Supreme Court’s decision in Donohue v. AMN Services, LLC, 11 Cal. 5th 58 (2021), hinted that change was afoot. Donohue confronted the legality of rounding in the context of meal periods, which by law must last “not less than 30 minutes.” The high court ultimately prohibited rounding time for meal breaks, reasoning that “[g]iven the relatively short length of a 30-minute meal period, the potential incursion that might result from rounding is significant.” Donohue, 11 Cal. 5th at 68.
Conceptually, that logic does not automatically extend to an employee’s entire workday, which might involve a shift of eight hours or more. And Donohue made clear that it was not addressing the legality of rounding writ large. But while it did not purport to outlaw rounding entirely, it did question the underlying policy basis for rounding, namely the supposed efficiencies gained by not recording time and calculating pay in such fine increments. Id. at 73. In the era of electronic timekeeping systems that can record time punches to the nearest minute or second, “it is not clear what efficiencies were gained” by rounding as opposed to simply recording and paying for all time worked. Id. at 74. Without saying so directly, Donohue provided a roadmap for undercutting the rule of See’s Candy.
…Until They Didn’t
Woodworth was not the first Court of Appeal to take the hint from Donohue. A different panel of the Court of Appeal held in 2022 that rounding is categorically prohibited “if an employer…can capture and has captured the exact amount of time an employee has worked during a shift[.]” Camp v. Home Depot U.S.A., Inc., 84 Cal. App. 5th 638, 660 (2022). Recognizing that this holding was a departure from See’s Candy, the Camp Court invited the California Supreme Court to resolve this split. The California Supreme Court has accepted Camp for review and is expected to issue a decision.
In the meantime, Woodworth recently joined with Camp in rejecting See’s Candy. It espouses the same rule that if an employer can and has captured the correct amount of time worked—as the employer in Woodworth did—it cannot thereafter take the “extra step” of rounding that time. Woodworth, 93 Cal. App. 5th at 1056. Doing so, in the Court’s view, conferred no efficiency benefits on the employer since it could easily have paid the employee the precise amount.
Presenting a further challenge for California employers, Woodworth concludes that this rule applies retroactively. For years, employers throughout the state have applied facially neutral rounding policies in reliance on the rule in See’s Candy. It is hard to argue that their reliance was unreasonable: until last year’s Camp decision, See’s Candy was the only published California addressing rounding of time worked by an employee, and it explicitly authorized such a policy as long as it did not systematically undercompensate employees. Nonetheless, in Woodworth’s judgment, this reliance was insufficient to dislodge “the general rule of retroactivity.” Woodworth, 93 Cal. App. 5th at 1058. For employers, strict adherence to California’s labyrinth of employment laws, regulations, wage orders, caselaw, and regulatory guidance may not be enough to guarantee safe harbor.