The California Court of Appeal, Sixth Appellate District, recently concluded while neutral time rounding is lawful under California law, an issue of material fact exist when a company can capture and has captured the exact amount of time an employee has worked during a shift but has not paid the employee for “all the time” worked.[i]  This reversed a trial court’s judgment granting Home Depot’s motion for summary judgment.

Facts and Procedural History

In Delmer Camp v. Home Depot, plaintiff filed suit against Home Depot based on a failure to pay adequate wages.  Plaintiff claimed Home Depot did have in place a system with the capacity to track an employee’s time worked down to the minute, which showed plaintiff was not paid for all the hours he worked for Home Depot.  The complaint consisted of multiple causes of action, including failure to pay “minimum and overtime wages” and “unfair competition.”[ii]

The trial court initially granted Home Depot’s motion for summary judgment and ruled Home Depot’s practice of rounding the hours an employee worked was appropriate and compliant with California law.  Plaintiff appealed the decision, and it was overturned.  The court of appeals found the practice utilized by Home Depot did not comport with the California Labor Code and the burden Home Depot had not met their burden, which required they demonstrate the employees were adequately compensated for time worked.[iii]

 Previous case precedent under See’s Candy Shops, Inc. v. Superior Court set forth a standard, which deemed a policy was lawful so long as the policy utilized was neutral on its face.[iv]  The rationale for the trial court’s initial finding was that it met the standard articulated in See’s Candy and appeared lawful and neutral on its face.  Additionally, the trial court found the practice implemented by Home Depot of rounding would not generally lead to improper compensation of those employees.

However, the court of appeals found Home Depot’s ability to track the exact time in minutes an employee worked each shift created a material issue of fact as to whether the employee was adequately paid for the time worked.  The system utilized by Home Depot precisely tracked each time an employee began a shift, ended a shift, or took any work-related breaks.  Despite Home Depot’s use of timekeeping system which has the capacity to track minutes worked accurately, they still implemented a rounding protocol.  Home Depot would round its employees’ hours worked to the nearest quarter-hour.  In some instances, the employees would gain time; in others, they would have time reduced by a small percentage.  According to Home Depot’s own records, some employees were being overpaid, and others, including plaintiff, were being underpaid.  As such, the court, in relying on Troester v. Starbucks[v] and Donohue v. Amn Services, LLC,[vi] found  an issue existed as to whether Plaintiff Camp was actually paid for all the time worked.

Analysis

 In Delmer Camp v. Home Depot, the court took a hardline approach which departed from prior precedent set forth in See’s Candy.  The prior case law allowed for the rounding principle, but the Troester v. Starbucks and Donohue v. Amn Services, LLC cases looked strictly at the express language in the California Labor Code.  The California Labor Code does not expressly state that rounding is an acceptable or appropriate manner of tracking time for employee hours worked.

In Delmer Camp v. Home Depot, it was argued the rounding function was used for ease of reference for employees when trying to understand their pay statements.  Home Depot failed to cite to any California labor laws that permit rounding as a manner for streamlining and creating a pay statement that is easier to understand.

Significantly, the appellate court explained the facts as presented in Delmer Camp v. Home Depot are some that either have not been decided or should be revisited.  Specifically, the facts dealt with rounding and accurate payment of wages when there was a timekeeping mechanism able to record employee time down to the minute.  Such facts create an issue as to whether the employee was adequately paid for all the time worked.

Takeaways

Employers may not simply change calculations and billing methods based on the alleged ease for the employer and employee.  It is important that employers look to the California Labor Code to determine whether a practice of calculating employee’s hours is appropriate.  The key takeaway is that employees need to be compensated for all hours worked.  There is currently no authority allowing an employer to continue to use rounding practices which result in failure to pay any employee less than the hours worked.  Additionally, the court pointed out if the employer is capable of tracking employee hours down to the minute, it is not proper to round the employees’ time or deviate from an accurate time-keeping protocol.  The appellate court looked to whether the California Labor Code and any relevant wage orders permitted the rounding of employee hours and neither allowed for a rounding practice as implemented by Home Depot in Delmer Camp v. Home Depot.

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Sources

[i] Delmer Camp et al., v. Home Depot U.S.A., Inc., (2022) Santa Clara County Super. Ct. No. 19CV344872.

[ii] Id. at 3.

[iii] See id.

[iv] See’s Candy Shops, Inc. v. Superior Court (2012) 210 Cal.App.4th 889.

[v] Troester v. Starbucks Corp. (2018) 5 Cal.5th 829.

[vi] Donohue v. AMN Services, LLC (2021) 11 Cal.5th 58.