Under long-standing California law, employers are permitted to use rounding techniques as it relates to employees’ time records—rounding time punches to the nearest pre-set increment (e.g. 10 minutes, 15 minutes).  Such policies have withstood challenges so long as the policies were neutral, and  tended to benefit the employee in the long run.  However, it remained unsettled as to whether or not such practices were allowed in the meal period context.   On February 25, 2021, in Donahue v. AMN Services, LLC the California Supreme Court held that employers are not permitted to do so.

California employers are generally required to provide an employee with one 30-minute meal period that begins no later than the end of the fifth hour worked, and another 30-minute meal period that begins no later than end of the tenth hour worked (Labor Code §512, IWC Wage Order No. 4). In the event an employer does provide an employer does not provide a compliant meal period, the employer must pay the employee one additional hour of pay. (Labor Code §226.7, IWC Wage Order No. 4). 

AMN Services serves as a staffing agency placing nurses at temporary job assignments.  AMN Services had a practice of rounding employee time punches to the nearest 10-minute increment.  An example noted by the court was an AMN Services employee clocking out for lunch at 11:02 a.m. and clocking back in at 11:23 am—the time punch system would note the punches as 11:00 a.m. and 11:30 a.m.  The effect being that the 23-minute meal period would be reflected as a complaint 30-minute meal period.   AMN Services also submitted expert evidence that the rounding policy actually resulted in an overcompensation of the class members when all time punches (not just meal periods) were calculated.

In rejecting the rounding practice in the context of meal periods, the Court relied heavily on public policy and the language of the Labor Code/IWC Wage Order.  The Court pointed out the Court is “to liberally construe the Labor Code and  wage orders to favor the protection of employees.” (citing Augustus v. ABM Security Services, Inc. (2016) 2 Cal.5^th 257, 262.)  The Court found that the practice of rounding is “inconsistent” with the provisions of the Labor Code and IWC Wage Orders which set forth specific time requirements  for the length of meal periods and when they are to occur.  As for the public policy, the Court noted the relatively short period of time a 30-minute meal periods provides, and any reduction, even a minute or two, can have a negative effect on the employee.

In a win for employers, the Court also stressed that the holding was in line with prior precedent. Specifically, the Court reaffirmed the holding in Brinker Restaurant Corp. v. Superior Court, (2012)  53 Cal. 4th 1004 in that the employer  is not required to police employees taking meal periods, and that there is not a violation when an “employee voluntarily chooses to work during a meal period after the employer has relieved the employee of all duty." The latter reaffirmation remains a helpful tool for employers who can establish the meal period was provided, yet the employee chose to work.  Still, the burden in proving this can remain a challenge.

Finally, the court clarified the burden of an employer when addressing meal period violations at summary judgement.   The Court stated that the lack of a documented meal period creates a rebuttable presumption of a missed meal period not only at the class certification level, but at the summary judgment level as well.  A lack of documented meal periods does not create “automatic liability”—as an employer can come forward with evidence that the employee were compensated for missed meal periods, or the employee was provided with a meal period but voluntarily chose to work through it.  This can take the form of “[r]epresentative testimony, surveys, and statistical analysis,”  that  “are available as tools to render manageable determinations of the extent of liability. (Citing Brinker at 1054).  The rebuttable presumption remains difficult to overcome many times, but the Court was helpful in providing guidance to employers as to the methods that will be looked at by the reviewing court.

The full court opinion is available here:  https://www.courts.ca.gov/opinions/documents/S253677.PDF

The Takeaway for California Employers

• Rounding time punches is still permitted so long as it remains neutral and has the overall effect of benefiting the employee, but cannot be used in the context of a meal period.  Still the court intimated that the advances made in time-keeping software may eventually render rounding obsolete.
• Documented meal periods remain the best evidence to defend against claims of missed meal periods.  Software platforms make it very simple to have employees clock in and out for meal periods.
• Although an employer can provide evidence that an employee voluntarily decided to work through a meal period, this needs to be done with caution.  One possibility as pointed out by the Donahue court was, to the extent the software allows, having an employee select an option when clocking a meal period that the employee “was given the opportunity to take a meal period but voluntarily chose to continue working.”
• Even so, given the high-level of exposure that can result from claims of missed meal periods, and the rebuttable presumption in favor of the employee, the best practice remains to have a strong written policy on meal periods, and ensure employees are documenting each meal period.

The nuances associated with permissible rounding techniques can be challenging.  If you have any questions in this area, the Ericksen Arbuthnot Employment Practice Group is available state-wide to address your inquiries.

Andrew Kozlow is a Shareholder at the Firm’s Oakland/East Bay office .  He is the Co-Chair of the Firm’s Employment Practices Group and can be reached at akozlow@ericksenarbuthnot.com.