Round and Round We Go: Rounding Policies in California

A California court recently held that employers may lawfully use rounding policies, i.e. policies that round an employee's time worked to the nearest tenth of an hour worked (or other similar increment) for purposes of calculating pay. 

In the case of Silva v. See's Candy, See's employees were required to use a timekeeping system to record their start and end times of work.  See's incorporated a rounding policy in which times would be rounded to the nearest tenth of an hour (up or down) for payroll purposes.  A former See's employee filed a lawsuit claiming the rounding policy resulted in underpayment of wages. 

The court held that "the rule in California is that an employer is entitled to use the nearest-tenth rounding policy if the rounding policy is fair and neutral on its face and it 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."  Thus, the legality of a rounding policy depends on (1) whether it operates over time to pay employees for all time worked and (2) whether it does not to short employees.  In the See's case, there was an expert’s report filed with the court that concluded that the See’s rounding policy actually had a net effect of slightly overpaying employees. 

The See’s case is the first published California decision to uphold the use of rounding policies.  However, not all rounding policies would be found legal in the eyes of the law.  The key requirement is that the policy, over time, properly compensates employees for hours worked and that it does not result in underpayment.  Absent these requirements, a rounding policy can create substantial liability for employers.