Right in time for Halloween, See’s Candy Shops, Inc., has managed to sweet talk the California Court of Appeal into giving a sugary treat to employers in terms of wage-and-hour laws. According to the decision in See’s v. Superior Court, California employers might be able to use a “timekeeping policy that rounds employee punch in/out times to the nearest one-tenth of an hour” without violating the state’s strict overtime laws. The appellate court’s opinion is available at this link.
Digesting the outcome too quickly or reading too much into the decision, however, could give employers the equivalent of a legal tummy ache. That is because the “ruling leaves open the issue whether the parties will prevail in proving their various claims and defenses relating to See’s Candy’s nearest-tenth rounding policy.” In other words, while employers who use this rounding policy may have an affirmative defense to overtime claims by employees, it remains to be seen how potent that defense will be.
Here is how See’s Candy’s timekeeping policy worked: The employees punched the equivalent of a time clock at work at the beginning and end of their shifts and at the beginning and end of their lunch breaks. The punches connected to a software system called Kronos, which showed to the minute the actual time that each employee punched in or out of the system. See’s Candy would adjust employee compensation based upon those time punches under either a nearest-tenth rounding policy or a grace-period policy.
Under the rounding policy, See’s Candy would round up or down in and out punches to the nearest tenth of an hour. For example, if an employee clocked in at 7:58 a.m., the system would round up the time to 8:00 a.m. On the other hand, if the employee clocked in at 8:02 a.m., the system would round down the entry to 8:00 a.m. Under the grace-period policy, employees whose schedules had been programmed into the Kronos system were permitted voluntarily to punch in up to 10 minutes before their scheduled start time and 10 minutes after their scheduled end time. Employees were not permitted to work during the grace period, but could punch in early (or punch out late) and use the time for their own personal activities. In general, if the grace-period policy were applied, the nearest-tenth rounding policy became irrelevant.
The Court of Appeal looked to federal regulations for guidance in this area. In view of those federal regulations, the appellate court “concluded 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.’”
It seems that the candy maker had to use an assortment approach to get to that result; specifically, the carrot of persuasive arguments along with the stick of the California Supreme Court. Indeed, the trial court ruled that the rounding policy was unlawful in the Golden State. Then, after the appellate court “summarily denied the petition” that challenged that ruling, “the California Supreme Court granted See’s Candy’s petition for review and ordered [the Court of Appeal] to vacate its prior order.”
Employers who are interested in considering or implementing such a policy should consult with an attorney who is knowledgeable about California’s wage-and-hour laws. Steps must be taken to ensure that the rounding policy does not unfairly favor the employer and that the rounding is gaged to come out about even over the course of time. Otherwise, the affirmative defense may not seem as tasty – and a California court might spit it out as quickly as a kid who bites into what he thinks is a chocolate-covered truffle and finds coconut in the center.