Ninth Circuit Approves Neutral Time Clock Rounding Practice

Time clock rounding is a longstanding employer practice whereby employers round employee starting and stopping times to the nearest five minutes, or to the nearest one-tenth or quarter of an hour. Is the practice legal? For over 50 years, a federal regulation has authorized the practice, but until recently, no federal appellate court had endorsed the practice. In May of 2016, the Ninth Circuit Court of Appeals determined that an employer’s time clock rounding procedures complied with federal law in Corbin v. Time Warner Entertainment-Advance/Newhouse Partnership, 821 F.3d 1069 (9th Cir. 2016).

Missing Pocket Change Fuels a Class Action

Time Warner Entertainment-Advance/Newhouse Partnership rounded employee time punches to the nearest quarter hour. For example, if an employee clocked in at 8:07 a.m., Time Warner would have rounded his or her time stamp to 8:00 a.m. Thus, the employee would benefit from rounding and be compensated for seven minutes that he or she was not actually working. Conversely, if an employee clocked out at 5:05 p.m., that time stamp would be rounded to 5:00 p.m., and the employee would not be compensated for five minutes that he or she actually worked.

The plaintiff, Andre Corbin, argued that the rounding practice short-changed him. Although the data showed that he gained or broke even under the rounding system for 58 percent of his shifts, over a span of several months he earned $15.02 less then he would have had the company not rounded his time. Corbin also alleged that on one occasion, he had logged on to an auxiliary computer system before logging into the time system, resulting in a loss of one minute of compensable time that was not captured by the time clock.

Corbin filed a class action lawsuit alleging that the rounding practice violated state and federal wage and hour law because it denied him full compensation for time spent actually working.

Round and Round We Go

The court began its opinion by observing that “[t]his case turns on $15.02 and one minute.” That was the amount by which the plaintiff argued he was underpaid as a result of the rounding policy. The plaintiff argued that unless every employee gains or breaks even over every pay period, an employer’s rounding policy violates the federal rounding regulation. The court rejected that contention.

The court analyzed a federal regulation allowing for time clock rounding. The regulation, found at 29 C.F.R. § 785.48(b), provides:

It has been found that in some industries, particularly where time clocks are used, there has been the practice for many years of recording the employees’ starting time and stopping time to the nearest 5 minutes, or to the nearest one-tenth or quarter of an hour. Presumably, this arrangement averages out so that the employees are fully compensated for all the time they actually work. For enforcement purposes this practice of computing working time will be accepted, provided that 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.

The court acknowledged that federal rounding rules had long been applied to federal claims pursuant to the Fair Labor Standards Act. The court also noted that California’s Division of Labor Standards Enforcement—“the agency empowered to enforce California’s labor laws”—has “adopted the federal regulation in its manual.” In See’s Candy Shops, Inc. v. Superior Court, 210 Cal. App. 4th 889 (2012), a California Court of Appeals, however, noted that the Supreme Court of California had not addressed whether rounding is permissible. Nevertheless, the See’s Candy Shops court held that the federal rounding regulation described above applies to California state claims so long as the employer’s “rounding-over-time policy is neutral, both facially and as applied.”

The Ninth Circuit determined that the federal regulation could not be read to mean that an employee must always come out even or ahead. The court reasoned that a rounding policy will mean that some pay periods an employee may come out ahead and sometimes he or she may come out behind. However, in the end, rounding is meant to average out over the course of time. Corbin’s rationale was faulty and impractical, according to the court, because it would essentially require the employer to “un-round” every employee’s time stamps for each pay period to ensure that every employee benefitted from the rounding policy. The court rejected Corbin’s argument given that obligating an employer to engage in this “mini actuarial process at the time of payroll” would defeat the purpose of rounding altogether.

Examining the company’s rounding policy, the court determined that it passed muster. It was facially neutral because it rounded all employee time punches to the nearest quarter-hour without considering whether the employer was benefitting from the policy (i.e., the employer rounds down and up) and it did not depend on managerial oversight (i.e., the system is entirely electronic and cannot be manipulated by supervisors or others). In the end, Corbin failed to show that over a period of time, he was not properly compensated for his work.

Wait a Minute

Separately, the court addressed Corbin’s claim that one day he lost one minute of compensable time by logging into an auxiliary system before logging into the time clock. Can an employee sue for as little as one minute of unpaid time?

The court dispensed with this claim by applying a longstanding judicial reality check in the realm of wage and hour law: the de minimis doctrine. This Latin phrase means “about minimal things.” In the legal context, it means that a court may refuse to consider trifling matters. “‘[I]n light of the realities of the industrial world,’ a ‘few seconds or minutes of work beyond the scheduled working hours . . . may be disregarded.’” The rule is concerned with “the practical administrative difficulty of recording small amounts of time for payroll purposes.”

In this case, it would have been impractical for the company to cross-reference computer log in times with time clock punches for each employee on each day in the off chance that an employee accidentally started a computer program before punching in. Moreover, the amount of lost time here, one minute, was so small that it resulted in only pennies in lost wages. Furthermore, the lost minute was not a recurring problem, but instead one rare instance of off-the-clock time. Accordingly, the court concluded that the uncompensated time was de minimis and therefore not a valid legal claim.

Practical Application

This case reaffirms the legality of time clock rounding. However, it also highlights the importance of implementing a neutral practice that, on average, does not undercompensate employees.

Although rounding is legal, it can be challenging to properly implement. As this case makes obvious, even a proper system can be challenged in litigation. To verify that a system is properly balanced, it may be prudent for employers to conduct periodic audits to ensure that rounding does not lead to an average underpayment of wages.

The de minimis rule continues to be a topic of ongoing litigation. Although federal courts and some lower state courts have addressed the issue, the Supreme Court of California has yet to address application of the de minimis rule to state law. In June of 2016, the Supreme Court of California agreed to review federal Ninth Circuit Court of Appeals case Troester v. Starbucks Corporation (S234969). The court will determine whether the de minimis rule applies in the context of a store employee who, after clocking out, spent time setting an alarm and locking up the store. An opinion is expected to be released sometime during the next year.