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By: Roger M. Mason, Esq., Caitlin E. Kaufman, Esq., and Rachael E. Brown, Esq.
In February 2021, the California Supreme Court held that “employers cannot engage in the practice of rounding time punches — that is, adjusting the hours that an employee has actually worked to the nearest preset time increment — in the meal period context. The meal period provisions are designed to prevent even minor infringements on meal period requirements, and rounding is incompatible with that objective.” Donohue v. AMN Service, LLC. The Court also held that “time records showing noncompliant meal periods raise a rebuttable presumption of meal period violations, including at the summary judgment stage.” Id.
In July 2021, the California Supreme Court’s decision in Ferra v. Loews Hollywood Hotel held that meal and rest period premium payments must be paid at the employee’s “regular rate of pay”. California Labor Code section 226.7 requires that employers pay employees “one additional hour of pay at the employee’s regular rate of compensation” as a premium on any workday when an employee does not receive a compliant meal period or rest break. Prior to Loews, the prevailing view was that meal and rest premium payments could be paid at a standard rate rather than at the regular rate. Since Loews, employers must now pay meal and rest premiums at the regular rate of pay. Thus, if your employees receive any type of payments in addition to their standard rate of pay, e.g., nondiscretionary bonuses or commissions, you will need to factor these payments into the regular rate calculation to pay the correct meal and rest premium payments. Failing to do so would be grounds for legal claims related to the failure to pay full and timely wages, which could in turn trigger a variety of penalties.
Most recently, in October 2022, the Sixth District California Court of Appeal, relying on Donohue, held that even neutral rounding policies applied to general timekeeping are unlawful because “amounts measured in minutes are compensable where the worktime is regularly occurring.” The court noted that there is nothing in the Labor Code or wage orders that permits underpayment of an individual employee for all time worked “where the employer can capture and has captured the employee's worktime in minute increments.” Camp v. Home Depot U.S.A. Inc.
The court invited the California Supreme Court to decide the validity of the decade-old rounding standard (that time rounding is permissible when neutral both on its face and in its application) in the limited circumstance “where the employer can capture and has captured all the minutes an employee has worked and then applies a quarter-hour rounding policy.” The court further “invite[d] the California Supreme Court to review the issue of neutral time rounding by employers and to provide guidance on the propriety of time rounding by employers, especially in view of the technological advances that now exist which help employers to track time more precisely.”
Until the California Supreme Court weighs in the law is still unsettled but, in light of the potentially significant implications of these cases, there are four practices that we strongly recommend you implement immediately, if not already in place:
1. Stop rounding time, including for meal periods.
2. Use contemporaneous time entry, including actual recording of meal periods.
3. Document the reasons for all meal period and rest break violations and pay meal period and rest break premiums when appropriate.
4. Review your regular rate calculations with counsel to ensure that you are paying meal period premiums, when applicable, at the correct rate of pay.
It is more critical than ever for employers to review their timekeeping and meal period practices, and we are here to help. We can review your existing policies and practices and/or provide new ones that will ensure compliance in these critical areas.
Please feel free to contact us with any questions.
For more information about any of these employment legal updates, please contact our employment team at 408-356-3000 or via email: Roger Mason at rmason@smwb.com, Caitlin Kaufman at ckaufman@smwb.com, or Rachael Brown at reb@smwb.com.
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