April 20, 2021

California Employers Must Adapt to New Time Rounding Rule

Companies use time clocks to collect the exact time when employees clock in or out of the system. However, when calculating pay, it’s common for employers to collect these punch times and use rounding and grace-period policies that allow for slight adjustments.

For example, an employer might round employee time punches to the closest 15-minute increment. If the employee clocks out for a meal break at 11:58 am, the employer might round that to 12:00 pm for calculation ease.

The Fair Labor Standards Act allows for rounding, “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.”

But as with anything related to time and pay, these calculations are complicated, especially for California employers.

Recent California Supreme Court ruling about rounding

In a recent wage and hour case, an employee in California argued that employees were not receiving compliant meal periods due to rounded time records in the automated timekeeping system.

In addition to 10-minute rest breaks, employees must receive a 30-minute unpaid meal break for every five hours they work. Meal breaks must take place before the end of the fifth hour of a shift. Suppose an employer does not provide an employee with a compliant meal period in California. In that case, the employer must give the employee premium pay — one hour of pay for each day a meal-period rule wasn’t followed.

The employee in the California case said they did not receive premium pay for non-compliant meal breaks due to rounding practices. For example, the rounding may have boosted a meal break to a minimum of 30 minutes, rather than the actual 25 minutes the employee took.

In response to the case, the California Supreme Court ruled that employers in the state are prohibited from using rounding practices for meal breaks.

What you need to know about time rounding and meal breaks

These detailed meal and rest break laws in California confuse employers, according to the Society for Human Resource Management (SHRM). They can also lead to severe legal risks, making it essential for California employers to understand the rulings and put the right tools and technology in place to avoid issues.

“Employers with timekeeping practices that round the start/end times of meal periods should cease doing so immediately,” according to legal experts from Ford & Harrison. These attorneys also advise that employers in California who round the start and end shift times should consult with legal advisors regarding implementing more exact time-tracking methods.

While the California Supreme Court said employers are not required to police meal breaks, legal experts said employers should “give employees a mechanism to record their meal periods and ensure that employees are using that mechanism properly.”

Steps to improve your timekeeping practices

Employers in California and other states should do everything possible to accurately track, record and prove meal period compliance. That includes having a clear policy about meal breaks, tracking exact time for breaks, and having a “voluntary waiver” practice in place for employees who work more than five hours—but no more than six—and elect to skip their meal period voluntarily.

To ensure meal and break compliance, employers can set up reminders in their timekeeping systems to notify managers when employees are approaching 4.5 hours without a break or to enforce minimum break lengths.

The practice of rounding is common among payroll service providers, so employers everywhere should verify current methods. It’s possible an employer could be using rounding without even realizing it. Additionally, organizations should also be reviewing records and addressing any issues.

“Someone needs to ensure that employees are actually getting their full breaks. An employee in HR should be trained to look through timekeeping records to identify short breaks,” an attorney practicing in Los Angeles told SHRM. “Employees who received short breaks should be given the one hour of premium pay, and paystubs should clearly designate the payment as a meal break premium.”

To remove any potential issues with rounding punches or automatically deducting meal breaks, one of our customers in California recently purchased 20 clocks from TCP. The clocks will enable them to accommodate all employees punching in and out for lunch. That data will then inform their payroll system to ensure employees are paid accurately, including premium pay for any non-compliant meal breaks.

If this new ruling changes your needs, or you have questions about how to set things up in your system, we are here to help. Contact us today to discuss your needs.