Last week, the California Court of Appeal allowed that an employer may round time entries to the nearest quarter hour for timekeeping and payroll calculations.  In the case AHMC Healthcare, Inc. v. Superior Court the employer has a policy that rounds employees’ time clock swipes up or down to the nearest quarter hour. For example, if an employee clocks in between 6:53 and 7:07, he or she is paid as if he or she had clocked in at 7:00; if an employee clocks in from 7:23 to 7:37, he or she is paid as if he or she had clocked in at 7:30.

The employees’ primary contention was that the employer’s method of calculating employee hours violated the Labor Code because the system rounded employees’ hours up or down to the nearest quarter hour prior to calculating wages and issuing paychecks, rather than using the employees’ exact check-in and check-out times.

Long story and many dollars later (you know the employer rarely “wins” on the P & L statement, even when they have a favorable decision, right?)  the employer hired a Ph.D. economics and statistics expert to review four years’ worth of  time records for two medical centers. Her mission:  to determine how the rounding practice had the net effect of overcompensating or undercompensating employees.  Her conclusions had mixed results between the medical centers and individual employees.  However, after looking at the overall results, the court determined that the rounding practice had a net effect of overcompensating employees and was deemed lawful.

At the hearing, the court explained that an employer may be permitted to use a rounding procedure “as long as [it] does not consistently result in a failure to pay employees per time worked,” and that “a rounding policy is lawful if it is fair and neutral on its face and it’s used in such a manner that would not result over a period of time in failure to compensate the employees properly for all the time that they have worked.”

Lots of time and money were spent on this case.  We caution employers to think twice about rounding time clock entries for non-exempt employees.  At minimum, a regular review of the impact will be beneficial.