Ninth Circuit Upholds Time Rounding Practices

The Ninth Circuit issued its decision in Corbin v. Time Warner-Advance Newhouse, rejecting an employee’s claim that he was unlawfully denied compensation for hours worked due to his employer’s poilcy of rounding time entries to the nearest quarter hour.  The Ninth Circuit further rejected the employee’s claim that the trial court erroneously denied class certification on the rounding claim.  The first paragraph of the Ninth Circuit opinion nicely captures just how ridiculous this claim, where less than $20 was actually at issue, was:

“This case turns on $15.02 and one minute.  $15.02 represents the total amount of compensation that Plaintiff Andre Corbin (“Corbin”) alleges he has lost due to his employer’s, Defendant Time Warner Entertainment-Advance/Newhouse Partnership (“TWEAN”), compensation policy that rounds all employee time stamps to the nearest quarter-hour.  One minute represents the total amount of time for which Corbin alleges he was not compensated as he once mistakenly opened an auxiliary computer program before clocking into TWEAN’s timekeeping software platform. $15.02 in lost wages and one minute of uncompensated time, Corbin argued before the district court, entitled him to relief under the Fair Labor Standards Act of 1938 (“FLSA”), 29 U.S.C. § 201, et seq., and various California state employment laws.”

Of course, it is safe to assume that several hundreds of thousands of dollars were spent litigating the merit of this $15.00 claim, the propriety of class certification, and the resulting appeal.  Fortunately, the Ninth Circuit, like the trial court, rejected the employee’s claims and in the process, upheld the validity of the employer’s rounding policy under both the FLSA and California law.

The rounding policy at issue rounded all employee time stamps to the nearest quarter hour.  There was no evidence that the policy operated to benefit only the employer by, for example, rounding all entries in the employer’s favor.  Instead, the evidence showed that the policy was neutral, meaning that if an employee clocked in up to 7 minutes early, the employee’s time would be rounded up (benefiting the employer), but if the employee clocked in up to 7 minutes late, his or her time would be rounded down (benefiting the employee).  Similarly, if the employee clocked out up to 7 minutes early, the time would be rounded up (benefiting the employee), and if the employee clocked out up to 7 minutes late, the time would be rounded down (benefiting the employer).  A review of the named plaintiff’s time records revealed that the rounding policy resulted in plaintiff gaining compensation or breaking even 58% of the time.  However, for the snapshot of time at issue, the net result was that plaintiff lost $15.02 based on the rounding policy.  Plaintiff alleged that this violated both the FLSA and California law, and sought to certify a class action on the claim.  The district court granted summary judgment in favor of the employer and rejected the plaintiff’s effort to certify a class.

Agreeing with the district court, the Ninth Circuit held that the rounding policy was lawful and that plaintiff did not have a valid claim for unpaid wages.  The Court relied on a FLSA regulation, 29 CFR 785.48, that specifically permits rounding practices as long as they are applied in a neutral manner that does not, over time, result in a failure to compensate employees for all time that they have actually worked.  The plaintiff argued that because he lost $15.02 as a result of the application of the rounding policy (for the snapshot of time analyzed), it violated the law because it resulted in him being underpaid.  The Ninth Circuit rejected this argument, reasoning that the validity of a rounding policy depends on how it operates in the global sense, not how it impacts one individual employee.  Here, the evidence showed that the policy was neutral in operation.  Furthermore, even looking at how the policy affected just the individual plaintiff in this case, even though the plaintiff lost $15.02 for the snapshot of time analyzed, the rounding policy was still lawful because it was undisputed that in most pay periods the policy operated to either overcompensate the plaintiff or he broke even.  Thus, it did not result in him being systematically underpaid.  Indeed, in 8 out of 10 of his last pay periods, he was overcompensated based on the rounding policy.  Thus, if he had continued working a few more pay periods and those were added into the analysis, it likely would have resulted in there being no net loss whatsoever.  The Court thus rejected the idea that just because the particular snapshot of time selected produced a net loss, this automatically invalidates the rounding policy.  The Court reasoned that if this were the case, this would lead to artful pleading by plaintiffs to craft rounding claims based on carefully selected snapshots of time that they know would yield a net loss.

Having determined that the rounding policy complied with federal law, the Court turned to plaintiff’s claim that the policy violated California law.  The Court rejected this argument as well, holding that California law is in accord with federal law on the issue of rounding.

The Court similarly rejected the plaintiff’s claim that he was denied one minute of pay for work he performed off the clock on one occasion when he mistakenly logged onto his computer before clocking in.  The court held that this was de minimis time that was not compensable under the FLSA or California law.  The Court further noted that the employee’s off the clock “work” was contrary to the employer’s policies specifically requiring employees to clock in before performing any work.

On the issue of class certification, the Court held that the trial court’s grant of summary judgment in favor of the employer on the named plaintiff’s rounding claim mooted the issue of whether or not a class should have been certified because there was no valid rounding claim upon which to base a class claim.

While a good result and a favorable decision for employers, this case should not be interpreted as providing blanket approval for rounding policies and practices.  Such policies still carry risk and invite litigation, particularly where combined with written or unwritten rules of practice that aim to ensure that the policy will operate to the benefit of the employer.

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