March 1, 2021

California Supreme Court Rejects Rounding of Timekeeping for Tracking Meal Periods

Holland & Knight Alert
Linda Auerbach Allderdice | Deisy Castro

Highlights

  • California law requires that employers "must generally provide employees with one 30-minute meal period that begins no later than the end of the fifth hour of work and another 30-minute meal period that begins no later than the end of the tenth hour of work." If an employee is not provided the opportunity to take a timely and uninterrupted meal period, the employee is due one hour of premium pay.
  • What has been an undecided question is whether an employer that used a timekeeping system that incorporated a neutral rounding practice — a practice permitted under California law — could apply such a practice when tracking meal periods.
  • This question was decided on Feb. 25, 2021, by the California Supreme Court in Donohue v. AMN Services, Inc. In a unanimous decision, the Court reinforced an employer's responsibility for implementing compliant meal period policies that allow employees to take the full, statutorily mandated 30-minute meal periods without reduction from even neutral rounding timekeeping practices.
  • This Holland & Knight alert includes several takeaways from the decision and discusses the impact of the Court's holdings for California employers.

If there were ever a time for California employers to have in place meal period policies and timekeeping practices for non-exempt employees that are compliant with California law, now is the time. California law requires that employers "must generally provide employees with one 30-minute meal period that begins no later than the end of the fifth hour of work and another 30-minute meal period that begins no later than the end of the tenth hour of work." If an employee is not provided the opportunity to take a timely and uninterrupted meal period, the employee is due one hour of premium pay. (Cal. Lab. Code § 512(a). Also see, e.g., Industrial Welfare Commission (IWC) Wage Order No. 4-2011, § 11(A), (B)).

What has been an undecided question is whether an employer that used a timekeeping system that incorporated a neutral rounding practice — a practice permitted under California law — could apply such a practice when tracking meal periods. This question was decided on Feb. 25, 2021, by the California Supreme Court in Donohue v. AMN Services, Inc., S253677. In a unanimous decision, the Court reinforced an employer's responsibility for implementing compliant meal and rest policies that allowed employees to take the full, statutorily mandated 30-minute meal periods without reduction from even neutral rounding timekeeping practices.

In the first part of the Court's opinion, the Court held that for tracking meal periods, 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 Court noted that the meal period provisions for a break of 30 minutes "are designed to prevent even minor infringements on meal period requirements" and that "rounding is incompatible with that objective." In the second part of the Court's opinion, the Court held that "records showing noncompliant meal periods raise a rebuttable presumption of meal period violations, including at the summary judgment stage."

Several significant takeaways from this decision immediately affect California employers:

  • Timekeeping practices, whether by timecard punches, electronic time recording systems accessed at employee's individual computer stations, biometric recordings or other means, should be reviewed to determine if they accurately track 30-minute meal periods.
  • Employers may wish to develop, with the assistance of counsel, recordkeeping policies and practices to support that they are providing employees with compliant meal periods, including, but not limited to, any records of an employee's voluntary choice not to take such meal periods, or to take a short or late meal period.
  • Employers may wish to consider and develop reinforcement practices and procedures, such as training regarding meal period and rest break policies. Supervisors should similarly be provided the tools to be comply with the legal requirements while meeting the operational needs of the business.
  • Claims involving meal periods (and for that matter rest breaks) in California are not going away anytime soon. Employers will wish to ensure they are well positioned to defend against such claims.

This Holland & Knight alert discusses below more specifically the Court's holdings in Donohue v. AMN Services and their impact for California employers.

AMN Services' Rounding Timekeeping Practices

AMN Services is a healthcare services and staffing company that recruits nurses for temporary contract assignments. The plaintiff was a nurse recruiter who did not work a preassigned shift but was expected to work eight-hour days. AMN Services maintained a company policy that provided nurse recruiters with a 30-minute meal period beginning no later than the fifth hour of work; its policy and trainings emphasized that the meal period was for an "uninterrupted" 30 minutes, that employees were "relieved of all job duties," were "free to leave the office site" and "control[led] the time." The policy also specified that supervisors should not "impede or discourage" employees form taking their breaks. At a first look, this policy appears to reflect a compliant meal period policy. So where did AMN go wrong, according to the California Supreme Court?

Employees accessed an electronic timekeeping system from their desktop computers to punch in at the start of the workday, to record their meal periods and to sign out at the end of the workday. The electronic timekeeping system incorporated an automatic rounding process whereby the punched time was rounded to the nearest 10-minute increments. For example, whereby an employee who clocked out for lunch at 11:02 a.m. and back in at 11:25 a.m., for a 23-minute meal period, would instead have a time record showing the meal period was from 11:00 a.m. and 11:30 a.m., for a compliant 30-minute meal period. Another example cited by the court involved a time punch starting the work day at 6:59 a.m. with the lunch meal period at 12:04 p.m., but the recorded time record reflected the times instead, respectively, as 7:00 a.m. and 12:00 p.m. Thus, the time record showed that the employee took lunch at the end of the fifth hour of work when in actuality the meal period was four minutes late. The electronic timekeeping system also permitted an employee to assign a reason why lunch was missed, delayed or short.

AMN Services Secured Wins in Lower Courts

Dueling cross-motions for summary adjudication in the certified class action were filed, and AMN Services filed a companion motion for summary judgment. The plaintiff asked the court to decide in its favor on the grounds that the employer denied employees compliant meal periods, improperly rounded time records of meal periods using the electronic timekeeping system, and failed to pay premium wages for missed meal periods. AMN Services argued that it did not have a uniform policy or practice of denying compliant meal periods, that its supervisors did not discourage employees from taking their full or a timely meal period, that the average length of the meal period exceeded 30 minutes and that, when all was tallied up, the rounding practice actually resulted in overcompensating employees for their time.

AMN Services won its motion in the trial court. The plaintiff's appeal was rejected by the Court of Appeal, which decided that it was proper to round time punches for meal periods. The appellate court explained that the governing statute and Wage Order did not prohibit rounding, that rounding was a "neutral calculation tool", that there was no contrary case law, and that the policy was neutral on its face and as applied, particularly in light of the fact that employees were fully compensated over time and in fact the class as a whole was overcompensated, so it met existing California requirements for a rounding policy. Lastly, the appellate court found that time records that "show[ed] missing, short, or delayed meal periods" did not give rise to a rebuttable presumption against the employer of meal period violations.

Rounding Timekeeping to Track Meal Periods Rejected by California Supreme Court

In the first prong of its decision, the California Supreme Court did not agree with the appellate court's opinion or AMN Services' position. The Court reiterated a guiding principal that the California Labor Code and the applicable Industrial Welfare Commission (IWC) Wage Order are to be "liberally construe[d] ... to favor the protection of employees." Referring to the text of the Labor Code and the Wage Order, the Court held that, "The practice of rounding time punches for meal periods is inconsistent with the purpose of the Labor Code provisions and the IWC wage order." The Court observed, "The precision of the time requirements set out in Labor Code section 512 and Wage Order No. 4—"not less than 30 minutes" and "five hours per day" or "ten hours per day"—is at odds with the imprecise calculations that rounding involves." As the Court observed, "The regulatory scheme that encompasses the meal period provisions is concerned with small amounts of time." With a rounding scheme, the Court determined that, "Small rounding errors can amount to a significant infringement on an employee's right to a 30-minute meal period." This determination, the Court noted, was bolstered by the fact that employers must pay employees premium pay of one hour of wages even for relatively "minor infringements" on meal periods. The Court also cited the importance of the meal period to an employee's mental and physical well-being.

The Court decided that "a rounding policy in the meal period context does not comport with its neutrality standard," and determined that, "By deeming delayed or shortened meal breaks as 'timely' and 'complete' when they are not, a rounding policy erodes the health and safety protections that the meal period requirements are intended to achieve." The Court emphasized the importance of the voluntariness of an employee's decision not to take advantage of the meal period.

In reaching its decision rejecting rounding timekeeping practices as applied to meal periods, the Court notably disagreed with the characterization that its holdings destroyed two established precedents that have guided employers in complying with their California wage and hour obligations.

The first concerns principles guiding meal period policies that were established in Brinker Restaurant Corp. v. Superior Court, 53 Cal. 4th 1004 (2012) (Brinker). Here, the Court in AMN Services readily confirmed that an employer is "not obligated to police meal breaks and ensure no work thereafter is performed." Nor is there a meal period violation, as the Court further observed, "if an employee voluntarily chooses to work during a meal period after the employer has relieved the employee of all duty."

The second precedent concerns the use of neutral rounding timekeeping practices that were upheld generally in the precedent-setting appellate court decision in See's Candy Shops, Inc. v. Superior Court, 210 Cal. App. 4th 889 (2012) (See's Candy I). Here, the Court in AMN Services observed that, although it was not asked to consider the validity of the rounding principles articulated in See's Candy I, "technological advances may help employers to track time more precisely, and 'employers are in a better position than employees to devise alternatives.' " The Court concluded by noting, "As technology continues to evolve, the practical advantages of rounding policies may diminish further." These comments appear to suggest continued scrutiny of an employer's timekeeping practices in light of not only the practical realities of the workplace but whether such practices best implement the protections provided for California employees.

The Court Addresses Meal Period Litigation in the Context of Summary Judgment

In the second part of its decision, the Court ruled that " time records showing noncompliant meal periods raise a rebuttable presumption of meal period violations" when an employer asks the Court to decide on summary judgment, without a trial, that it has a compliant timekeeping system. In Brinker, the California Supreme Court majority opinion did not impose a requirement that employers record employee meal periods; rather, such a requirement was stated by Justice Kathryn Werdegar in her concurring opinion supporting the Brinker decision. In AMN Services, the Court cited former Justice Werdegar's views as underpinning its decision that rounding timekeeping practices by law could not satisfy the employer's obligation to maintain accurate records of meal periods. Given this clear recordkeeping duty, the Court held that the rebuttable presumption created by time records appearing to reflect noncompliant meal periods was proper because the employer can offer evidence as to why the records might be "incomplete or inaccurate" and thus not are indicative of the employer's liability to pay premium pay.

The Court explained that, "Applying the presumption does not mean that time records showing missed, short, or delayed meal periods result in 'automatic liability' for employers." If time records show noncompliant meal periods, the Court noted employers can then "rebut the presumption" of liability by presenting "evidence that employees were compensated for noncompliant meal periods or that they had in fact been provided compliant meal periods during which they chose to work." The Court suggested that employers can present " 'representative testimony, surveys, and statistical analysis,' along with other types of evidence" in support of its position that there are no questions of liability. While the Court reiterated that it was not changing the rules in Brinker, the Court highlighted the importance of providing employees with means or mechanism to properly record their meal periods.

The Court did not go so far as to state that summary judgment was no longer an option for employers, including AMN Services. In fact, after reviewing the type of evidence that could be introduced, the Court observed, "Altogether, this evidence presented at summary judgment may reveal that there are no triable issues of material fact." Accordingly, the Court sent the case back to the trial court to allow the parties the opportunity to have their disposition motions heard again with the benefit of the Court's opinion.

Conclusion

Overall, the Court's decisions serves to reinforce the importance of not only implementing proper meal period policies but also developing timekeeping and reinforcement mechanisms and procedures to support such policies. Due to the complexity and particular timing requirements associated with California's meal and rest break laws, employers may wish to consider reviewing their existing policies and procedures with the advice of counsel.


Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.


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