California Supreme Court Strikes Down Rounding Time Programs For Meal Breaks

In its recent Donohue v. AMN Services, LLC decision, the California Supreme Court held that employers can not “round” employee time for purposes of calculating statutorily mandated meal breaks. It also held that records showing late, shortened or missed meal breaks raise a rebuttable presumption of Labor Code violations for purposes of summary judgment.

Rounding Policies Impermissible for Meal Breaks

Rounding time programs have been a source of considerable litigation in recent years. Under these programs, recorded time is rounded in set increments such as the nearest ten minutes. Reversing the Court of Appeal’s 2018 decision, the Donohue court squarely rejected the use of such programs to calculate meal breaks under the California Labor Code. It did not address the validity of the California Court of Appeal’s prior holding in See’s Candy I that rounding policies that are both facially neutral and neutral as applied may be permitted. Yet, “even assuming the validity” of See’s Candy I, the court held that “a rounding policy in the meal period context does not comport with its neutrality standard.”

The Donohue court emphasized the role of premium compensation for meal breaks to reach its decision. Under Section 226.7 of the California Labor Code, an employer that fails to provide meal breaks as required must provide “one additional hour of pay at the employee’s regular rate of compensation for each workday that the meal or rest or recovery period is not provided.” This premium pay requirement results in what the California Supreme Court described as “an asymmetry between the treatment of rounded-up minutes . . . and rounded down minutes” for meal breaks whereby the rounding does not “average[ ] out.” An employee whose recorded meal break lasts just a couple minutes less than the full 30 mandated by Labor Code Section 512 would have his or her break rounded up to 30 minutes under the rounding software and would be denied the one hour of premium pay otherwise owed. Yet, where the meal break lasts a couple minutes longer than the requisite 30, the rounding software would also calculate a 30-minute break, with nothing to compensate for the corresponding loss of premium pay in the former scenario. Or, as Justice Liu described it, the rounding policy “never provides employees with premium pay when such pay is not owed, but it does not always trigger premium pay when such pay is owed.”

In addition to noting the role premium pay plays in meal breaks, the Donohue court noted the statute’s purposes, which include both compensating employees and incentivizing compliance for employers. Citing the previous Troester decision, the court also noted that “technological advances may help employers to track time more precisely,” and that “employers are in a better position than employees to devise alternatives.”

Rebuttable Presumption Created by Records Indicating Noncompliance

The Donohue court’s additional holding that time records indicating noncompliant meal periods raise a rebuttable presumption of violation on summary judgment was informed by the parties’ respective burdens on claims and defenses. The court noted that “an employer’s assertion that an employee waived a meal period is not an element that a plaintiff must disprove as part of the plaintiff’s case-in-chief,” but “[i]nstead, the assertion is an affirmative defense and the burden is on the employer as the party asserting waiver to plead and prove it.”

The court also emphasized public policy considerations: “To place the burden elsewhere would offer an employer an incentive to avoid its recording duty and a potential windfall from the failure to record meal periods.”

Donohue’s holding means it will be incumbent upon employers to record and document a basis for statutory compliance where employee time records indicate meal breaks that are missing, short or occur after five hours of work.

Strategies for Compliance

While Donohue provides a cautionary illustration of policies to avoid—namely, rounding—it also provides some guidance for employers seeking to comply with California law. In Brinker, the California Supreme Court had previously held that an employer satisfies its meal break obligations “if it relieves its employees of all duty, relinquishes control over their activities and permits them a reasonable opportunity to take an uninterrupted 30-minute break, and does not impede or discourage them from doing so.”

Shortly after the Brinker decision, Donohue defendant AMN added features to its timekeeping system, called Team Time, to comply. When AMN employees recorded a seemingly non-complaint entry indicating missed, short or delayed meal breaks, the system offered them a drop-down menu under which they were prompted to choose one of three options: (1) that they were provided an opportunity to take a full meal break but chose not to; (2) that they were provided an opportunity to take full 30-minute break but chose to take a shorter or later break; or (3) that they were “not provided an opportunity to take a 30 min[ute] break before the end of [their] 5th hour of work.”

The Donohue court explained that “[e]mployers may use a timekeeping system like Team Time to track meal period violations as long as the system does not round time punches.” Seemingly approving of AMN’s approach in all other respects, the court commented that “Team Time would have ensured accurate tracking of meal period violations if it had simply omitted rounding.” These comments are worth heeding. By implementing a tracking system whereby employees voluntarily and accurately confirm compliance under Brinker, employers may be able to provide the evidence needed to rebut the presumption of a Labor Code violation on summary judgment.

Rounding in Other Contexts

The Donohue decision relates only to meal break requirements under California law and does not invalidate facially neutral rounding policies used in other contexts. The court pointedly refrained from directly affirming or rejecting the See’s Candy I holding that neutral rounding policies are generally permissible. Yet, it is not clear what the California Supreme Court would do if presented with that question.

Much of Donohue’s reasoning centers on the role statutorily mandated premium pay plays in the meal break context. These considerations do not apply to other contexts such as calculation of hours worked, where rounding policies may ‘average out’ over time. But some of the public policy considerations articulated by Donohue might be said to apply in other contexts. For this reason, vigilant California employers might be well-served to update all of their time-calculation software. They will already be replacing rounding time programs for meal breaks in any event.

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