Time Clock Rounding in California Continues to Evolve
Rounding time was once viewed as a necessity by many employers before the use of modern timekeeping and payroll technologies.
Timekeeping devices have evolved to a point where employers can track time to the minute without much manual work. With those changes in technology, courts and agencies are focused on assuring that employees are paid for all time worked – to the minute. Thus, the best practice in tracking time is not to engage in time clock rounding for nonexempt employees.
What are the rules for time clock rounding?
Although federal regulations and various state laws currently permit time clock rounding (because they were issued or enacted when time-tracking technology was not generally available), an employer must be able to show that rounding is neutral in its impact on the employee and demonstrate that employees are fully compensated for all time worked. In reality, rounding is not always neutral in its application and employers often fail to adequately audit their pay practices to confirm neutrality and compliance. And even neutral time-rounding policies have increasingly become the target of scrutiny at the federal and state level. For this reason, as we have for years, ADP continues to recommend against rounding time in all jurisdictions.
Is time clock rounding allowed in California?
Courts in California have become increasingly critical of rounding policies. In 2021, the California Supreme Court ruled in Donohue v. AMN Services, LLC, that employers in California cannot use rounding policies for employees' mealtime entries. Further, there is another case currently pending before the California Supreme Court, titled Camp v. Home Depot U.S.A., Inc., through which the Court will decide whether employers may use neutral time-rounding practices to calculate employees' work time for purposes of paying wages or whether such practice is unlawful under California law.
In addition to determining whether the practice of rounding is lawful, the Court will determine whether its holding applies prospectively or retroactively. California courts have applied other wage and hour holdings retroactively, leading to greater potential liability for employers. Thus, we recommend that you review your timekeeping practices and make any changes you deem necessary to help you limit any potential exposure related to time-rounding practices.
Preparing for the future of time clock rounding
The best way to limit liability (prospectively) is to remove all rounding configurations in all jurisdictions (or, at the very least, in California) and pay employees to the minute. Rounding time was once viewed as a necessity by many employers before the use of modern timekeeping and payroll technologies. However, the days of employers manually calculating time entries have largely passed and tracking time to the minute is now more easily accomplished. For these reasons, ADP reiterates the best practice of paying employees to the minute for all time worked. You should review your current practices with your legal counsel to ensure compliance with state and federal laws and greater accuracy in your timekeeping practices.
ADP compliance resources
ADP maintains a staff of dedicated professionals who carefully monitor federal and state legislative and regulatory measures affecting employment-related human resource, payroll, tax and benefits administration, and help ensure that ADP systems are updated as relevant laws evolve. For the latest on how federal and state tax law changes may impact your business, visit the ADP Eye on Washington Web page.
ADP is committed to assisting businesses with increased compliance requirements resulting from rapidly evolving legislation. Our goal is to help minimize your administrative burden across the entire spectrum of employment-related payroll, tax, HR and benefits, so that you can focus on running your business. This information is provided as a courtesy to assist in your understanding of the impact of certain regulatory requirements and should not be construed as tax or legal advice. Such information is by nature subject to revision and may not be the most current information available. ADP encourages readers to consult with appropriate legal and/or tax advisors. Please be advised that calls to and from ADP may be monitored or recorded.
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Updated on Dec. 20, 2023
