Hourly employees in California have a legal right to be paid fairly for all hours worked. Unbeknownst to many employees, rounding policies can have a significant impact on this right. Rounding is the practice of adjusting an employee’s hours worked, either up or down, to the nearest increment of a certain dollar amount. Generally speaking, California follows federal wage and hour regulations (California Labor Code § 204). Under these rules, rounding hours worked is permitted so long as it meets a certain standard. If a rounding policy results in the systematic underpayment of workers, then it is unlawful.

For an employer rounding policy to be valid, it must:

  • Be fair and neutral on its face; and
  • On average, not favor the employer.

This means that a rounding policy, by definition, must result in hours being rounded up (overpayment) as frequently as it results in hours being rounded down.

California court cases over the last few years have upheld policies that round to the nearest tenth of an hour increment (See’s Candy Shops, Inc. v. Superior Court, 210 Cal. App. 4th 889 (2012)), or quarter-hour increment (AHMC Healthcare, Inc. v. Superior Court of Los Angeles County, 24 Cal.App.5th 1014 (2018)).  In California, if any amount of wages is unpaid, the employer is liable for a violation of the law.

What is a Grace Period?

Some California employers adopt a “grace period” policy. While similar to a rounding policy, a grace period policy allows employees to clock in early or clock out late and still be paid for hours worked. The employer assumes that no work is performed during those times and pays the employee according to their scheduled shift.⁠

What is My Recourse?

California employees who have been underpaid generally have at least three options, including:

  1. Resolving the dispute informally with the employer,
  2. File a lawsuit in court, or
  3. Bring a claim for unpaid wages and penalties with a government agency.⁠

Employees who choose to pursue a remedy for unpaid wages will need to decide whether to seek relief under federal or state law. Both federal and state law allow an employee to recover unpaid overtime that the employee earned and are available options to California employees. To discuss your potential claim, contact the experienced employment attorneys at Webb Law Group today.