California Supreme Court Declines to Extend Rounding Standard to Meal Period Context

March 3, 2021

Over the last decade, courts have permitted California employers to use timekeeping policies that round employee time punches (e.g., to the nearest 10th of an hour) if the rounding policy is facially neutral and used in a manner that will not result over time in the failure to compensate employees properly for all time actually worked. However, whether rounding can be similarly used for California meal period compliance purposes has been an unresolved issue.

On Feb. 25, 2021, the California Supreme Court held in Donohue v. AMN Services, LLC that rounding policies cannot be applied in the meal period context. The court also held that time records showing noncompliant meal periods raise a rebuttable presumption of meal period violations.

Kennedy Donohue, a non-exempt nurse recruiter for AMN, brought a class action against AMN on behalf of himself and other non-exempt California AMN nurse recruiters, alleging various wage and hour violations, one of which challenged AMN’s practice of rounding time punches to the nearest 10-minute increment for meal periods. When an employee recorded a missed, short or delayed meal period based on the rounded time punches, a dropdown menu in AMN’s timekeeping system prompted the employee to choose one of three options, indicating that the employee either: (1) had the opportunity to take a break but chose not to, (2) had the opportunity to take a break but chose to take a shorter break, or (3) was not provided with an opportunity to take a meal break before the end of the fifth hour of work. The employee received premium pay for a noncompliant meal period only if the employee chose the third option.

The trial court granted AMN’s motion for summary judgment, holding that its practice of rounding time punches for meal periods complied with California law. The Court of Appeal affirmed, holding that the rounding policy for meal periods fully compensated AMN employees over time and even resulted in overpayment to the class as a whole. The Court of Appeal also rejected Donohue’s argument that time records showing missed, short or delayed meal periods gave rise to a rebuttable presumption of meal period violations.

California Supreme Court Ruling

The California Supreme Court reversed, holding that (1) employers cannot engage in the practice of rounding time punches in the meal period compliance context, and (2) time records showing facially noncompliant (i.e., missed, short or delayed) meal periods raise a rebuttable presumption of meal period violations, including at the summary judgment stage.

As to the rounding, the court held that the practice of rounding time punches for meal periods was “inconsistent” with the precise requirements of both the California Labor Code and Industrial Welfare Commission (IWC) Wage Orders for the provision of meal periods. The court reasoned that even “[s]mall rounding errors can amount to a significant infringement on an employee’s right to a 30-minute meal period.” The court also found that rounding meal periods erodes the “health and safety protections” that the meal period requirements are intended to achieve.

The court also rejected AMN’s contention that its rounding policy was neutral, noting the “asymmetry” between the treatment of rounded-up meal breaks and rounded-down meal breaks. In other words, because the rounding policy enabled noncompliant meal breaks to appear compliant, AMN’s timekeeping system failed to identify all noncompliant meal breaks for which premium pay could be owed.

As to the rebuttable presumption, the court relied on the IWC Wage Orders’ requirement that employers record meal periods, holding that an assertion by an employer that an employee voluntarily worked through a meal period during which he or she was relieved of all duty is an affirmative defense that must be pled and proven by the employer. Indeed, the court held that “it makes sense to apply a rebuttable presumption of liability when records show noncompliant meal periods” because “time records are required to be accurate.”

The court also rejected AMN’s contentions that the rebuttable presumption should apply only to records showing missed meal periods, but not to records showing short or delayed meal periods, and that applying the presumption at the summary judgment stage (rather than at the class certification stage) would result in “automatic liability” for employers. The court noted that employers can rebut the presumption by presenting evidence that employees were compensated for noncompliant meal periods or that they were in fact provided the opportunity to take compliant meal periods during which they instead chose to work.

Donohue stands as a continuing reminder for California employers to revisit their meal break policies and practices and ensure that their timekeeping systems allow for accurate recording of beginning and ending times of all meal periods. Employers should also evaluate what options are available to help rebut the presumption of noncompliance that will arise when an employee records a facially noncompliant meal period. This could include building mechanisms into the timekeeping system that flag such facial noncompliance and allow employees to indicate whether they were provided the opportunity to take a compliant meal period, and whether the employees’ facially noncompliant meal period was the result of their voluntary choice or involuntary operational requirements, and if the latter, what those requirements were.

For additional information regarding the Donohue decision and its impact on employer meal period policies in California, please contact the authors or any other member of McGuireWoods’ Labor & Employment Department.