California Supreme Court Rules Against Rounding Meal Periods

On February 25, 2021, the California Supreme Court issued an important ruling affecting meal period compliance and rounding policies. In Donohue v. AMN Services, LLC, the Court held:

• (1) Meal periods cannot be rounded, even if the rounding policy is neutral and the aggregate results in employees being paid for more time worked; and
• (2) Time records reflecting noncompliant meal periods raise a rebuttable presumption of meal period violations at the summary judgment stage.

Brief Background

AMN (a healthcare staffing company) maintained a meal period policy that automatically paid meal period premiums if the system showed a missed meal period, a meal period shorter than 30 minutes, or a meal period that began later than the end of the fifth hour of work.

Further, if an employee indicated they were unable to take a full meal period, a dropdown menu appeared on the system prompting the employee to attest that the meal period was noncompliant because the employee either voluntarily chose not to take it or was not provided with one, in which case a premium payment was automatically paid to the employee. Employees also verified the accuracy of their timesheets on a daily and bi-weekly basis.

Despite these measures, AMN's rounding policy, which recorded a nurse recruiter's time in 10-minute increments and then rounded to the nearest one-hundredth, resulted in inaccurate statements related to meal periods. For example, if an employee clocked out at 11:02 a.m. for lunch and clocked back in afterwards at 11:25 a.m., the timekeeping system inaccurately recorded the break as a compliant 30-minute meal period when, in actuality, it was not compliant.

Furthermore, AMN relied on the rounded time punches generated by their timekeeping system to determine whether a meal period was short or delayed. Using the example above, the system would round the meal period in the timekeeping system, and, therefore, it would not have triggered premium payment because it would have appeared as compliant. Thus, the system would not have alerted the employee of a meal period violation in the dropdown menu and consequently created noncompliant records of employee meal periods.

Plaintiff Kennedy Donohue, who worked as a nurse recruiter for AMN, filed a class action alleging employers were prevented from taking their full meal breaks and claiming a rounding policy resulted in employees being denied premium pay. The trial court granted summary judgment to AMN and the Court of Appeal affirmed, based on a rounding policy that was neutral on its face and accompanied by an attestation of meal-period compliance.

Holding No. 1: No Rounding of Meal Periods

AMN argued that its neutral rounding policy resulted in an overpayment to the class by 85 hours and, therefore, qualified as a compliant rounding policy. However, the Court focused on the precision of the time requirements set forth in California Labor Code section 512 and Wage Order 4, noting that the requirements are specific: "not less than 30 minutes" and "five hours per day."

The Court also noted that AMN's rounding policy was not neutral because it did not always trigger premium pay when it was owed, such as when the meal period was slightly short (instead, rounding recorded it as a compliant 30-minute meal period). The Court found the imprecise rounding method was at odds with the legally mandated exactitude required in the meal period context and held that meal periods cannot be rounded.

Holding No. 2: Noncompliant Time Records Create a Presumption of Violation

The Court held that time records reflecting noncompliant meal periods raise a rebuttable presumption that compliant meal periods were not provided. The Court rejected AMN's argument that this presumption would result in "automatic liability" for employers producing noncompliant time records because the presumption could be rebutted with evidence a compliant meal period was provided.

Such evidence could include employee written verification of actual hours worked or a drop-down attestation system in which the employee indicated whether a complaint meal period was provided or not. Absent the rounding practice, the Court stated that AMN's attestation system would have been deemed sufficient to rebut the presumption.

Key Takeaways

Employers should immediately eliminate any rounding policies affecting meal periods. Furthermore, we recommend the following:

• Provide an option for employees to attest that they were provided with a full, 30-minute meal period but chose not to take it, and maintain records of the employee's attestation (and a premium payment if made to the employee).
• Assess whether to stop rounding policies as to all hours worked. Rounding policies are increasingly subject to legal challenge and are particularly difficult to defend if the timekeeping system is capable of capturing actual time worked. Even lawful rounding programs can be time-consuming to audit and costly to defend.
  
  In addition, to be defensible the rounding system is expected to be neutral as to the workforce generally. Therefore, it is often questionable whether a rounding system provides significant administrative benefits or any compensation cost savings. Conduct regular, privileged audits to ensure that employees are not undercompensated over time.
• Consider establishing work rules regarding timekeeping procedures to monitor compensation costs, such as providing more opportunities for employees to record actual time worked. A timekeeping smartphone application could be an option (but with added cost if the employee is not already otherwise reimbursed for cellular data under California Labor Code section 2802).
  
  
• If employees cannot automatically capture their time when they begin working, either by using their smartphone application or a computer-based timekeeping system, employers should require employees to certify actual work times recorded each shift.