See's Candy Shops, Inc. v. Superior Court provides modest confection for employers

If I tried really hard, I could probably come up with similarly dumb headlines for most posts on appellate decisions.  But it would hurt me as much as it would hurt you, so I don't.  But, getting back on track, in See's Candy Shops, Inc. v. Superior Court (October 29, 2012), the Court of Appeal (Fourth Appellate District, Division One) granted a petition for a writ filed by See's Candy after the trial court granted summary adjudication in favor of the plaintiff as to four affirmative defenses asserted in the case.  The defenses related to See's Candy's practice of rounding hourly employee punch in and punch out times to the nearest tenth of an hour.

In an amended answer, See's Candy denied plaintiff's allegations and "asserted 62 affirmative defenses, including defenses based on See's Candy's claim that: (1) any unpaid amounts are de minimis; (2) the nearest-tenth rounding policy is consistent with federal and state law; and (3) the grace period policy is lawful under federal and state law."  Slip op., at 5.  Two of the defenses concerned See's Candy's claim that any unpaid wages based on off-the-clock claims or its rounding policies were "de minimis."  The "de minimis" defense was not at issue in the writ proceedings, so don't get excited.  The other two challenged defenses encompassed See's Candy's claim that its rounding policy is consistent with state and federal laws "permitting employers to use rounding for purposes of computing and paying wages and overtime" and that the nearest-tenth rounding policy did not deny plaintiffs or the class members "full and accurate compensation." Plaintiff did not move for summary adjudication on See's Candy's affirmative defense that its grace period policy is "lawful under both federal and California law."

Plaintiff argued that there is no California statutory or case authority allowing See's Candy to use a rounding policy, and its policy violates section 204, which generally requires an employer to pay an employee "All wages" every two weeks, and section 510, which requires an employer to pay an employee premium wages for "Any work" after eight hours per day or 40 hours per work week.  See's Candy then argued that its timekeeping records were inaccurate because of its unusual grace period policy that allows employees to clock in up to 10 minutes before their scheduled shift time so long as they do not start working until the actual start time.

The Court of Appeal examined the competing approaches, holding that See's Candy had the better view:

Although California employers have long engaged in employee time-rounding, there is no California statute or case law specifically authorizing or prohibiting this practice. Absent specific binding authority under California law, See's Candy argues that it is appropriate for this court to adopt the federal regulatory standard, which is also used by the DLSE (the state agency charged with enforcing California's wage and hour laws), and allows rounding if the employees are fully compensated "over a period of time." (29 C.F.R. § 785.48(b).) Silva counters that this federal/DLSE rule violates California statutes and rounding should be permitted only if the employer "unrounds" every two weeks to ensure full compensation. For the reasons explained below, we conclude the federal/DLSE standard is the appropriate standard.

Slip op., at 17.  To support this conclusion, an extensive discussion of federal law, state law, and DLSE regulations follows.  Distilled to its essence, the key holding of the Court turns on its construction of Labor Code section 204:

Moreover, Silva's contention has a false premise — that using unrounded figures within a finite time period is the only way to measure "All" earned wages. (§ 204, subd. (a).) Fundamentally, the question whether all wages have been paid is different from the issue of how an employer calculates the number of hours worked and thus what wages are owed. Section 204 does not address the measurement issue. The Legislature has amended section 204 since the DLSE adopted the federal rounding regulation, and has never indicated that the state agency's adoption of the federal rounding rule is inconsistent with its statutory provision.

Slip op., at 24.  The Court then declared its finding as to California law, and addressed the analysis that it would apply in the context of the case before it:

Relying on the DOL rounding standard, we have concluded that the rule in California is that an employer is entitled to use the nearest-tenth rounding policy if the rounding policy is fair and neutral on its face and "it is used in such a manner that it will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked." (29 C.F.R. § 785.48; see DLSE Manual, supra, §§ 47.1, 47.2.) Applying this legal standard, we turn to address whether the parties met their summary adjudication burdens with respect to the 39th and 40th affirmative defenses alleging that See's Candy's nearest-tenth rounding policy was consistent with California law.

Slip op., at 27.  Thus, as with federal law, the legality of rounding in California turns on the outcome, not its use.  Rounding is judged "as applied," not "as defined."  In this matter, the Court concluded that the plaintiff did not meet the burden of proof on a motion for summary judgment to dispose of See's Candy's affirmative defenses before trial.