On February 25, 2021, the California Supreme Court decided Donohue v. AMN Services, LLC (Donohue).  In that case, the court held that (1) employers cannot round time in the meal period context and (2) time records showing noncompliant meal periods raise a rebuttable presumption of a meal period violation.  Accordingly, the court’s decision has significant implications for employers who rely on time keeping systems that round time during employee meal breaks.

California’s meal period laws are governed primarily by California Labor Code section 512 and the Industrial Welfare Commission Wage Order No. 4.  Pursuant to these regulations, an employee is entitled to a 30 minute meal break no later than the end of the fifth hour of work and another 30 minute meal break no later than the end of the tenth hour of work.  An employer must provide the opportunity for a compliant meal period, but need not police it.  If an employee voluntarily chooses not to take a meal break, then there is no meal period violation.  However, if an employer fails to provide a compliant meal break and an employee does not voluntarily waive it, then the employer must provide that employee a premium pay, or one additional hour of pay at the employee’s regular rate of compensation for each workday a meal period is not provided.  To avoid such penalties, an employer must provide its employees with complete and timely meal breaks whenever required by law.

In Donohue, the class of plaintiffs alleged AMN Services’ rounding policy violated California’s meal period law.  AMN Services used an electronic timekeeping system that rounded time punches to the nearest 10 minute interval.  If an employee clocked out for a meal break at 11:02 AM and clocked in at 11:25 AM, AMN Services’ timekeeping system would record the meal period as 11:00 AM and 11:30 AM.  So, the system would record a break of 30 minutes when the actual meal period was only 23 minutes.  AMN Services argued its rounding policy was proper and it did not pay a premium wage for this type of break because it appeared as a full 30 minute period in its records.

The California Supreme Court rejected AMN Services’ arguments and held that rounding is improper as to meal break periods.  The court stated California’s meal period laws have “precise time requirements” and rounding is inconsistent with the purpose of those laws. The court further reasoned that because the regulations required premium pay for any violation, no matter how minor, the regulatory scheme makes clear that rounding is improper.  The court determined that the intent of providing complete and timely meal breaks was to primarily protect the employee’s health and well-being, not to protect employees’ wages.  Thus, according to the court, rounding policies are at odds with the legislative purpose of the regulations since shorter meal periods on one day cannot be offset with longer meal periods another day.  Further, the court rejected AMN Services’ argument that its policy was not unlawful because it was neutrally applied; that is, sometimes AMN Services overcompensated the class for a few extra minutes they did not work.  The court determined that, even if the neutrality standard is valid and applicable, rounding is not neutral because it never provides premium pay when such pay is not owed or when it is owed.

The California Supreme Court further decided that time records showing noncompliant meal periods raise a rebuttable presumption of meal period violations at summary judgment.  The court rejected AMN Services’ argument that such a presumption would result in automatic liability for employers or force employers to police meal breaks.  Instead, the court indicated that employers could defeat the presumption by showing evidence that the employees were either compensated for noncompliant meal breaks or had been provided compliant meal breaks and voluntarily chose to work.  Finally, the court stated that such a rebuttable presumption does not require employers to police meal periods but merely requires them to provide employees a mechanism for accurately recording their meal periods.

In light of the Donohue decision, employers should review their time keeping protocols to ensure that that they do not round time during meal periods.  Further, employers should ensure its employees are provided complete and timely meal breaks when entitled to one by law.  Failure to do so risks violating California’s meal period law and may carry significant monetary penalties.  It is likely, however, that employers may continue to round in other contexts.  Reed Smith’s team of attorneys are available to provide guidance and assist in ensuring workplace systems and policies are compliant with the recent changes in this area.