March 6, 2017

California Court of Appeal Analyzes Rounding and Grace-Period Policies

BY: Jonathan Judge, Shawn Ogle

Recently, after years of litigation, the California Court of Appeal published its decision approving See’s Candy Shops, Inc.’s (“See’s”) rounding and grace-period policies.  (Silva v. See’s Candy Shops, Inc. (2016) 7 Cal. App. 5th 235).

The court previously approved See’s rounding policy in 2012, in See’s Candy Shops, Inc. v. Superior Court (2012) 210 Cal.App.4th 889, but left open the factual issue of whether the rounding policy actually undercompensated employees.  After remand, See’s successfully moved for summary adjudication on plaintiff, Pamela Silva’s Private Attorneys General Act (“PAGA”) cause of action, and the trial court granted summary judgment in See’s favor on all of Silva’s remaining claims.  Silva appealed.

Summary

See’s grace-period policy allowed employees to clock-in prior to the start of their scheduled shift, and clock-out after the end of their scheduled shift, but calculated the employee’s hours of work from the start and end of their scheduled shift as long as the employees performed no work during the grace-period.

Silva filed a lawsuit against See’s challenging two of See’s policies on a class-wide basis: (1) a rounding policy which calculated an employee’s hours worked to the nearest tenth of an hour as recorded by time punches; and (2) a grace-period policy, which permitted employees to clock in 10 minutes before and after a shift, but calculated work time from the employee’s scheduled shift.

After extensive pre-trial and appellate proceedings, See’s moved for summary judgment on Silva’s class claims on the ground that the undisputed evidence showed that Silva could not prove that the class lost compensation due to the rounding or grace-period policies.  In support of the motion, See’s presented the report and declaration of its expert showing that the rounding policy actually resulted in a net surplus of 2,749 hours in the employees’ favor.

As to the grace-period policy, See’s presented evidence that the policy was (1) voluntary; (2) the policy prohibited employees from working during the grace-period; (3) if an employee worked during the grace-period, the employee’s time records would be adjusted to compensate the employee for the time worked; and (4) the employees could (and did) engage in ‘exclusively personal’ activities during the grace-period, which included leaving the premises to run errands, applying makeup, drinking coffee, and making personal phone calls.

Silva opposed the motion arguing that the report and declaration of See’s expert assumed, without any evidence, that employees were not performing work during the grace-period, provided a declaration from her own expert who testified that numerous employees “lost very large amounts of compensation” due to the rounding and grace-period policies, and relied on her own deposition testimony which stated that she saw employees clock-in early and then “either do hand exercises or …do things or whatever, you know.  They would just come in and start their shift and work.”  However, Silva also acknowledged that she did not know if these employees had their schedule programmed into the timekeeping system, and did not know if these employees were paid for this time.

Ultimately the trial court granted summary judgment in favor of See’s.  Silva appealed.

Appellate Decision

The Court of Appeal distinguished the See’s employees who were clocked-in during the grace-period from an earlier Supreme Court decision in Morillion v. Royal Packing Co. (2000) 22 Cal. 4th 575, where employees were found to be under the employer’s control (and thus entitled to compensation) where they were confined to a bus to be transported to their next workplace.

Nevertheless, even under the facts presented by See’s, the Court of Appeal recognized that Silva’s grace-period claims could have survived summary judgment had Silva presented evidence showing that employees performed work during the grace-period for which they failed to receive compensation.  However, Silva failed to present any such evidence.  Accordingly, the Court of Appeal affirmed the trial court’s ruling in favor of See’s on the rounding and grace-period claims.

What This Means for Employers

This decision is not a blanket approval of employer grace-period policies.  While See’s was successful in defending its policy, doing so required See’s to present considerable evidence explaining time records that ultimately did not accurately reflect time worked by the employees.  Memories fade and stories change (especially when statutes of limitation of up to four years are involved), which would leave such a policy vulnerable to challenge by employees.

If an employer intends to implement a voluntary grace-period policy, then they should first consult with employment law counsel to discuss the potential risks and ensure that the policy complies with California wage and hour laws.  Employers with questions regarding the implications of this case may contact one of the authors or their usual contact at AALRR.

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Attorney Bio(s)

jjudge

Jonathan Judge

Partner

562-653-3200

jjudge@aalrr.com

Jonathan Judge is a partner in the Cerritos office of Atkinson, Andelson, Loya, Ruud & Romo. He advises employers in labor and employment law and various employment litigation matters, including drug testing, mass layoffs, disparate impact analysis, WARN Act, trade secrets, privacy, technology in the workplace, piece rate compensation, municipal and state sick leave, local, state and federal minimum wage law, and the Patient Protection and Affordable Care Act.

full bio

Shawn Ogle

Shawn Ogle

Associate

(562) 653-3200

sogle@aalrr.com

Shawn Ogle represents individuals, businesses, and public agencies of all sizes for a variety of issues, including employment law claims, fraud allegations, securities violation claims, misappropriation of trade secrets charges, claims for breach of fiduciary duty, breach of contract, real property claims, easement rights, validity of trust instruments, and shareholder disputes. Mr. Ogle has worked as a litigator in private practice since 2009. He has skillfully handled a wide variety of practice areas, including business litigation, employer defense, high profile trust and estate issues, and other matters, from the initial stage of client counseling and case analysis through trial and the appellate process.

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