AHMC Healthcare, Inc. v. Superior Court ( 2018 )

Filed 6/25/18
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FOUR
AHMC HEALTHCARE, INC. et B285655
al.,
(Los Angeles County
Petitioners, Super. Ct. No. BC629297)
v.
THE SUPERIOR COURT OF
LOS ANGELES COUNTY,
Respondent;
EMILIO LETONA et al.,
Real Parties in Interest.
ORIGINAL PROCEEDINGS in mandate. Elihu M. Berle, Judge.
Petition granted.
Ballard Rosenberg Golper & Savitt, Jeffrey P. Fuchsman and
Zareh A. Jaltorossian for Petitioners.
Law Offices of Kevin T. Barnes, Kevin T. Barnes and Gregg
Lander; Davtyan Professional Law Corporation and Emil Davtyan;
Blumenthal, Nordrehaug & Bhowmik, Norman B. Blumenthal, Kyle R.
Nordrehaug and Aparajit Bhowmik for Real Parties in Interest.
No appearance for Respondent.
_______________________________________
State law requires employers to pay their employees for all time
the employees are at work and subject to the employers’ control.
(Mendiola v. CPS Security Solutions, Inc. (2015) 60 Cal. 4th 833, 839.)
The issue in this case is whether an employer’s use of a payroll system
that automatically rounds employee time up or down to the nearest
quarter hour, and thus provides a less than exact measure of employee
work time, violates California law. In the underlying matter, both
employers and employees moved for summary adjudication on the issue,
and the trial court denied both motions. Petitioners AHMC Healthcare,
Inc., AHMC, Inc., AHMC Anaheim Regional Medical Center, L.P.
(Anaheim), and AHMC San Gabriel Valley Medical Center, L.P. (San
Gabriel) sought a writ of mandate directing the trial court to grant its
motion, contending they had established as a matter of undisputed fact
that their system was neutral on its face and as applied. We agree the
undisputed facts established that petitioners’ system was in compliance
with California law. Accordingly, we grant the writ.
FACTUAL AND PROCEDURAL BACKGROUND
Real parties Emilio Letona and Jacquelyn Abeyta, acting on
behalf of themselves and others similarly situated, brought suit against
petitioners for failure to pay wages, failure to provide meal periods,
failure to provide rest periods, failure to furnish timely and accurate
wage statements, failure to pay wages to discharged employees, and
unfair business practices. The operative complaint also sought
penalties under the Private Attorneys General Act (Lab. Code, § 2698 et
seq.).
2
Real party Letona was employed by San Gabriel as a part-time
respiratory care technician from 2009 to 2016. Real party Abeyta was
employed by Anaheim as an R.N. from November 2015 to August 2016.
Both real parties were employed in hourly positions, requiring them to
clock in and out, which they did by swiping their ID badges at the
beginning and end of their shifts. Real parties’ primary contention was
that petitioners’ method of calculating employee hours violated the
Labor Code because the system rounded employees’ hours up or down to
the nearest quarter hour prior to calculating wages and issuing
paychecks, rather than using the employees’ exact check-in and check-
out times.1 Both sides moved for summary adjudication to establish
whether petitioners’ method of calculation passed muster under
California law. 2
1 The original plaintiff was Ernesto Fajardo, an R.N. employed by AHMC
Garfield Medical Center, L.P. However, as it was determined that Fajardo’s
hours and wages had been increased as a result of the rounding procedures,
he was substituted out for Letona and Abeyta. AHMC Garfield Medical
Center L.P., AHMC Monterey Park Hospital, L.P., AHMC Greater El Monte
Community Hospital, L.P. and AHMC Whittier Hospital Medical Center, L.P.
were named as defendants in the original complaint, but dismissed when the
complaint was amended. Real parties acknowledged that the evidence did
not show that employees at these medical facilities were undercompensated
by the rounding system.
2 The trial court has not yet decided whether to certify the proposed
class. It is well settled that “trial courts . . . should decide whether a class is
proper and, if so, order class notice before ruling on the substantive merits of
the action” in order to prevent “‘one-way intervention’” which occurs when
potential plaintiffs “elect to stay in a class after favorable merits rulings but
opt out after unfavorable ones.” (Fireside Bank v. Superior Court (2007) 40
Cal. 4th 1069, 1074.) The parties entered into a stipulation waiving this rule.
In the stipulation, the parties asked the court to proceed under Code of Civil
Procedure section 437c, subdivision (t), which permits the parties to stipulate
to adjudication of “a legal issue or a claim for damages other than punitive
damages that does not completely dispose of a cause of action, affirmative
defense, or issue of duty . . . .”
3
The parties stipulated to the following facts. Petitioners have a
policy that rounds employees’ time clock swipes up or down to the
nearest quarter hour. For example, if an employee clocks in between
6:53 and 7:07, he or she is paid as if he or she had clocked in at 7:00; if
an employee clocks in from 7:23 to 7:37, he or she is paid as if he or she
had clocked in at 7:30. In addition, meal breaks that last between 23
and 37 minutes are rounded to 30 minutes.
The time records for San Gabriel and Anaheim for the period
August 2, 2012 through June 30, 2016 were examined by Deborah K.
Foster, Ph. D., an economic and statistics expert. During this period,
employee shifts totaled 527,472 at San Gabriel, and 766,573 at
Anaheim. Dr. Foster examined the data over the four-year period from
three perspectives: (1) the percentage of employees who gained by
having minutes added to their time, compared to the percentage who
lost by having minutes deducted; (2) the percentage of employee shifts
in which time was rounded up, compared to the percentage in which
time was rounded down; and (3) whether the employees as a whole
benefitted by being paid for minutes or hours they did not work, or the
petitioners benefitted by paying for fewer minutes or hours than
actually worked. The parties stipulated to the accuracy of her findings,
discussed below.
At San Gabriel, petitioners’ rounding procedure added time (9,476
hours) to the pay of 49.3% of the workforce (709 employees) and left 1.2
percent of the workforce (17 employees) unaffected; 49.5 percent of the
workforce (713 employees) lost time (a total of 8,097 hours). 3 On a day-
by-day analysis, the procedure added time to 45.2 percent of the
employee shifts, averaging 4.96 minutes per day; it reduced time from
43.3 percent of employee shifts, averaging 4.82 minutes per employee
shift; it had no effect on 11.6 percent of employee shifts. Overall, the
3 For those employees whose time was reduced, the average net
reduction was 2.04 minutes per employee shift.
4
number of minutes added to employee time by the rounding policy
exceeded the number of minutes subtracted, adding 1,378 hours to the
employees’ total compensable time.
At Anaheim, the rounding procedure added time (17,464 hours) to
the pay of 47.1 percent of the workforce (861 employees), and had no
effect on 0.8 percent of the workforce (14 employees); 52.1 percent of the
workforce (953 employees) lost time (a total of 13,588 hours). 4 On a
day-by-day analysis, the procedure added time to 46.6 percent of the
employee shifts examined, reduced time from 42.3 percent of the
employee shifts examined, and had no effect on 11 percent. Overall, the
rounding policy added 3,875 hours to the employees’ total compensable
time.5
The parties also stipulated to the net effect of rounding on the two
named plaintiffs: over the nearly four-year period examined, Letona
lost 3.7 hours, an average of .86 of a minute per shift, for a total dollar
loss of $118.41. Abeyta, who worked at San Gabriel for only nine
4 For those employees whose time was reduced, the average net
reduction was 2.33 minutes per employee shift.
5 The parties stipulated that the two medical facilities should be
considered separately. Nonetheless, petitioners combined the figures for
certain purposes, and sometimes referred to the combined figures in their
argument. Although real parties asked the court to disregard the combined
figures, they too referred to them in their argument. To clarify the record, we
note that according to the parties, combining the San Gabriel and Anaheim
figures leads to the following results: for the 1,294,045 total employee shifts
at the two facilities; 26,938 hours were added to the time of 1,568 employees
(48% of the combined total number of employees); 21,685 hours were taken
from 1,666 employees (51% of the combined total number of employees); there
was no effect on 31 employees (0.9% of the combined total number of
employees). The effect of the rounding procedure on San Gabriel and
Anaheim employees combined was a net increase of 5,254 in compensated
hours.
5
months during the examined period, lost 1.6 hours, an average of 1.85
minutes per shift, for a total dollar loss of $63.70.
Based on these facts, petitioners contended the rounding
procedure was lawful, as it was facially neutral, applied fairly, and
provided a net benefit to employees considered as a whole. As proof of
its tilt toward employees, petitioners pointed to the stipulated facts that
at both facilities, the majority of employee shifts either had time added
or were unaffected, and the number of minutes added to employee time
from rounding up exceeded the number of minutes subtracted from
rounding down. The result was a net loss to petitioners and net gain for
their employees, who were paid for 1,378 additional hours at San
Gabriel and 3,875 additional hours at Anaheim. Moreover, with respect
to the employees who lost time, the total amount was small per
employee, particularly when calculated on a daily basis. For example,
Letona’s loss of 3.7 hours, worked out to less than a minute per shift.
Abeyta’s loss of 1.6 hours worked out to less than two minutes per shift.
Petitioners contended this negligible amount of lost time was not
compensable, under a de minimis theory.
Real parties opposed petitioners’ motion, and asked the court to
grant summary adjudication in their favor on the rounding issue. They
contended that an employer’s rounding practice is unlawful if it
systematically undercompensates employees, and that such systematic
undercompensation occurs whenever “the average employee suffers a
loss of income due to rounding.” According to real parties, petitioners’
rounding procedure was unlawful because it resulted in
undercompensation for a slight majority of petitioners’ employees.6
Real parties further maintained that a rounding policy that resulted in
6 As we have seen, the majority of employees at San Gabriel did not lose
any compensation as the result of rounding. Real parties used the combined
numbers to support the argument that the majority of employees at
petitioners’ facilities suffered a loss.
6
any loss to any employee, no matter how minimal, violates California
employment law.
The trial court denied both petitioners’ and real parties’ motions
for summary adjudication. At the hearing, the court explained that an
employer may be permitted to use a rounding procedure “as long as [it]
does not consistently result in a failure to pay employees per time
worked,” and that “a rounding policy is lawful if it is fair and neutral on
its face and it’s used in such a manner that would not result over a
period of time in failure to compensate the employees properly for all
the time that they have worked.” The court further explained that
determining whether a rounding policy is slanted against employees “is
a factual issue and not a legal one,” and that “the analysis turns on
whether the policy is used in such a manner that will not result over a
period of time in failure to compensate employees properly for all the
time that they’ve actually worked.” The court cited Shiferaw v. Sunrise
Senior Living Mgmt., Inc. (C.D.Cal., Mar. 21, 2016, CV-13-02171-JAK
(PLAx)) 2016 U.S. Dist. LEXIS 187548 (Shiferaw) for the proposition
that “a plaintiff may establish [that] the employ[er]’s facially-neutral
policy is unlawful using either a net effect approach or an employee
percentage approach.” The court expressed concern that an employer
could manipulate the system by “consistently overcompensat[ing]” low
wage earners and “consistently overcompensat[ing]” “high wage
earners” in order to “serve [the] company’s whims at the expense of the
employees.” The court concluded that the evidence that 49.5 percent of
the employees at San Gabriel and 52.1 percent of the employees at
Anaheim had their hours reduced supported a finding that the rounding
policy “consistently favored the employer.” Thus, the court concluded,
the evidence “raise[d] triable issues as to whether the rounding policies
systematically under-compensate employees.”
Petitioners filed a petition for writ of mandate, seeking reversal of
the order denying their motion for summary adjudication. On February
8, 2018, this court issued an alternative writ of mandate, instructing
7
the trial court either to vacate the order insofar as it denied petitioners’
motion and make a new and different order granting the motion or, in
the alternative, to show cause why a peremptory writ of mandate
should not issue. The trial court did not vacate its original order.
DISCUSSION
Section 785.48 of title 29 of the Code of Federal Regulations
(section 785.48), promulgated many decades ago, allows employers to
compute employee worktime by rounding “to the nearest 5 minutes, or
to the nearest one-tenth or quarter of an hour,” provided that the
rounding system adopted by the employer “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(b).) 7 Federal district courts interpreting the provision
have almost universally concluded that a rounding system is valid if it
“average[s] out sufficiently,” rejecting claims that minor discrepancies
in individual employee’s wage calculations establish that the employee
is entitled to assert a claim for underpayment of wages. (East v.
Bullock’s Inc. (D. Ariz. 1998) 34 F. Supp. 2d 1176, 1184 [employee
presented evidence of 24 occasions of time reductions of less than 15
minutes]; accord, Alonzo v. Maximus, Inc. (C.D. Cal. 2011) 832
F. Supp. 2d 1122, 1126-1127 [“[A]n employer’s rounding practices comply
with § 785.48(b) if the employer applies a consistent rounding policy
that, on average, favors neither overpayment nor underpayment. . . . [¶]
An employer’s rounding practices violate § 785.48(b) if they
systematically undercompensate employees”]; Mendez v. H.J. Heinz Co.,
L.P. (C.D. Cal., Nov. 13, 2012, No. CV-12-5652-GHK (DTBx)) 2012 U.S.
7 Section 785.48 is part of section 785, title 29 of the Code of Federal
Regulations, the regulations that define “what constitutes working time” for
purposes of determining whether employees are receiving the minimum wage
or are entitled to overtime. (29 C.F.R., § 785.1.)
8
Dist. LEXIS 170785, p. *6 [“Rounding policies may be permissible if
they, ‘on average, favor neither overpayment nor underpayment’ of
wages”]; Eddings v. Health Net, Inc. (C.D. Cal., Mar. 23, 2012, Case No.
CV-10-1744-JST (RZx)) 2012 U.S. Dist. LEXIS 51158, p. *11 (Eddings)
[“[A]n employer’s rounding practices comply with § 785.48(b) if the
employer applies a consistent rounding policy that, on average, favors
neither overpayment nor underpayment”].)8
In Corbin v. Time Warner Entm’t-Advance/Newhouse P’ship. (9th
Cir. 2016) 821 F.3d 1069 (Corbin), the first federal appellate court to
interpret the regulation “join[ed] the consensus of district courts that
have analyzed this issue . . . .” (Id. at p. 1079.) The plaintiff there had
lost $15.02 in total compensation over a one-year period, and contended
that “if an employee loses any compensation due to the operation of a
company’s rounding policy, that policy should be found to violate the
federal rounding regulation.” (Id. at pp. 1076-1077.) “In other words,
. . . unless every employee gains or breaks even over every pay period or
set of pay periods analyzed, an employer’s rounding policy violate[s] the
8 We note that in each of the above-cited cases, the federal courts applied
section 785.48 to state law claims. (East v. Bullock’s, Inc., supra, 34
F.Supp.2d at pp. 1183-1184 [Arizona law]; Alonzo v. Maximus, supra, 832
F.Supp. at p. 1126 [California law]; Mendez v. H.J. Heinz Co., L.P., supra,
2012 U.S. Dist. LEXIS 170785 at p. *2 [California law]; Eddings v. Health
Net, Inc., supra, 2012 U.S. Dist. LEXIS 51158 at p. *7 [California law].)
Courts deciding claims asserted under the federal Fair Labor Standards Act
have interpreted section 785.48 in the same manner. (See, e.g., Bustillos v.
Board of County Commissioners of Hidalgo County (D.N.M., Oct. 20, 2015,
No. CIV-13-0971 JB/GBW) 2015 U.S. Dist. LEXIS 162697, p. *66, affd. in
pertinent part sub nom. Jimenez v. Board of County Commissioners of
Hidalgo County (10th Cir. 2017) 697 Fed.Appx. 597 [“Employers may . . .
lawfully use rounding policies to record and compensate time, as long as the
policy does not ‘consistently result[] in a failure to pay employees for time
worked’”]; Sloan v. Renzenberger, Inc. (D. Kan., Apr. 15, 2011, No. 10-2508-
CM-JPO) 2011 U.S. Dist. LEXIS 41018, p. *8 [“[R]ounding is unlawful if it
consistently results in a failure to pay employees for time worked”].)
9
federal rounding regulation . . . .” (Id. at p. 1077, italics omitted.) The
Ninth Circuit rejected that contention for multiple reasons. First, the
court observed, the plaintiff’s interpretation “read into the federal
rounding regulation an ‘individual employee’ requirement that does not
exist. The regulation instead explicitly notes that it applies to
‘employees’ and contemplates wages for the time ‘they’ actually work.”
(Ibid., quoting 29 C.F.R. § 785.48(b).) “If the rounding policy was meant
to be applied individually to each employee to ensure that no employee
ever lost a single cent over a pay period, the regulation would have said
as much.” (Corbin, supra, at p. 1077.)
The court further found that interpreting the regulation to require
the rounding to work out neutrally for every employee “would undercut
the purpose” and “gut the effectiveness” of the typical rounding policy.
(Corbin, supra, 821 F.3d at p. 1077.) “Employers use rounding policies
to calculate wages efficiently; sometimes, in any given pay period,
employees come out ahead and sometimes they come out behind, but
the policy is meant to average out in the long-term. If an employer’s
rounding practice does not permit both upward and downward
rounding, then the system is not neutral . . . .” (Ibid.) The plaintiff’s
interpretation “would require employers to engage in the very
mathematical calculation that the federal rounding regulation serves to
avoid,” requiring employers to “‘un-round’ every employee’s time stamps
for every pay period to verify that the rounding policy had benefitted
every employee.” (Ibid.) “The proper interpretation of the federal
rounding regulation cannot be one that renders it entirely useless.”
(Ibid.)
Finally, the court expressed concern that the plaintiff’s
interpretation of the regulation would “reward[] strategic pleading,
permitting plaintiffs to selectively edit their relevant employment
windows to include only pay periods in which they may have come out
behind while chopping off pay periods in which they may have come out
ahead.” (Corbin, supra, 821 F.3d at p. 1077.) The court did not believe
10
that “the legality of an employer’s rounding policy” should “turn[] on the
vagaries of clever pleading.” (Id. at p. 1078.)
Applying its reasoning to the facts presented, the Corbin court
found that the rounding policy at issue “passe[d] muster.” The policy
was “facially neutral,” the court observed, as the employer “rounds all
employee time punches to the nearest quarter-hour without an eye
towards whether the employer or the employee is benefitting from the
rounding.” (Corbin, supra, 821 F.3d at pp. 1078-1079.) Moreover, the
plaintiff’s own compensation records demonstrated that the rounding
policy was “neutral in application”: “sometimes [he] gained minutes
and compensation, and sometimes [he] lost minutes and compensation.”
Although the plaintiff was able to show an aggregate loss of $15.02,
“[the] numbers . . . fluctuated from pay period to pay period, and . . . a
few more pay periods of employment may have tilted the total
time/compensation tally in the other direction . . . .” (Id. at p. 1079.)
Because California’s wage laws are patterned on federal statutes,
in determining employee wage claims, California courts may look to
federal authorities for guidance in interpreting state labor provisions.
(Bell v. Farmers Ins. Exchange (2001) 87 Cal. App. 4th 805, 817; accord,
Huntington Memorial Hospital v. Superior Court (2005) 131
Cal. App. 4th 893, 903.) In See’s Candy Shops, Inc. v. Superior Court
(2012) 210 Cal. App. 4th 889, 903 (See’s I), the court agreed with the
federal courts’ interpretation of section 785.48.9 There, See’s Candy
9 Real parties do not dispute that section 785.48 is applicable to claims
made under state law. We note that California’s Division of Labor Standards
Enforcement (DLSE) adopted the federal regulation in its Enforcement
Policies and Interpretations Manual (DLSE Manual or Manual): “The
Division utilizes the practice of the U.S. Department of Labor of ‘rounding’
employee’s hours to the nearest five minute, one-tenth or quarter hour for
purposes of calculating the number of hours worked pursuant to certain
restrictions.” (DLSE Manual (Revised, June 2002 Update), ¶ 47.1,
“Rounding.”) The court in See’s I agreed with the DLSE and the federal
courts in concluding that section 785.48 and the policies underlying it “apply
(Fn. is continued on the next page.)
11
used a timekeeping system that automatically rounded employee
punches up or down to the nearest tenth of an hour. (Id. at p. 892.) The
plaintiff brought a class action for unpaid wages, and moved for
summary adjudication that the rounding policy was inconsistent with
federal and state law. (Id. at pp. 893-894.) The defense expert’s
analysis showed that 59.1 percent of the affected employees had a net
gain in time; 33 percent had a net loss; and 7.9 percent had no
difference. (Id. at p. 896.) The plaintiff herself received a net benefit of
five seconds per shift, but lost 3.6 seconds of overtime. (Id. at pp. 896-
897.)
The court held that “a rounding-over-time policy” does not
systematically undercompensate employees if it is “neutral, both
facially and as applied,” because “its net effect is to permit employers to
efficiently calculate hours worked without imposing any burden on
employees. [Citation.]” (See’s I, supra, 210 Cal.App.4th at p. 903.)
Having found that an employer is entitled to use rounding if the system
is “fair and neutral” on its face and in practice (id. at pp. 903, 907), the
court went on to consider whether a reasonable trier of fact could find
that See’s Candy’s policy was consistent with section 785.48 under the
evidence presented. Because the defense expert’s analysis established
that the rounding resulted in a total gain of thousands of hours for the
employee class members as a whole, that most of the class member
were fully compensated for every minute of their time, and that “the
equally to the employee-protective policies embodied in California labor law.”
(See’s I, supra, 210 Cal.App.4th at p. 903.) The court observed that “the
rounding practice has long been adopted by employers throughout the
country.” (Ibid.) To construe the requirements of California’s wage laws in a
manner inconsistent with federal law, “would preclude [California] employers
from adopting and maintaining rounding practices that are available to
employers throughout the rest of the United States.’” (Ibid., quoting East v.
Bullock’s Inc., supra, 34 F.Supp.2d at p. 1184.)
12
majority was paid for more time than their actual working time,” the
court found that See’s Candy had met its burden to show a triable issue
of fact regarding whether its nearest-tenth rounding policy was proper
under California law. 10 (Id. at p. 908.)
Focusing on the evidence that “the majority” of See’s Candy
employees were overcompensated under the system at issue in See’s I,
real parties contend that the case stands for the proposition that a
rounding policy is unlawful where a bare majority of employees lose
compensation.11 We do not read the holding in See’s I to create such
rule. Because the expert analysis established that the class as a whole
gained time and compensation and that the majority of See’s Candy’s
10 In See’s I, the appellate court reviewed the trial court’s order granting
the plaintiff’s motion for summary adjudication. In a subsequent decision,
Silva v. See’s Candy Shops, Inc. (2016) 7 Cal.App.5th 235 (See’s II), the
appellate court affirmed a grant of summary judgment in favor of See’s
Candy on essentially the same facts: “(1) the aggregate impact of rounding
actual time punches produced a net surplus of 2,749 employee work hours in
time paid and thus resulted in a net economic benefit to the employees as a
group; (2) 67 percent of the employees had either no impact or a net gain
under the rounding policy; (3) the rounding policy did not negatively impact
employee overtime compensation: it was ‘virtually a wash -- neither the
employees nor See’s [Candy] benefited from this rounding practice’; and (4)
there was no meaningful impact on [the plaintiff’s] hours paid under the
rounding practice; she obtained an aggregate surplus of 1.85 hours.” (Id. at
pp. 242, 250.) The court concluded that “See’s Candy met its burden to show
the rounding policy is fair and neutral on its face and is used in a manner
that over a relevant time period will compensate the employees for all the
time they have actually worked.” (Id. at p. 252.)
11 As real parties acknowledge, the majority of employees at San Gabriel
either had time added to their shifts and received compensation for time they
did not work, or broke even. A slight majority (52.1 percent) of Anaheim
employees had time (an average of 2.33 minutes) subtracted. Only by
combining the data for the two facilities can real parties assert that the
majority of employees suffered a loss.
13
employees gained time and compensation, the court had no basis to
resolve whether either factor was decisive. However, two recent federal
district courts have considered the issue and, relying on Corbin and
See’s I, concluded that the fact that a slight majority of employees lost
time over a defined period was not sufficient to invalidate an otherwise
neutral rounding practice. (Utne v. Home Depot U.S.A., Inc. (N.D. Cal.,
Dec. 4, 2017, Case No. 16-cv-01854-RS) 2017 U.S. Dist. LEXIS 199184
(Utne); Boone v. PrimeFlight Aviation Services, Inc. (E.D.N.Y., Feb. 20,
2018, No. 15-CV-6077 (JMA) (ARL)) 2018 U.S. Dist. LEXIS 28000
(Boone).)
In Utne, the timekeeping system was programmed to round either
up or down to the nearest quarter of an hour for purposes of calculating
employee compensation. (Utne, supra, 2017 U.S. Dist. LEXIS 199184 at
p. *5.) The employer’s expert performed an analysis of a representative
sample of the potential class over a five-year period and found that:
51.3 percent of shifts had minutes added rather than subtracted; in
more than half of all analyzed pay periods, employees were credited
with extra minutes; the average potential class member was paid for an
additional 11.3 minutes; and overall, the employer paid for an
additional 339,331 minutes (5,656 hours) when compared to the actual
minutes employees worked. (Id. at p. *7.) However, the plaintiff had
lost time -- an average of 36 seconds per shift -- and of the 13,387
employees analyzed, 53 percent were negatively impacted by the
rounding, an average of 141.7 minutes per employee over the five-year
period. (Id. at p. *9.) The court nonetheless granted summary
judgment in favor of the employer: “The rounding policy rounds both up
and down, and is thus facially neutral. There is no evidence that the
rounding policy is applied differently to [the plaintiff] or to any of the
proposed class members. [The employer’s] expert calculations are
sufficient to establish that the practice does not systematically
undercompensate employees over time.” (Id. at p. 11, italics omitted.)
The court observed that the figures were “consistent with [the
14
employer’s] contention that rounding contemplates the possibility that
in any given time period, some employees will have net
overcompensation and some will have net undercompensation. Given
the expected fluctuation with respect to individual employees, shifting
the time window even slightly could flip the figures.” (Id. at pp. *11-
12.)12
Boone also involved a quarter-hour rounding system. As in Utne,
expert evaluation of employee compensation during the relevant period
resulted in evidence that a majority (58.5%) of all time entries were
either neutral or rounded in favor of the employee and that the
employer suffered a loss overall, but that the majority of employees
(55.8%), including the plaintiff, suffered minor losses in compensated
time. (Boone, supra, 2018 U.S. Dist. LEXIS 28000 at pp. *6-7, 26.)
Relying on the Ninth Circuit’s conclusion in Corbin that “‘the rounding
policy is not meant to “ensure that no employee ever lost a single cent
12 The Utne court rejected the plaintiff’s request to certify as a class those
employees who lost time as “expressly foreclosed by Corbin, which explained
that the federal rounding regulation was not meant to apply individually to
each employee.” (Utne, supra, 2017 U.S. Dist. LEXIS 199184 at p. *14, citing
Corbin, supra, 821 F.3d at p. 1077.) “Provided [the] rounding policy does not
systematically undercompensate employees over time, [the plaintiff] cannot
defeat summary judgment on his rounding claims by limiting his proposed
class to only those employees who happen to come out behind during the class
period. As the Ninth Circuit explained in Corbin, the federal regulation did
not intend to reward strategic pleading where a plaintiff includes only pay
periods during which he or she came out behind a few minutes.” (Id. at
p. *15.) The court also rejected the plaintiff’s contention that See’s I “goes too
far under California law and does not reflect how the California Supreme
Court would treat rounding”: “Because California law does not address
rounding one way or another, courts must ask whether the federal rule is
consistent with California wage and hour law. The California Court of
Appeal [in See’s I] carefully studied the issue and answered that question in
the affirmative. [Citation.]” (Utne, supra, at pp. *13-14.)
15
over a pay period”’” (Boone, supra, at p. *27, quoting Corbin, supra, 821
F.3d at p. 1077), the court granted summary judgment in favor of the
employer, finding that the plaintiff “failed to raise a genuine issue of
material fact on whether [the employer’s] timekeeping system did not
‘result over a period of time, in failure to compensate the employees
properly for all the time they have actually worked.’” (Boone, supra, at
p. *28, quoting 29 C.F.R. § 785.48(b).) The court explained: “[A]n
analysis of the putative class as a whole demonstrates that the
rounding policy was neutral. It is undisputed that (1) 58.5% of all time
entries resulted in either neutral rounding or rounding in favor of the
employee; (2) the 138 putative class members gained compensation or
broke even on approximately 54.5% of their shifts; and (3) 42% of the
putative class members gained compensation from rounding over the
entire length of the class period analyzed. Further, . . . Plaintiff does
not refute that [when employees lost time,] the 138 putative class
members lost on average 15.67 seconds per shift. Although the data
analyzed here . . . did not average out to 0, Defendant’s expert
calculations are sufficient to establish that the practice does not
systematically undercompensate employees over time.” (Id. at pp. *27-
28, italics omitted.)
Real parties contend that two federal cases -- Eddings, supra,
2012 U.S. Dist. LEXIS 51158 and Shiferaw, supra, 2016 U.S. Dist.
LEXIS 187548 -- support the position that section 785.48 is violated
where the majority of the employees suffer a minor loss in
compensation. In Eddings, one of the two systems challenged in the
complaint required the employees to round their own time up or down,
rather than input their time and leave it to an impartial system to
round up or down according to a fixed formula. The employer claimed
to have communicated to the employees that time was always to be
rounded in their favor, but some employees submitted declarations
stating they were told to round down. Accordingly, the court found the
existence of a genuine issue of material fact “both as to the facial
16
neutrality of the [system] and to the effects of its application . . . . ”
(Eddings, supra, at pp. *15-16.) Because the policy “could have been
interpreted differently by different associates,” and it was “at best
ambiguous as to whether employees are ever allowed to round up,” the
fact that the majority of employees gained time was not determinative.
(Id. at pp. *15-16.)
In Shiferaw, which involved a system that automatically rounded
time to the nearest quarter hour, the court stated that “two pragmatic
approaches” could be used “to gather data” in determining whether a
rounding system, neutral in its face, was neutral in application: “(1)
compare all rounded punches with the actual punch times to determine
the overall net effect -- in hours, minutes, and/or seconds -- of the
rounding; and (2) compare the percentage of employees for whom the
rounding resulted in a net loss of time -- those who were
undercompensated -- with the percentage of employees for whom the
rounding resulted in overcompensation.” (Shiferaw, supra, 2016 U.S.
Dist. LEXIS 187548 at pp. *6, 81.) The plaintiffs’ expert provided data
establishing that the rounding policy resulted in net undercompen-
sation of the employees in the amount of 1,783 hours and that the
majority of employee (53.3%) lost time due to rounding. (Id. at p. 83.)
Contrary to real parties’ assertion that “the . . . court concluded [the] . . .
expert created a triable issue of fact under either the net effect or
percentage methodology,” the court considered both assumptions in
finding “[the] evidence . . . sufficient to show the existence of a genuine
dispute as to whether [the employer’s] challenged rounding policy
results in a ‘failure to compensate the employees properly for all the
time they have actually worked.’” (Id. at p. 85, italics omitted.) As the
plaintiffs introduced evidence that both the net effect and percentage
effect analysis supported their claims, the court had no cause to
consider whether a difference in either datapoint would have led to a
different result. Moreover, Shiferaw was decided before the Ninth
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Circuit issued its decision in Corbin. To the extent it conflicts with that
decision, it is no longer good law.
Here, the rounding system is neutral on its face. It “rounds all
employee time punches to the nearest quarter-hour without an eye
towards whether the employer or the employee is benefitting from the
rounding.” (Corbin, supra, 821 F.3d at pp. 1078-1079.) It also proved
neutral in practice. At San Gabriel, a minority of employees lost time,
the remainder either gained time or broke even, and overall it caused
the employer to compensate employees for 1,378 hours not worked. At
Anaheim, although a slight majority of employees (52.1 percent) lost
time, overall, employees were compensated for 3,875 more hours than
they worked. Because petitioners presented undisputed evidence that
the rounding system was neutral on its face, and that employees as a
whole were significantly overcompensated, the evidence established
that petitioners’ rounding system did not systematically undercome-
pensate employees over time. The fact that a bare majority at one
hospital lost minor sums during a discrete period did not create an issue
of fact as to the validity of the system. We agree with the court in
Corbin that the regulation does not require that every employee gain or
break even over every pay period or set of pay periods analyzed;
fluctuations from pay period to pay period are to be expected under a
neutral system. (See also Utne, supra, 2017 U.S. Dist. LEXIS 199184 at
p. *12 [“[R]ounding contemplates the possibility that in any given time
period some employees will have net overcompensation and some will
have net undercompensation”]; Boone, supra, 2018 U.S. Dist. LEXIS
28000 at pp. *27-28 [rounding policy was neutral as applied where
majority of time entries resulted in rounding in favor of employees,
class members broke even or gained compensation on their shifts, and
bare majority of class members lost time, but only an average of 15.67
seconds per shift].) We further agree with the court in See’s I and See’s
II that a system is fair and neutral and does not systematically
undercompensate employees where it results in a net surplus of
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compensated hours and a net economic benefit to employees viewed as a
whole.
Nothing in our analysis precludes a trial court from looking at
multiple datapoints to determine whether the rounding system at issue
is neutral as applied. Such analysis could uncover bias in the system
that unfairly singles out certain employees. For example, as the trial
court discussed, a system that in practice overcompensates lower paid
employees at the expense of higher paid employees could unfairly
benefit the employer. However, real parties presented no evidence of a
bias in the system or that the policy was applied differently to different
employees. Dr. Foster analyzed the data on an overall basis, a per shift
basis and a per employee basis. Her analysis established that overall,
at both hospitals, the rounding policy benefitted employees and caused
petitioners to overcompensate them. Her per shift analysis established
that for the majority of shifts, the employees at both facilities gained
compensable time. Moreover, at San Gabriel, the majority of employees
gained time and compensation or broke even during the approximately
four years of the study. The sole discrepancy was at Anaheim where a
slight majority (52.1%) lost an average of 2.33 minutes per employee
shift. But where the system is neutral on its face and overcompensates
employees overall by a significant amount to the detriment of the
employer, the plaintiff must do more to establish systematic
undercompensation than show that a bare majority of employees lost
minor amounts of time over a particular period. Because the
petitioners’ employees benefited overall from the rounding policy, the
fact that a bare majority lost a minimal amount of time was not
sufficient to create a triable issue of a fact. Petitioners’ motion for
summary adjudication should have been granted. 13
13 Because we conclude petitioners’ rounding system complies with
section 785.48, we do not consider whether the de minimus rule, which
permits “insubstantial or insignificant periods of time beyond the scheduled
(Fn. is continued on the next page.)
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DISPOSITION
The petition is granted. Let a peremptory writ of mandate issue
directing respondent superior court to set aside that portion of its order
of September 26, 2017 denying petitioners’ motion for summary
adjudication of issues, and issue a new order granting such motion.
Petitioners are awarded their costs on appeal.
CERTIFIED FOR PUBLICATION
MANELLA, J.
We concur:
EPSTEIN, P. J.
WILLHITE, J.
working hours to be disregarded” (29 C.F.R. § 785.47) -- applies in California.
That issue is currently before the Supreme Court in Troester v. Starbucks
Corp., rev. granted Aug. 17, 2016, S234969.
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