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Federal Rounding Regulation Does Not Require All Employees to Gain or Break Even Over Every Pay Period: Ninth Circuit
Practical Law Legal Update w-002-2287 (Approx. 5 pages)
Federal Rounding Regulation Does Not Require All Employees to Gain or Break Even Over Every Pay Period: Ninth Circuit
by Practical Law Labor & Employment
| Published on 10 May 2016 • USA (National/Federal) |
In Corbin v. Time Warner Entertainment,-Advance/Newhouse Partnership the US Court of Appeals for the Ninth Circuit held, in a matter of first impression, that the federal rounding regulation does not require all employees to gain or break even over every pay period.
On May 2, 2016, in Corbin v. Time Warner Entertainment,-Advance/Newhouse Partnership, the US Court of Appeals for the Ninth Circuit held, in a matter of first impression, that the federal rounding regulation does not require all employees to gain or break even over every pay period, and that the point of the regulation is to calculate wages efficiently so that they average out over the long-term. The Ninth Circuit also held that an employer is not required to plead a de minimus doctrine as an affirmative defense. (Corbin v. Time Warner Entm't-Advance/Newhouse Partnership, (9th Cir. May 2, 2016).)
Background
Corbin worked at a Time Warner Entertainment-Advance/Newhouse Partnership (TWEAN) customer call center. In 2010, TWEAN implemented an online timekeeping platform, which was designed to prevent off-the-clock work, by requiring employees to clock into its system before taking customer calls. TWEAN's compensation policies included a rounding system, which, based on the online time-keeping records, rounded each non-exempt employee's time stamp back to the nearest quarter hour. This system sometimes added minutes of work time for time that an employee was not on the clock (for example, paying an employee from 8:00 am despite him clocking in at 8:05 am) or deducted several minutes of work time for which an employee was actually on the clock (for example, paying an employee until 5:00 pm despite him clocking out at 5:05 pm). For Corbin, he gained compensation or broke even in 58% of his shifts subject to the rounding policy in the policy's first 13 months. However, as a result of the policy, he lost $15.02 in aggregate compensation in that time.
Corbin filed an action alleging violations of the FLSA and California wage and hour laws. He later added a claim concerning TWEAN's rounding policy. The district court granted TWEAN's motion for summary judgment. Corbin appealed the decision, asserting two claims:
- TWEAN's rounding policy violated the federal rounding regulation by:
- not being facially neutral as applied to Corbin; and
- depriving him of the full amount of his earned wages, including overtime.
- TWEAN allowed employees to load auxiliary computer programs before clocking into the time-keeping system, so he was denied pay for that single minute each day that he spent working.
Outcome
The Ninth Circuit affirmed the district court's decision to grant summary judgment to TWEAN on all of Corbin's claims and held that:
- As a matter of first impression, the federal rounding regulation does not require all employees to gain or break even over every pay period.
- An employer is not required to plead a de minimus doctrine as an affirmative defense.
The Ninth Circuit noted that:
- A federal rounding regulation is in effect as a neutral tool to prevent employers from failing to pay their employees for all of the time they worked (29 C.F.R. 785.48(b)).
- Federal rounding rules have been applied to federal FLSA claims and California state labor claims (Alonzo v. Maximus, Inc., 832 F.Supp.2d 1122, 1126 (C.D.Cal.2011); See's Candy Shops, Inc. v. Superior Court, 210 Cal.App.4th 889, 903, 148 Cal.Rptr.3d 690 (2012)).
- No court of appeals has published a decision addressing the rounding regulation, but district courts have regularly upheld the validity of employers' rounding practices if they were consistent and "favor neither overpayment or underpayment" (Alonzo, 832 F.Supp.2d at 1126).
- The Federal Rules of Civil Procedure list a series of affirmative defenses that must be asserted in a responsive pleading. A de minimus doctrine is not among those affirmative defenses. (Fed.R.Civ.P. 8(c)(1).)
- In applying the de minimus doctrine, the US Supreme Court has long held that a few minutes of work beyond scheduled hours may be disregarded (Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 692, 694 (1946)).
- Courts should follow a three-prong test to determine if compensable time is classified as de minimus, by considering:
- the practical administrative difficulty of recording the additional time;
- the aggregate amount of compensable time; and
- the regularity of the additional work.
The Ninth Circuit found that:
- TWEAN's employees were not required to gain or break even over every pay period.
- TWEAN's policy comports with the federal rounding regulation.
- Corbin erred in his analysis of the federal rounding regulation by:
- reading an "individual employee" requirement into the regulation that does not exist;
- misunderstanding the point of the rounding regulation, which is to calculate wages efficiently so that they average out over the long-term, not to focus only on the results of a particular week in which the employee came out behind;
- preferring an interpretation that could lead to plaintiffs engaging in strategic pleading, including months when they finish behind while disregarding surrounding months during which they came out ahead; and
- arguing, incorrectly, that due to overtime minutes being compensated differently than regular minutes in California, the district court improperly characterized the rounding statute as neutral. Corbin offers no case law to support his argument.
- TWEAN's rounding policy was neutral:
- on its face, since it rounds all employee time punches the same way; and
- as applied to Corbin, since he sometimes gained and sometimes lost minutes and compensation.
- The single minute of daily auxiliary computer time that Corbin fought to be compensated for was de minimus and TWEAN was not required to plead a de minimus doctrine as an affirmative defense.
- All three factors of the Lindow test support the conclusion that the minute of uncompensated time that Corbin challenged was de minimus.
- The district court properly granted TWEAN's motion for summary judgment on the claims concerning California's wage and hour laws.
Practical Implications
In Corbin, the Ninth Circuit became the first circuit court to address the federal rounding regulation and agreed with the numerous district courts that have upheld the validity of employers' neutral rounding policies. Employers that implement such policies should make sure that the policies are neutral on their face and as applied to individuals. A challenge to an employer's rounding policy can be combated by showing that, despite the employee not breaking even in a particular pay period, the policy averages out over the long-term.