December 16, 2015
Closely related to the de minimis rule, the practice of rounding is specifically permitted by both federal and state laws. However, the underlying principle for allowing rounding is that time rounding must, over time, balance out evenly and not result in an accumulation of unpaid time that benefits only the employer. Collective actions have increased recently alleging improper rounding of time.
Where time recording systems are used, employers may discard time recorded as a result of early or late punching, but should be aware that a prima facie case of time worked will be established from the actual times shown on the time cards. The Department of Labor generally permits employers to round time to the nearest five minutes or so, provided this arrangement averages out over a period of time so that employees are fully paid for all time they actually work. 29 C.F.R. § 785.48(b) specifically states:
“Rounding” practices. It has been found that in some industries, particularly where time clocks are used, there has been the practice for many years of recording the employees’ starting time and stopping time to the nearest 5 minutes, or to the nearest one-tenth or quarter of an hour.
Presumably, this arrangement averages out so that the employees are fully compensated for all the time they actually work. For enforcement purposes this practice of computing working time will be accepted, provided that 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.
If the rounded time for the employees does not “average out” “over a period of time,” the employer may be sued for violating minimum wage and overtime laws in the amount the employer has so benefited. Where an employer utilizes a rounding policy it must, therefore, be very careful to make certain that the policy itself does not favor the employer with respect to being evenly applied to both early and late clocking in and out by employees.
In Austin v. Amazon, 2010 WL 1875811 (W.D. Wash. May 2010), the court found that a facially neutral policy of rounding time forward at the beginning of the day and backward at the end of the shift in seven minute increments, was not, in fact, neutral because the company “flagged” for disciplinary action all late clock in times that were in excess of three minutes.
While the ability to round time is included in electronic timekeeping systems and the systems may report the rounded amount for payroll purposes, every system also records the precise times the employees clock in and out. This is information that will be available in any private litigation or government enforcement action. The proliferation of litigation has resulted in many companies abandoning the traditional use of rounding entirely, instead paying all non-exempt employees for the actual minutes recorded each day.
Checklist Regarding Rounding Practices
Step 1: Make sure you are aware of any rounding practices. Even if there is no corporate policy authorizing rounding, it may occur in discrete units or divisions.
Step 2: Consider whether there is any legitimate need or justification for your organization’s rounding practices. Unless there are truly extenuating circumstances, rounding practices generally do not serve any purpose sufficient to outweigh the risks of using accurate time records.
Step 3: Check if you are using a proper rounding interval (i.e., five minutes, six minutes, fifteen minutes). Consider switching to the smallest interval practicable.
Step 4: Check if your organization matches the grace period for tardies to the rounding interval you use for purposes of compensation. The argument is that if an employee can clock in 6 minutes early (and not be paid), they should also be able to clock in 6 minutes late without adverse consequences.
Step 5: Make sure you don’t have a “one-way” system, in which you round in only one direction (i.e., always rounding down or always
rounding up, or always rounding to the shift start time for early punches but not late punches, and only rounding back at the end of a shift).
Step 6: Calendar periodic, but regularly scheduled, “spot audits” to ensure that rounding “averages out” (i.e., the practice does not tend to systemically favor the employer).
Step 7: Check your training materials and employee manuals to make sure that employees understand they are allowed to clock in early/clock out late solely for their convenience and should not perform compensable work until their scheduled working hours actually begin.
Step 8: Is there a mechanism for tracking complaints regarding rounding practices?
Step 9: If you become aware that your rounding practices are inconsistent with any of the above guidance, immediately contact counsel. There may be ways to resolve any problems before litigation is filed.
Step 10: Make sure your organization is creating a “paper trail” in case your practice is ever challenged. You want to document: (1) the rationale for your rounding practice; (ii) why the use of precise timekeeping systems is not feasible; (iii) that you have considered alternatives, before concluding rounding is superior; (iv) that you have analyzed the appropriate rounding increment; and (v) your efforts to ensure the practice does not systemically favor the employer.