Dijares, CC BY-SA 4.0, via Wikimedia Commons
Two wage and hour posts in a row! And this one has an 80’s hair metal track (with a Milton Berle cameo) to back it.
So, cut off your sleeves and sing along as we talk about rounding time under the Fair Labor Standards Act.
There’s a hospital in the Midwest that uses an automated timekeeping system. Employees clock in and out at the beginning and end of their shifts, and the system records the exact time. That system then applies a rounding policy.
Clocked times within six minutes of a shift’s scheduled start or end get rounded to the scheduled time for compensation purposes. For example, an employee who clocks in at 8:56 a.m. for a 9:00 a.m. shift would not be paid for those four minutes. Likewise, an employee who clocks out early at 4:54 p.m. for a shift ending at 5:00 p.m. would still be paid for those unworked six minutes.
On paper, is there anything wrong with this? Not from a federal wage-and-hour standpoint.
The FLSA regulations permit employers to “round” an employee’s clocked start and end times for ease in calculating time worked. Indeed, “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.”
But there’s a catch. A rounding arrangement assumes that the time “averages out so that the employees are fully compensated for all the time they actually work.” (Employers do not have to compensate employees if they aren’t working after clocking in early or before they clock out late.)
In the hospital’s case, they stipulated with the plaintiffs in a lawsuit about their rounding practices that the employees were always working. So, the sole issue was whether its rounding policy had a neutral effect on employee pay.
It didn’t.
Two experts, one of the plaintiffs and one for the hospital, opined that the net effect of the policy over an extended time was a discernible pattern of under-compensation of employees.
For that reason, the Eighth Circuit Court of Appeals reversed the lower court’s entry of summary judgment in favor of the hospital and remanded it for further proceedings.
Now, if you use a rounding system, you may be thinking the same thing as the hospital: Why would any employer ever implement a rounding policy if it has to audit its timekeeping practices perpetually? The juice isn’t worth the squeeze.
The court had two responses to that. First, no one’s putting a gun to your head; rounding is permissive, not mandatory. Second, with automated electronic timing and accounting (as opposed to punch cards or gumballs or whatever rudimentary system you may have used in the past), employers can quickly run reports to verify pay trends.
Maybe consider doing that after you finish this blog post and see what’s up — before a plaintiff’s lawyer beats you to it.