A recent case from the Eighth Federal Circuit Court raises an issue about a longstanding common practice of some employers use of rounding policies when tracking hours worked by employees. In the case, the employer used an automated timekeeping system which rounded to the next quarter hour when an employee clocked in within 6 minutes of the scheduled shift start time, or out within 6 minutes of the scheduled end time. For example, an employee who clocked in at 7:55 for a scheduled 8:00 shift would not be paid for the 5 minutes before 8:00, because the clock would round up to 8:00. An employee clocking out at 3:55 for a scheduled 4:00 end time would be paid for the 5 minutes of unworked time before 4:00, because the clock would round to 4:00.
The Fair Labor Standards Act, “FLSA,” is the federal law governing the payment of wages to employees. When it was enacted, 86 years ago, employers obviously did not have the technology available today to track employee work hours. Back then, it would have been very complex to calculate each employee’s hours worked on a minute-by-minute basis. Accordingly, rounding polices were common, and are specifically allowed by FLSA regulations. However, the regulations state that such polices will “presumably average out over time so that employees are fully compensated.”
Unfortunately for the employer in the recent case, experts determined that the rounding policy resulted in lost time for two-thirds of the employees over all of the 2-6 year periods examined, and they lost more time than the one-third of employees who benefited from the policy.
The court found that the rounding policy was not in compliance with the FLSA regulation because, rather than “averaging out” so that employees were fully compensated, it resulted in a clear trend of under compensation for the employees.
The court specifically noted that automated, electronic timing and accounting systems (such as the one involved in this case) record exact punch in and out times, and there therefore are no administrative hassles with capturing an employee’s exact work time. “This is not like the old days of punch cards and hand arithmetic.”
So, employers using automated systems and a rounding policy to pay hourly employees should probably give a great deal of thought to retiring the rounding policy and paying actual clock in and out times to avoid claims by employees that they have not been paid for all time worked. The employees in the case discussed herein are looking for over $2,000,000 in damages, plus attorney fees.
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