The Fair Labor Standards Act (FLSA) requires employers to pay overtime compensation when nonexempt employees work more than forty hours in a week. Longstanding regulations interpreting the FLSA permit employers to "round" an employee's clocked start and end times for ease in calculating time worked. Time clocks are not required, but when time clocks or an automated system are used, rounding time must not result in systematic or routine underpayment "over a period of time" for work performed.
The actual regulation is 29 C.F.R. § 785.48(b):
(b) “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.
An example of a rounding practice from a recent case involved an automated timekeeping system in which employees clock in and out at the beginning and end of their shifts. The system records the exact times in and out, and then applies a rounding policy. Clocked times within 6 minutes of a shift’s scheduled start or end are 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.
The regulations do not define precisely what constitutes “over a period of time”, and courts that have examined this issue also have not adopted a precise standard. Many of the cases examine a contested rounding practice over the period of one year, and some apply even longer periods.
A facially neutral timekeeping system that rounds employee time up or down is permissible as long as it does not result in undercompensation over the long run. It is the long-term average that counts.
John Falcone and Luke Malloy handle employment law matters at PLDR Law. Feel free to contact us if you have questions about this matter.