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Aug 18, 2016

Payroll timekeeping practices: Rounding policies are permitted as long as they are neutral

Wage and Hour 


The U.S. Ninth Circuit Court of Appeals recently ruled that both federal and California law allow rounding of employee work time to the nearest quarter-hour. Rounding should be neutral and even out over time, meaning that employees could benefit from the rounding by receiving more pay just as easily as they could miss out on some pay. The rounding regulation does not require rounding policies to ensure that no employee ever loses any money over a pay period, but rather, that they average out for employees by permitting for both upward and downward rounding (Corbin v. Time Warner Entertainment-Advance/Newhouse Partnership, 9th Cir, May 2016).
 
Tips on Time-Rounding Practices: The court’s ruling is consistent with federal regulations on the use of time clocks under the Fair Labor Standards Act (FLSA). However, adopt this practice with caution, and be sure you’re aware of the requirements and emphasis on neutrality. A few tips:

  • If you choose to round employee work time as a part of your payroll timekeeping process, be sure to include both upward and downward rounding in your policy.

  • Ensure that when averaged over a representative period of time, employees are fully paid for all time worked. For example, if you round to the nearest quarter-hour and an employee who normally works five days per week consistently starts work five minutes before each shift and keeps working five minutes after each shift, that adds up to 50 minutes per week of unpaid time.

  • We recommend that all time punches are controlled by one system. We also recommend not permitting supervisor edits, unless the supervisor can really verify that no work was performed.

  • Neutrality is key to complying with the rounding regulation. Random audits to check that the rounding policy is neutral and properly compensating employees over time is another recommended practice.

 

Contact your Vigilant employment attorney if you need assistance implementing a rounding practice, or to ensure that a current rounding practice is neutral. For further guidance, see our Legal Guide, “Watch Out for Wage and Hour Issues with Time Clocks.”  Also, in preparation for the new Fair Labor Standards Act (FLSA) overtime rules that take effect this December, ensure that you keep these rounding rules in mind if you have to reclassify salaried exempt workers as nonexempt (i.e., eligible for overtime). Consult our legal guide, “When is an Employee Exempt Under Federal Law?” for more information.

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