Rounding Down Adds Up

The federal Fair Labor Standards Act (“FLSA”) requires employers to compensate its employees for all of the hours that they work. Under the FLSA, employers are required to "make, keep, and preserve" accurate records of their employees' "wages, hours, and other conditions and practices of employment. Many employers utilize time clocks or apps to record the hours worked by their employees. However, the wage and hour regulations under the FLSA do not require employers to utilize time clocks. But, employees need to be careful about how their working hours are recorded using apps or time clocks. In some industries, especially where time clocks are used, employers record their employees' starting time and stopping time using the nearest 5 minutes, or to the nearest one-tenth or quarter of an hour. The FLSA permits employers to use rounding provided that the rounding does not result in a failure to properly compensate the employees for the hours that they work. This is especially important if the employers’ rounding practices result in a denial of overtime compensation. Federal law and state law require employers to compensate their non-exempt employees (i.e., hourly) at a rate of 1.5 times their hourly rate of pay for each hour worked above forty (40) per week. Under the FLSA, an employer’s rounding policy is permissible if it "on average, favors neither overpayment nor underpayment." It is impermissible if it an employer’s rounding "favor[s] the employer and systematically undercompensate[s] employees.”

Employees who voluntarily clock in before their regular starting time or remain at work after their shift has ended do not have to be paid for that time, provided that they do not engage in any work. In these situations, early clock-ins and late clock-outs can be disregarded by the employer. The FLSA does not actually define “work.” However, employers are required to compensate employees for their performance of "principal activities," which are those activities that the employee is "employed to perform" or those activities that are integral and indispensable to the principal activity. Many times, employers require employees to perform these “principal activities” off-the-clock. That is, these activities are required for the performance of an employees’ job but the employer fails to compensate the employees for the performance of these activities. Off the clock work is especially relevant to employees who are entitled to overtime compensation (i.e., employees who are hourly). A few examples of this include the performance of the following activities:

Employees who use a time clock or an app to record their time in/time out at work should be aware of how the employer treats their recorded hours. Does your employer’s timekeeping system utilize rounding? Does your employer round up or round down? An employee should know what the employer’s rounding policy is to see if it results in a systemic underpayment of wages. The law recognizes that minor differences between an employee’s time clock records and actual hours worked by the employee cannot ordinarily be avoided. In addition to rounding, there are other mechanisms by which an employee’s compensable hours might be reduced. Does your manager or supervisor edit your time-clock entries? Does your employer deduct the amount of time that you spend performing compensable activities? Does your employer deduct the time spent taking breaks. Federal regulations require all break times between five and twenty minutes to be compensated.