- “Rounding” Out Your Time Keeping Practices
- July 24, 2013 | Author: Tami Z. Hannon
- Law Firm: Mazanec, Raskin & Ryder Co., L.P.A. - Cleveland Office
Times are tough and employment litigation is up. At the forefront of this movement are cases under the Fair Labor Standards Act ("FLSA"). Cases filed under the FLSA are increasing rapidly, more so than any other type of employment case. In 2012, 7,672 FLSA lawsuits were filed, an increase of 893 cases over the previous record breaking year of 2011, according to Seyfarth’s Ninth Annual Workplace Class Action Litigation Report. According to the Department of Labor’s Enforcement Database, as of March 30 there have been 547 cases where minimum wage and overtime violations were found, with almost $1.1 million in back wages to be paid. By comparison, the entirety of 2012 saw $79.3 million in back wages, $2.3 million in civil penalties and over 11,000 cases filed. Tripping up on the FLSA can spell big penalties and exposure.
Under the FLSA, employees have 2 years to file a complaint for a violation under the Act. If the Court determines that a violation was intentional, it can reach back three years. The penalties? For overtime issues, the employee is entitled to the amount he or she should have been paid in overtime PLUS the same amount by way of liquidated damages. On top of that, the employer pays for both its attorney’s fees and the employee’s attorney’s fees. The real trouble with these suits? They often impact ALL of your employees as the pay practices are typically company wide. Given the lack of any real defense to the suits coupled with the attorney’s fee provisions and these suit can spell big trouble for companies.
One of the keys to complying with the FLSA is ensuring that your employees are properly paid for the time they worked. In order to do this, it is imperative that good time records are kept. Yet this can make payroll a nightmare. If an employee works 8 hours and 3 minutes, you have to figure out what fraction 3 minutes is to the full hour (0.05 for those playing along at home) and then apply that to the employee’s hourly wage. If you have a lot of employees, you can spend A LOT of time calculating the pay. It’s no surprise then that some employers choose to round.
The FLSA permits employers to round an employee’s time worked, provided that it does not average out to the employee being paid for less time than the employee worked. Rounding can be done in 5 minute increments, 6 minute increments (one-tenth of an hour) or 15 minute increments (quarter hour).
The trick to rounding, however, is to make sure that it averages out to what the employee actually worked. By way of guidance, the Department of Labor discussed rounding in 2009. Using a 15 minute increment, the Department of Labor recommending rounding up half the time and rounding down half the time.
How would this work? Here’s a typical example, worked through the various rounding methods.
Example: Employee Joe Smith clocks in everyday at 8:02 a.m., takes a one hour unpaid lunch break and clocks out at 5:04 p.m. How do the rounding methods affect Joe's hours?
We’ll start the examples with the easiest method - straight time, no rounding.
Under straight time, Joe worked 8 hours and 2 minutes, or 8.033 hours. This would result in 10 minutes of overtime for the week (or 2 minutes x 5 days = 10 minutes total).
Using 5 minute increments:
Using a 5 minute rounding, the 8:02 a.m. clock in time would be 8:00 a.m. and the 5:04 p.m. clock out time would be rounded to 5:05 p.m. This would result in 5 minutes of overtime per day, or 25 minutes of overtime for the week.
Using 6 minute increments:
Using a 6 minute rounding, the 8:02 a.m. clock in time would be 8:00 a.m. and the 5:04 p.m. clock out time would be rounded to 5:06 p.m. This would result in 6 minutes of overtime per day, or 30 minutes of overtime for the week.
Using 15 minute increments:
Using a 15 minute rounding, the 8:02 a.m. clock in time would be 8:00 a.m. and the 5:04 p.m. clock out time would be rounded to 5:00 p.m. This would result in no overtime for the week.
If you choose to adopt a rounding method, make sure the method is clearly stated and applied equally to all employees. Keep in mind the halfway point for rounding. This means:
- For a 5 minute increment, round down for minutes 1 and 2 and round up for 3 and 4.
- For a 6 minute increment, round down for minutes 1 and 2 and round up for 3 to 5.
- For a 15 minute increment, round down for minutes 1 to 7 and round up for 8 and 14.
The FLSA does not require rounding of time. However, if you are an employer that does round time, do so consistently and in a manner demonstrable in your record-keeping. This will ensure that you are less vulnerable to a FLSA claim. And, as always, check with your counsel before altering any time keeping practices to ensure changes are done in accordance with the FLSA’s requirements.