A common question that often arises for employment attorneys relates to proper rounding policies for employee time. A legal policy can be an effective, efficient method of dealing with the issue, while a misstep can lead to significant potential liability, costing an employer thousands of dollars in legal fees, and considerable time and headaches. The best way to avoid this wasted money, time, and frustration is to preemptively review your policies and procedures to ensure they are compliant with the law. Below are things to consider to achieve a compliant rounding policy.
“Rounding” refers to shifting an employee’s clock in or clock out time to a time more easily calculated, rather than using the exact time they worked. The general principle behind rounding is that if an employer has a consistent policy that requires rounding time up or down, over time the rounding up and down will even out for the employee. Thus, the employee is not harmed, and the employer’s administrative functions become more efficient.
A major reason for some confusion in this area is due to overlapping state and federal laws, and the lack of clarity at the state level. According to guidance from the Wisconsin Department of Workforce Development, the maximum amount of time allowed to be rounded is to the nearest quarter hour. The time an employer rounds up or down to the nearest quarter hour can be considered de minimis. This means if employees punch in either 7 minutes early or 7 minutes late, their hours worked will not reflect that time. If an employer elects to round its employees time punches to the nearest quarter hour, the employer must ensure that its employees can also benefit from the rounding.
The federal law is less restrictive. According to the Federal Code of Regulations, 29 C.F.R. § 785.48(b), an employer may record an employee’s starting or stopping time to the nearest five minutes or tenth or quarter of an hour, so long as the amount that is rounded off averages out over time and does not result in the failure to compensate an employee for all time actually worked. An employer should be cautious about rounding at the beginning and end of a workday if the employee actually begins work a few minutes early and works a few minutes at the end of the shift. The rounding practice should not result in the employee being “docked” one-tenth or one-quarter of an hour each day unless the time is unsubstantial or insignificant.
As an example, assume an employee’s shift concludes at 3:00. If he or she punches out between 3:00 and 3:07, the employer could round the time down to 3:00. However, the employer would also need to round the employee’s time up to 3:15 if he or she punched out between 3:08 and 3:15. Otherwise, if the employer only rounded the employee’s post-shift punches down, the employee would never be able to benefit from the arrangement.
Although an employer is required to maintain accurate records of time worked, there is no requirement that time clocks or time cards be used. If a time clock is used, an employer is not required to pay for time punched in early or late by employees if the employee does not perform any work during those periods. Wisconsin defines hours worked as “all time spent in physical or mental exertion which is controlled or required by the employer and pursued necessarily and primarily for the benefit of the employer’s business.” Wis. Admin. Code DWD § 272.12(1)-(2)(a). Thus, if the employee punches in early but doesn’t work, he or she is not spending time in physical or mental exertion, and this time is not counted towards hours worked. This is more explicit according to federal law, which states: “In those cases where time clocks are used, employees who voluntarily come in before their regular starting time or remain after their closing time, do not have to be paid for such periods provided, of course, that they do not engage in any work.” 29 C.F.R. § 785.48. Thus, even if all time is rounded to a scheduled start time, if the employee does not begin working until that scheduled start time, that time does not have to be counted towards a balancing of rounded hours.
The ultimate consideration is whether the arrangement averages out so that the employees are fully compensated for all the time they actually work. These policies can be seen in practice in the following cases. While these cases are not mandatory authority in Wisconsin, they give us a guide into how this issue is handled in federal litigation. In Contini v. United Trophy Mfg., Inc., No. 6:06-CV-432-ORL-18UA, 2007 WL 1696030 (M.D. Fla. June 12, 2007), the employer successfully defended a lawsuit because the employer’s rounding practice worked both to the benefit and detriment of employees by rounding time both up and down. In contrast, in Lacy v. Reddy Elec. Co., No. 3:11-CV-52, 2013 WL 3580309 (S.D. Ohio July 11, 2013), a policy of exclusively rounding time up to scheduled start time was found to be unlawful because employees began working before their scheduled start time. Rounding policies that result in major discrepancies in recordkeeping or in a failure to compensate employees for time actually worked are improper.
Consistent with the information above, a policy that rounds to the nearest quarter hour is lawful according to both federal and Wisconsin state law, and is the ideal policy to strive for under Wisconsin law. Further, any rounding policy must work to both the benefit and detriment of employees to be considered lawful, and must average out over time so employees are generally compensated for all time actually worked. Employers should keep these recommendations in mind to understand exactly what an employer is required to do in order to implement an effective and lawful time rounding policy.
If you have any questions regarding this article, please contact a member of Mallery & Zimmerman’s labor and employment law team.