In Schneider v. Union Hospital, Inc., two former employees brought a combined collective and class action against their employer claiming that its policy for rounding employees’ time violated the Fair Labor Standards Act (FLSA). The District Court for the Southern District of Indiana certified the combined class and collective action of over 1,800 hourly employees who were not paid overtime due to the rounding policy.
Union Hospital rounded employee time in one-tenth of an hour increments twice a day, once at the beginning of the shift and once at the end. The hospital argued that rounding is an acceptable practice under the FLSA as long as employees are paid for all hours actually worked. In this case, the Hospital argued (and produced evidence) that employees were not working during the time. According to the hospital, employees spent this time before and after their shifts socializing with co-workers, getting coffee and engaging in other non-work-related activities. The Hospital also pointed to its handbook provisions and argued that employees were not required to clock in five minutes before their shift start times nor directed to work during the five minutes prior to their shifts or in the five minutes after their shifts ended.
The employees, on the other hand, pointed to the Hospital’s tardiness policy which required them to be at their workstations on time or risk discipline. They also argued that the rounding policy was uniformly unlawful because it always rounded the time in the Hospital’s favor – irrespective of whether any individual employee was actually working (or getting prepared to work) during the rounded time. The Court agreed and noted that for purposes of class certification, the fact the rounding always benefited the employer resulted in a common question as to whether the Hospital’s rounding policy was lawful. Any resulting underpayment of wages was therefore an individualized damages question which was not relevant for certification purposes.
The Court further noted that while some rounding policies are indeed lawful, not all rounding policies are created equal. “Neutral” rounding policies, where the time clock is rounded to the nearest one-tenth of an hour, are appropriate under the FLSA because such policies presumably “average out” over time to benefit the employer and employees equally. Rounding policies that always round in the employer’s favor, however, do not fall within the FLSA rounding exception, and therefore, arguably violate the law.