Does your company use a time clock or other work-time recording system for nonexempt, hourly employees that “rounds” employee work time to conform to employee work schedules? For example, if a nonexempt, hourly employee arrives for work and clocks in before the employee’s scheduled shift start time, does the system automatically round the employee’s recorded work time to reflect the scheduled shift start time? Similarly, if a nonexempt, hourly employee clocks out after the employee’s scheduled shift end time, does the system automatically round the employee’s recorded work time to reflect the employee’s scheduled shift end time? Does your company mandate that nonexempt, hourly employees don and doff work uniforms, other work-related attire, and safety and other equipment onsite but “off the clock”? Does your company require that nonexempt, hourly shift employees who relieve employees coming off shift report to work early so that they can meet with the employee being relieved to discuss what occurred during that employee’s earlier shift (commonly called “shift turnover”) off the clock?

If the answer to any one or more of these questions is “yes,” your company could potentially be subject to costly enforcement action by the U.S. Department of Labor (DOL) or an analogous state or other local agency should it be audited by any of these administrative entities to determine whether it is in compliance with wage and hour and recordkeeping requirements of the Fair Labor Standards Act (FLSA) and analogous state or other local statutory enactments. The likelihood that your company will be audited and subjected to enforcement action by the DOL has increased during the past several months. The DOL has hired additional staff to audit employers and to determine if the wage and hour practices of employers are compliant with FLSA requirements. The DOL also is actively encouraging — through electronic and other means — the filing of wage and hour complaints by nonexempt, hourly employees. The DOL has developed and disseminated a smartphone application to facilitate this. Using the application, nonexempt, hourly employees can track their work time to support claims for violation of the FLSA.

Additionally, if you answered “yes” to any one or more of the questions, your company may be potentially subjected to expensive collective or class action litigation. Plaintiff lawyers are increasingly filing collective and class action lawsuits against employers challenging payroll practices of these types as violations of the FLSA and analogous state statutory and common law.

Permissible Rounding

The DOL has specified by regulation that employers can disregard early clocking in by any nonexempt, hourly employee who voluntarily arrives early for work and late clock out by any nonexempt, hourly employee who voluntarily remains after hours provided the employee does not perform any work during the applicable period. See 29 CFR § 785.48.  In this regard, the rounding of an employee’s shift start or shift end times to the nearest five minutes or to the nearest one-tenth or quarter of an hour is deemed by the DOL to be presumptively valid. See 29 CFR § 785.48(b).

However, the presumption of validity is premised on the DOL’s assumption that such arrangements average out so that the employees are fully compensated for all the time they actually work. See 29 CFR § 785.48(b). An employer’s practice of rounding is deemed by the DOL to be permissible only if it used in such a manner that it will not result in major discrepancies in recordkeeping or in a failure to compensate nonexempt, hourly employees for all time they actually work. See 29 CFR § 785.48.

Judicial decisions are to the same effect. These are premised on specific facts related to an employer’s rounding practices and determinations regarding whether affected employees are fully compensated for work time.

Liability Avoidance

An employer will be able to avoid liability for back straight time and overtime wages in the event of an adverse DOL audit outcome or were litigation commenced against it either by federal or state DOLs or private attorneys if it can demonstrate through apposite records and other evidence that it fully compensates its nonexempt, hourly employees for all the time they actually work, i.e., that when the clock-in and clock-out times of employees are averaged, it is evident that employees are fully compensated for all time they actually work or that disputed time is de minimis. An employer that requires that nonexempt, hourly employees don and doff uniforms, other work-related attire, and safety and other equipment on site while off the clock (although there may be exceptions for nonexempt, hourly employees whose terms and conditions of employment are governed by a collective bargaining agreement depending on the applicable facts and circumstances, See 29 U.S.C. § 203(o), and/or that nonexempt, hourly employees engage in shift turnovers while off the clock may have difficulty demonstrating, if challenged, that it fully compensates its nonexempt, hourly employees for all the time they actually work or that any noncompensated work time is de minimis.

Recommendation

An employer that engages in rounding with the respect to the shift start and end times of nonexempt, hourly employees should, at a minimum, conform its rounding practices to what the DOL has recognized as presumptively permissible: nearest five minutes or nearest one-tenth or quarter of an hour. Nevertheless, the employer should still ensure that employees are fully compensated for all time they actually work when the clock-in and clock-out times of employees are averaged despite the presumption of validity applicable to rounding practices of this type.

An employer that engages in such rounding practices and that also requires that nonexempt, hourly employees don and doff uniforms, other work-related attire, and safety and other equipment on site (other than employees whose terms and conditions of employment are governed by a collective bargaining agreement for which the exception under 29 U.S.C. § 203(o) is applicable), and/or that they conduct shift turnover while off the clock should consider whether rounding practices or work schedules should be altered to factor in the time spent by employees who currently engage in these practices off the clock.

An employer that engages in rounding with the respect to the shift start and end times of nonexempt, hourly employees should ensure that apposite records and other evidence are retained and are available in the event of an audit to demonstrate its compliance with federal and state recordkeeping requirements and that it fully compensates nonexempt, hourly employees for all time they actually work.

Employers should implement, publish, and consistently enforce specific policies or rules that pertain to nonexempt, hourly employee timekeeping requirements that conform to applicable wage and hour laws. An employer should consider including polices and rules like those noted below in employee handbooks, posted on facility bulletin boards where employee notices are posted, and posted electronically to the extent this mode of employee communication is used by the employer:

  • An employee shall not clock in more than five, 10, or 15 minutes (depending on rounding factor) before the start of an employee’s shift without authorization from the employee’s supervisor
  • Each employee shall clock out at the end of the employee’s work shift
  • Each employee is prohibited from working at any time without clocking in before the employee starts work
  • Each employee is prohibited from working at any time after the employee has clocked out from working
  • Each employee is required to work all hours for which the employee is scheduled unless the employee’s supervisor authorizes a change to the schedule
  • Each employee must receive authorization from the employee’s supervisor to work more or less than scheduled work hours
  • An employee may not work overtime either before the start or after the conclusion of the employee’s shift unless it is authorized by the employee’s supervisor
  • Each employee is required to accurately report the employee’s work time on a daily basis for each day the employee works