Round Nonexempt Hours Correctly

Work-Time Calculations: Rules on Rounding Hours Q&A

“Rounding” is generally accepted under the FLSA, but only as long as the rounding practices “average out” and nonexempt employees are paid properly for hours worked. Find out how to implement this practice in your workplace.

Q: When recording work time for nonexempt employees, can we round to the nearest quarter of an hour? Our preference would be to round backwards whenever possible so that overtime is not incurred.

A: The Fair Labor Standards Act (FLSA) generally requires that nonexempt employees covered by the Act be paid for all hours actually worked and be paid at least one and one-half times their regular rate of pay for each hour worked over 40 in a single workweek. Further, employers are required to keep accurate records of the time worked.

The FLSA regulations do allow employers to round work-time calculations, as long as the rounding practices “average out” and they result in employees being paid “properly” for all hours worked. In other words, the rounding should not always favor the employer. Here is what the FLSA regulations say with respect to rounding practices, in 29 C.F.R. §785.48(b), “it has been found that in some industries, there has been the practice for many years of recording the employees’ starting and stopping time to the nearest five minutes, or to the nearest one-tenth or one-fourth of an hour. Presumably, the most common arrangement averages out so that the employees are fully compensated for all the time they actually work. This practice of computing working time will be accepted, provided that it is used in a manner that will not fail to compensate employees properly for all the time they have actually worked.”

(Download a free Hours of Work model policy including HR best practices and legal background.)

The Department of Labor (DOL) has interpreted the rounding practices regulation to mean that the employer should both round up and round down. Here is what the agency has said in a fact sheet discussing rounding practices in the health care industry:

“Some employers track employee hours worked in 15 minute increments, and the FLSA allows an employer to round employee time to the nearest quarter hour. However, an employer may violate the FLSA minimum wage and overtime pay requirements if the employer always rounds down. Employee time from 1 to 7 minutes may be rounded down, and thus not counted as hours worked, but employee time from 8 to 14 minutes must be rounded up and counted as a quarter hour of work time.”

The fact sheet goes on to provide the following three helpful examples:

“An intermediate care facility docks employees by a full quarter hour (15 minutes) when they start work more than seven minutes after the start of their scheduled shift. Does this practice comply with the FLSA requirements? Yes, as long as the employees’ time is rounded up a full quarter hour when the employee starts working from 8 to 14 minutes before their shift or if the employee works from 8 to 14 minutes beyond the scheduled end of their shift.”

“An employee’s schedule is 7 a.m. to 3:30 p.m. with a thirty minute unpaid lunch break.  The employee receives overtime compensation after 40 hours in a workweek.  The employee clocks in 10 minutes early every day and clocks out 7 minutes late each day.  The employer follows the standard rounding rules.  Is the employee entitled to overtime compensation?  Yes.  If the employer rounds back a quarter hour each morning to 6:45 a.m. and rounds back each evening to 3:30 p.m., the employee will show a total of 41.25 hours worked during that workweek. The employee will be entitled to additional overtime compensation for the 1.25 hours over 40.”

“An employer only records and pays for time if employees work in full 15 minute increments. An employee paid $10 per hour is scheduled to work 8 hours a day Monday through Friday, for a total of 40 hours a week. The employee always clocks out 12 minutes after the end of her shift.  The employee is paid $400 per week. Does this comply with the FLSA? No, the employer has violated the overtime requirements. The employee worked an hour each week (12 minutes times 5) that was not compensated. The employer has not violated the minimum wage requirement because the employee was paid $9.75 per hour ($400 divided by 41 hours).  However, the employer owes the employee for one hour of overtime each week.”

(Download a free Hours of Work model policy including HR best practices and legal background.)

Accordingly, any rounding practice that always rounds down, particularly in 15 minute increments, likely would not comply with the DOL’s requirements. You should review this practice with an attorney familiar with the FLSA requirements.

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