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Court OKs Employee Lawsuit Over ‘Rounded-Off’ Time

pay roll

In order to foster more efficient payroll recordkeeping, employers have engaged in the practice of “rounding” hourly employees’ time up and down at the beginning and end of shifts for decades, going back to when people physically “punched in” by inserting a timesheet into a time clock.

This is permitted under the Fair Labor Standards Act — or FLSA — but only if the worker’s pay “averages out” over a period of time to the amount of time they actually worked.

In this context, a recent ruling from the 8th U.S. Circuit Court of Appeals should signal to employers that it may be time to discuss their rounding-off polices with a wage-and-hour lawyer to ensure compliance with the law.

In the 8th Circuit case, employers at St. Luke’s Health System in Kansas City brought a class action against the hospital arguing that its rounding-off policy violated the FLSA. The policy in question rounded clock times within six minutes of a shift’s scheduled start or end time, meaning that an employee who punched in at 11:54 for a 12 p.m. shift would have the time rounded up to noon (not getting paid for the extra six minutes worked), and if an employee clocked out at 2:54 for a shift ending at 3 p.m., the time would be rounded up to 3 p.m., paying them for the six minutes not worked.

A lower court tossed out the lawsuit finding that because some of the workers’ time was rounded up, and their pay rounded up as a result, workers weren’t getting less than they were owed.

But the 8th Circuit reversed the decision. In doing so, the court examined actual hours and pay data that the hospital provided. The data apparently showed that, in the aggregate, the policy resulted in time getting cut from about half of all shifts, while it was added to about a third of all shifts, with no effect on remaining shifts. This apparently favored the employer by about 74,000 hours over a six-year period.

The court did not, however, enter judgment in the workers’ favor; it ruled that the case should be able to proceed to trial. The employer may still win at that stage. However, it should serve as a warning to employers to do regular internal audits to make sure time is actually averaging out and not rounding in the employer’s favor.