Stop Rounding Time Entries!

Back in 2015, we did a series of posts on automatic meal break deductions and rounding time entries. Rounding happens even more commonly at the beginning and ending of shifts. If your employees punch in for work at 7:57, 8:01, and 8:02, and you treat all three punches as occurring at 8:00 a.m. for payroll purposes, then you take a risk that you could end up in litigation.

The Fair Labor Standards Act (FLSA) regulations do not outlaw rounding, but at the same time, they do not require employers to do it.  The FLSA was written in 1938 when tracking time to the exact minute was a bit more difficult than in today’s age of Excel, payroll providers, and payroll systems. I warned back then that if you are rounding employee time punches, you should seriously consider not doing it!  You can track employees’ work time from the exact minute they start until the exact minute they stop in nearly every employment situation. Rounding is vestige of manual calculation of time cards and paychecks, and you should relegate it to the dustbin of history. If my prior posts didn’t convince you of that, consider this case from the California Supreme Court last week.

The Sordid History and Bad Economic Decisions by the Employer

In Donohue v. AMS Services, Inc., the plaintiff worked as a nurse recruiter for AMN Services. AMN used a computer-based timekeeping system called Team Time that recorded exact punch times and was programmed to then round those actual punch-in and punch-out times to the nearest 10-minute increment. Punch times between 7:55 a.m. and 8:04 a.m. would thus be recorded as 8:00 a.m. Donohue asserted claims against AMN for meal and rest period violations, unpaid overtime, inadequate wage statements, unreimbursed business expenses, unpaid waiting-time penalties, and unfair business practices. She also sued under the Private Attorneys General Act. In October 2015, the trial court certified five classes of non-exempt employees.

Let’s stop for a moment: because of a wholly unnecessary rounding practice, AMN has now had to defend a class action lawsuit and pay substantial fees to a law firm. Already a loss, but wait…it gets worse:

AMN’s own expert testified that AMN’s rounding practice had resulted in a net surplus of 1,929 work hours in paid time for the class as a whole.

So, not only did AMN have to defend a case at trial and before the Court of Appeal, but their policy resulted in AMN overpaying their employees by 1,929 hours over the period covered by the class.

Fail.

But, wait, there’s more!

The California Supreme Court’s Decision

Unsurprisingly, Donohue’s attorneys appealed the decision. Last week, the California Supreme Court held that employers may not engage in time rounding time punches for meal breaks under California law at all, for any reason.  The Court held that “meal period provisions are designed to prevent even minor infringements on meal period requirements, and rounding is incompatible with that objective.”  Furthermore, the Court held that “meal period provisions are designed to prevent even minor infringements on meal period requirements, and rounding is incompatible with that objective.”

As I was saying six years ago, the Court also raised concerns about time rounding policies given the ease of tracking employees’ time with technology, observing that, “[a]s technology continues to evolve, the practical advantages of rounding policies may diminish further.” The Court called out the employer’s bizarre rounding policy, noting that AMN “was already using an electronic timekeeping system” that recorded the unrounded punches and then “actually had to take the extra step of converting the unrounded time punches to rounded ones.”

Employer Takeaways

1. Stop rounding time entries, it does not save you money.
2. Stop rounding time entries, it does not make calculating payroll easier.
3. Stop rounding time entries, unless you like betting your company in class action lawsuits.
4. Stop rounding time entries. Even if you’re not in California.
5. Please.

Rounding is not a synonym for permissible inaccuracy.  Even though they permit you to round, the FLSA regulations still require employers to accurately record employees’ hours worked.  Rounding should never obscure your duties under the FLSA to accurately record the hours your employees work. Yes, this might mean an extra calculation step or an investment in that $100/year Microsoft Excel license that helps you do the math. You will find lots of great, free timekeeping spreadsheet templates out there.

It might mean changing longtime company policy, but inaccuracy is never your friend under the FLSA or in any state, including California.  If your internal review leads you to conclude that your time tracking system is weird, difficult, or inaccurate, change it! You can’t avoid all lawsuits, but you can avoid making bad decisions worse and wasting precious company time and treasure defending them.