Under the Fair Labor Standards Act (FLSA), nonexempt employees must be paid for every minute worked. It is the duty of the employer to maintain records of time worked by its employees. To accomplish this, many employers have an electronic time clock, which employees use to “punch in” and “punch out” at their starting and ending times. Neither the FLSA nor the Delaware Wage Payment and Collection Act (“DWPCA”), require employers to use time clocks but there is a great number of reasons to do so.
One question that often arises from employers who use time-clock systems is how to handle “rounding time worked”? If an employee must be paid for all time worked and he clocks in at 8:01 a.m., must the employer’s payroll system generate a payment for 1 hour and 1 minute? If not, does the employer have to pay the employee for 1 hour and 15 minutes if its payroll system is set up to pay in 15-minute increments?
The FLSA explicitly permits “rounding” of an employee’s starting and stopping times. In fact, the Department of Labor has promulgated a regulation that deals directly with this question. According to 29 C.F.R. Sec. 785.48(b):
It has been found that in some industries, particularly where timeclocks are used, there has been the practice for many years of recording the employee’s starting time and stopping time to the nearest five minutes, or to the nearest one-tenth or quarter of an hour. Presumably, this arrangement averages out so that the employees are fully compensated for all the time they actually work.
As an example, assume that the employer pays in 15-minute increments and has an established practice of rounding working time in this amount. This method is acceptable, provided that the rounding must not always benefit the employer–the rounding method must “average out.” To ensure that you are “averaging out” the employee’s working time when using a rounding method to calculate time worked, you have three options:
1. Always round up to favor the employee. (This works just fine for some employers due the easy calculations and certainty of compliance).
2. Round up to favor the employee at starting time and round down to favor the employer at ending time. (A little complicated for many payroll systems but workable for others).
3. Round up and down based on the increment. For example, if the employee reports to work at 8:08 a.m, he would be paid for time worked beginning at 8:15 a.m. If he clocked in at 9:07 a.m., he would have to be paid for time worked beginning at 9 a.m.
Over time, the presumption is, this system would even out in a way that is fair to both employer and employee.
See our previous posts on the wage and hour requirements of the Fair Labor Standards Act.