Question

We are struggling to get our employees to punch in on time. Is there any program or strategy that we could adopt to help us control or manage this better?

Answer

One strategy that many companies find effective is called “rounding.”  According to the Fair Labor Standards Act (FLSA) regulation and Massachusetts minimum wage regulations,  employers may establish and maintain a  “rounding “ policy. The purpose of such a policy is to allow non-exempt (hourly) employees to clock in on the company’s time clock before or after the established start time and be paid starting at the actual time of the shift’s start. The U.S. Department of Labor (DOL) ’s Wage and Hour Division explains this option in its WHD Fact Sheet #53.

What the Law Says

Under the FLSA version of the rounding rule, non-exempt workers need not necessarily be paid additional compensation (including potentially overtime) when a workplace time clock indicates that they may have performed a few minutes of extra work.

The rule states:

“For enforcement purposes, “rounding” will be accepted, provided that it is used in such a manner that it will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked.

The Massachusetts regulation is similar, stating:

“An employer may round …provided that this manner of computing working time averages out over a reasonable period of time so that an employee is fully compensated for all the time he or she actually worked.”

However, Massachusetts does not define what constitutes a “reasonable” period.

How Rounding Works

The FLSA explicitly permits “rounding” an employee’s starting and stopping times. An employer may round workers’ hours to the nearest 15-minute increment without violating the FLSA. This provision is sometimes referred to as the “seven-minute rule.”

According to the Department of Labor (DOL):

[i]t 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.”

Although fact sheet #53 discusses workers in the health-care industry specifically, rounding applies to all industries with non-exempt employees who use some form of time clock to track working time. The long and short of it is that rounding should not always favor the employer, and factoring in the Massachusetts rule, people must be paid for every minute they work.

Example Scenario

Let’s say an hourly employee is scheduled to start at 9 am:

• If they clock in at 9:06, they are paid as if they arrived at 9:00.
• If they clock in at 9:08, they are paid as if they arrived at 9:15.
• If they clock in at 8:55, they are paid as if they arrived at 9:00.

If rounding is the employer’s practice, it must be done consistently, and for every hourly employee.  Employers may not pick and choose or only apply the policy when someone is late.

A Legal Win for Employers

Rounding was recently in the news when a Massachusetts company successfully fought off a former employee’s legal challenge to its rounding policy.

The former employee alleged that the employer’s time clock rounding policy of “time shaving” resulted in employees not receiving their full wages and working uncompensated overtime. The court rejected that argument, stating that the claim should be dismissed because the employer’s timekeeping system did not fail to compensate employees adequately for all the time they worked. Thus, it was reasonable.

If you’re considering implementing a rounding policy, here are a few guidelines to follow:

• Employers seeking a rounding policy should adopt clearly written and communicated standards requiring non-exempt employees to accurately record all time worked.
• Supervisors should be educated on the policy and understand how to address any punching violations, errors on timecards, attendance policy violations, and employee complaints on proper payment for hours worked.
• Any policy should prohibit employees from working off the clock or continuing for somebody else, and offer clarity on whom employees should report to if they believe their pay is incorrect.
• Any employer concerned about employee abuse of this policy should monitor its implementation to ensure that employees are not exhibiting a pattern of always punching in at the last possible minute and punching out at the first possible opportunity to exploit a policy designed to balance out the interests of the employer and the employee.

Need a Roadmap for HR Compliance?

AIM HR Solutions’ HR Compliance Audit will provide you with an HR roadmap for the future of your business. It offers valuable insight to help you avoid compliance and regulatory liabilities that may stem from your company’s HR policies and practices. After the audit, our experts deliver a comprehensive, detailed report outlining recommendations and taking actionable steps to remedy any areas of concern. Visit our website for more information.

If you have questions about this or any other HR-related topic, or would like information on AIM’s HR Audit service, please contact the AIM HR Helpline at 800-470-6277 or email helpline@aimnet.org.

If AIM members have a quick question about compliance or want guidance on timekeeping policies, give the AIM HR Helpline a call at 800-470-6277 or email helpline@aimnet.org.