Question

We are struggling with getting our employees to punch in on time. Is there any sort of program that we could adopt to help us manage it better?

Answer

According to the Fair Labor Standards Act (FLSA), an employer may establish and maintain a “rounding” policy that allows non-exempt employees (hourly) to punch in a few minutes before or after the established start time and be paid starting at the actual time of the shift start.

Non-exempt workers need not necessarily be paid additional compensation (including potentially overtime) when a workplace timeclock indicates that the employees may have performed a few minutes of extra work.

Remember, however, that Massachusetts requires that an employee be paid for all time worked.  That will be addressed more fully later in this article.

The FLSA explicitly permits “rounding” of an employee’s starting and stopping times. 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.”

The DOL has explained this position in its Wage and Hour Division Fact Sheet #53 in the context of the health-care industry.

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

The Massachusetts Rule

Massachusetts has its own rounding regulation that copies the federal rule nearly word for word but contains a provision requiring that the employee be paid for all time actually worked. The Massachusetts rule drives home the point that no employer can expect to get uncompensated labor out of someone who punches in early, reports to a workstation and begins work.

From the Massachusetts Wage Act regulations (454 C.M.R. 27.07):

Recording of Working Time. An employer may round an employee’s starting and stopping time to the nearest five minutes, one-tenth, or quarter of an hour 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.

The main question revolves around the phrase “presumably averages out over time” or, in the case of Massachusetts, “averages out over a reasonable period of time.” Both federal and Massachusetts law require that the employee be compensated for hours worked.

An employer should review the impact of its rounding policy on employee wages.  A safe practice would be to audit employee time punches over a weekly or biweekly pay period to determine the fairness of its rounding practice and confirm that the practice complies with the law.  Many automated time and attendance programs can produce audit reports that help employers identify alterations or consistency problems with timesheets.

Final thoughts

Lawsuits alleging non-payment of wages have become frequent in Massachusetts. Any situation in which an employee is not paid her or his full wages – including cases arising from a rounding system – could invite a lawsuit and expose the employer to a treble damages penalty. Any employer operating a rounding time system needs to consider the following:

• Employers should adopt clearly written and communicated policies 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 and offer clarity on whom employees should consult if they believe their pay amount is incorrect.

An employer concerned about employee abuse of this policy should monitor its use 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.

Members who would like information on AIM’s HR Audit service please contact the AIM Employer Hotline at 800-470-6277.