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Can an Employer Round Up (or Down) Employee Hours?

A recent court case examined a common practice with regards to employee timekeeping - the practice of rounding up (or down) an employee's hours. The California Labor Commissioner will accept the practice of computing working time by rounding to the nearest five minutes or one-tenth or even one-quarter of an hour. However, the rounding must be used in such a manner that it will not result in failure to compensate the employees for all the time they actually worked over a period of time.

In a recent case (Corbin v. Time Warner-Advance Newhouse), an employee sued his employer claiming that the employer's policy that rounded all employee time stamps to the nearest quarter-hour was unlawful. (Mr. Corbin argued that there was one minute he worked and was not compensated for.) The court determined that the rounding policy was neutral. Under the policy, if an employee clocked in up to 7 minutes early, the employee's time would be rounded up (benefiting the employer), but if the employee clocked in up to 7 minutes late, his or her time would be rounded down (benefiting the employee). Similarly, if the employee clocked out up to 7 minutes early, the time would be rounded up (benefiting the employee), and if the employee clocked out up to 7 minutes late, the time would be rounded down (benefiting the employer). A review of the employee's time records revealed that the rounding policy resulted in the employee gaining compensation or breaking even 58% of the time.

The court relied on a Federal regulation that specifically permits rounding practices as long as they are applied in a neutral manner that does not, over time, result in a failure to compensate employees for all time that they have actually worked. The court also held that the validity of a rounding policy depends on how it operates in the global sense, not how it impacts one individual employee. However, even looking at how the policy affected just the individual employee in the case, the rounding policy was still lawful because in most pay periods the policy resulted in the employee either being overcompensated or breaking even. In sum, it did not result in him being systematically underpaid.

So what do we take away from all this? As long as your rounding policy is neutral and does not, over time, result in employees failing to receive compensation for all the time they work, the policy is permissible.

This article is for education and information purposes only; it should not be construed as legal advice. If you have an employment law question for inclusion in a future article, contact Brett T. Abbott at Gubler & Abbott LLP (bta@thecalifornialawyers.com). For specific employment law advice or other legal assistance, contact Gubler & Abbott LLP, (559) 625-9600, 1110 N. Chinowith St., Visalia, CA 93291 (www.thecalifornialawyers.com).

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