Time clock rounding is a longtime practice by which employers round employee start and stop times to the nearest five minutes, nearest one-tenth of an hour, or nearest quarter of an hour. While it has been the norm for many years, is the practice legal? Although federal regulation has authorized this practice for over 50 years, until recently it had not been endorsed by any federal appellate court. This changed, however, in May of 2016, when the Ninth Circuit Court of Appeals determined that an employer’s system of time clock rounding was in compliance with federal law in Corbin v. Time Warner Entertainment-Advance/Newhouse Partnership, 821 F.3d 1069 (9th Cir. 2016).
Missing Pocket Change Fuels a Class Action
In this instance, Time Warner Entertainment-Advance/Newhouse Partnership rounded its employees’ time punches to the nearest quarter hour. For instance, if an employee clocked in at 7:07 a.m., Time Warner would have rounded the time stamp to 7:00 a.m. As such, the employee would be paid for seven minutes that he or she did not work. On the other hand, if an employee clocked out at 5:05 p.m., the time stamp would be rounded to 5:00 p.m., causing the employee to lose five minutes of pay for time that he or she actually worked. The premise being that the rounding would, over time, even out.
Andre Corbin, the plaintiff in this matter, took the position that this rounding practice short-changed him. While the data revealed that Corbin either gained or broke even for 58 percent of his shifts with the use of the rounding system, over a span of several months he actually lost $15.02, which he would have been paid had the company not engaged in time rounding. Moreover, Corbin alleged he had logged on to an auxiliary computer system on one occasion before logging into the time system, and this, he alleged, resulted in a loss of one minute of compensable time not captured by the time clock.
Corbin filed a class action lawsuit claiming that the time clock rounding practice was in violation of state and federal wage and hour law because he was not compensated for every minute he worked.
Round and Round We Go
The court opened its opinion by stating “[t]his case turns on $15.02 and one minute.” Corbin contended that an employer’s rounding policy was in violation of the federal rounding regulation unless every employee would either gain or break even over the course of every pay period. The court disagreed.
Analyzing a federal regulation allowing for time clock rounding, 29 C.F.R. § 785.48(b), the court explained:
It has been found that in some industries, particularly where time clocks are used, there has been the practice for many years of recording the employees’ starting time and stopping time to the nearest 5 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. For enforcement purposes this practice of computing working time 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 court also acknowledged that, pursuant to the Fair Labor Standards Act, federal rounding rules had long been applied to federal claims. Additionally, the court recognized that California’s Division of Labor Standards Enforcement—“the agency empowered to enforce California’s labor laws”—has “adopted the federal regulation in its manual.” A California Court of Appeals, however, in See’s Candy Shops, Inc. v. Superior Court, 210 Cal. App. 4th 889 (2012), noted that the permissibility of rounding had not been addressed by the Supreme Court of California. Nonetheless, the court, in See’s Candy Shops, held that the federal rounding regulation described above applies to California state claims so long as the employer’s “rounding-over-time policy is neutral, both facially and as applied.”
The Ninth Circuit in Corbin instructed that the federal regulation does not require that an employee always come out even or ahead. The court reasoned that a rounding policy means that an employee may come out ahead in some pay periods and behind in others. The expectation is that the rounding will average out over the course of time. According to the court, Corbin’s rationale was faulty and impractical, in that it would basically require the employer to “un-round” employees’ time stamps every pay period to guarantee that the rounding policy would benefit all employees. In rejecting Corbin’s argument, the court opined that obligating an employer to engage in this “mini actuarial process at the time of payroll” would altogether defeat the purpose of rounding.
Examining the company’s rounding policy, the court determined that it passed muster. It was facially neutral because it rounded all employee time punches to the nearest quarter-hour without considering whether the employer was benefitting from the policy (i.e., the employer rounds down and up) and it did not depend on managerial oversight (i.e., the system is entirely electronic and cannot be manipulated by supervisors or others). In the end, Corbin failed to show that over a period of time he was not properly compensated for his work.
Wait a Minute
Can an employee sue for the loss of compensation for as little as one minute of time? The court addressed this issue separately. Corbin’s claim was that on one day he lost one minute of compensable time when he logged into an auxiliary system prior to logging into the time clock.
This claim was discarded with the court applying a long-established judicial reality check in the world of wage and hour law, the de minimis doctrine, meaning, in Latin, “about minimal things.” This doctrine allows courts to refuse to consider trivial matters. Applying the rule in this case, the court held that “‘[I]n light of the realities of the industrial world,’ a ‘few seconds or minutes of work beyond the scheduled working hours . . . may be disregarded.’”
It would not have been practical in the Corbin matter for the company to cross-check the auxiliary computer log in times with the time clock stamps for each employee every day, to catch the rare instances where an employee accidentally logged on to a computer program before clocking in. In addition, the loss of time here, one minute, was so miniscule that it resulted in mere pennies of lost wages. Moreover, the loss of one minute was not a recurring problem, but simply an infrequent occurrence at best. Consequently, the court determined that the one minute of uncompensated time was de minimis and as such, not a valid legal claim.
Not only does this case reaffirm the legality of time clock rounding, it also emphasizes the importance of implementing a neutral timekeeping practice that will not, on average, undercompensate employees.
While it may be legal, time clock rounding can pose a challenge when it comes to proper implementation. Even a proper system can be challenged in litigation, as evidenced by the Corbin case. To avoid employee claims relating to time clock rounding, employers should periodically conduct audits to verify that the rounding system (i) is facially neutral (it applies the same rules to all hourly employees); (ii) it rounds both up and down such that over some period of time (not necessarily per pay period) employees are being paid very close to what they earned and especially that employees are not routinely coming out on the short end; and (iii) there is no manipulation of the up-or-down rounding by management or anyone else.
If you have questions about wage and hour issues, recordkeeping or overtime laws, the lawyers at Faulkner Law Offices, PLLC stand ready to help. We have decades of employment law experience, particularly in the wage and hour area, and have worked on behalf of both employees and management, always with the goal of ensuring the laws are applied correctly and disputes are resolved quickly.