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Fair Labor Standards Act Rounding Principles

Under the Fair Labor Standards Act, companies may use "rounding principles," for employees' hours worked. The FLSA allows companies to round the employees' hours to the nearest quarter hour. But the problem becomes that companies don't implement the principles correctly. Companies violate the rounding principle by only rounding down, which will result in a wage and hour violation.

The rounding principles come into play when employees come to work earlier than they are scheduled to work or they stay later than they are scheduled to work. As long as the employee is not performing any work during that time (because the employee has voluntarily come to work early or stayed later), the Company does not need to pay the employee for that time. Because let's face it, small discrepancies between the employees' clock-in hours and the hours they actual work simply can't be avoided.

So what should a Company do to avoid these discrepancies? Well this is where the rounding principles can kick in. Let's use the principle that the Company will round to the nearest quarter hour. The idea is that the employee's hours will average out, so the employee will be paid for all hours actually worked. If an employee is scheduled to work at 8:00 a.m. every day, and the employee clocks in 10 minutes early each day and clocks out 5 minutes late every day, for what hours would the employee be paid? The Company would use the rounding principles, where the Company would round the employee's hours to 7:45 a.m. and then round the employee's hours to 3:30 p.m. when they leave. This allows the employee to receive all money worked and allows the Company to be in compliance with the rounding principles.

What if the employee comes to work 7 minutes early every day and leaves work 7 minutes late every day? Well, the Company who uses 15 minute increments can round the employee's hours up to 8:00 a.m. and then down to 3:30 p.m., since the employee clocks in between 1 to 7 minutes early/late. If the employee clocks in 8 to 14 minutes early/late, then the Company would need to round to the 7:45 a.m. and then 3:45 p.m., since it's to the nearest quarter hour.

Best practices: The best practice is to make employees aware that they cannot clock in more than 7 minutes early or 7 minutes late, if using 15 minute increments. If the employee does in fact clock in early or late beyond the 7 minutes, pay the employee the proper hours worked and discipline the employee for violating a Company policy. Eventually the employee won't try to steal minutes away from the organization, and if they continue to do it, eventually the Company will need to terminate the employee.

Sean Darke, Esq. is a shareholder at Wessels Sherman Joerg Liszka Laverty Seneczko, P.C. a management-side labor and employment law firm in Chicago, Illinois. Mr. Darke successfully defends Businesses in all areas of Employment and Labor laws under both State and Federal laws. Mr. Darke can be contacted at 312-629-9300 or at sedarke@wesselssherman.com.

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