California Reaffirms an Employer’s Right to Timesheet Rounding

Joseph Patterson | August 16, 2018

So long as employees aren’t negatively affected

 If you’ve read any of our past blogs on timesheet rounding, you know it’s an issue we’ve covered in detail.We’ve even published articles about it on other sites, like this one on to say, when it comes to articles on timesheet rounding, this isn’t our first rodeo, so we’ll be brief. 

First, what is timesheet rounding?

[caption id="attachment_27943" align="alignright" width="300"] The $22 Billion Cost of Wage Theft[/caption]Timesheet rounding is essentially what it sounds like. Time tracking software solutions, including TSheets, often provide this feature, allowing admins to round clock in and clock out times to the nearest five, 10, or even 15 minutes. This feature comes in handy for other software integrations. For instance, while TSheets can certainly keep track of time to the nearest hundredth of a second, QuickBooks Payroll doesn’t calculate seconds, so times have to be in minutes and hours only. Likewise, for a variety of reasons, some businesses require times to be recorded with nice, round numbers, often taken up or down to the nearest five minutes. But it’s the direction the time is rounded to that matters.  

Up or down, timesheet rounding should move in pairs

In the end, it doesn’t matter if times are rounded up or down, so long as they’re rounded in the same direction or to the benefit of the employee. For instance, say you clock in at 8:34 and your company clocks down to the nearest five minutes. Instead of saying 8:34, your time card will show 8:30. Right on time! Plus, you’ll get paid for four minutes of time you didn’t work. But say, at the end of the day, you clock out at 5:04. Once again, the time card rounds down to the nearest five minutes, so the time shown would actually be 5:00. You wouldn’t be paid for those last four minutes of work. This type of timesheet rounding is perfectly legal, even if the rounding occurs all the way to the nearest 15 or 30 minutes! So long as the time an employee loses evens out with the time they’re credited — so the effect of timesheet rounding remains neutral — the practice itself is fine. And you don’t have to take our word for it.  

California’s Court of Appeals reaffirms rounding to the nearest 15 minutes

Understandably, questions over the legality of timesheet rounding have come up before, and just recently, California’s Court of Appeals took up the case, reaffirming previous rulings. This time, on June 25, 2018, the court reviewed the class action case of AHMC Healthcare Inc. v. Superior Court. The case was brought up by employees who had a variety of grievances. The primary complaint being their employer’s time tracking system, which was set to round time up or down to the nearest quarter hour, rather than using the employees’ actual clock-in and clock-out times. FLSA Rules and RegulationsThe court found the policy itself was lawful, saying it took a neutral position in regard to who might benefit from the rounding (the employer or the employee). According to FordHarrison, a global human resources company, “A rounding policy is neutral in practice where the system is fair and neutral (e.g., the employer has a facially compliant system to round time, and the employer does not act to use the system against employees with the intent to underpay them) and does not systematically undercompensate employees where it results in a net surplus of compensated hours and a net economic benefit to employees viewed ‘as a whole.’” The court then looked into how the policy was actually implemented to see if the execution of it was also neutral. According to court documents, AHMC’s San Gabriel location added 9,476 hours to employee timesheets over a four-year period, augmenting the pay of 49.3 percent of their workforce. Another 49.5 percent of employees lost time (totaling 8,097 hours), while 1.2 percent of employees (17) weren’t affected either way. Of those who lost time, the average reduction was about two minutes per shift. While this particular AHMC location did benefit slightly more from the rounding than the employees, in other locations, the policy resulted in significantly overcompensating employees, to the detriment of the employer. Taking these results into account, the court perceived the actual practice of timesheet rounding to be neutral, designed to neither help nor hinder the employee or the employer. The court ruled the burden was on employees to establish “systematic undercompensation.” If the plaintiff's only proof was the minority group of employees had lost a small amount of time over a specific period, such evidence would not be enough to disprove a rounding system’s neutrality.  

Here’s the brief

We’ve said it before, and we’ll say it again. Timesheet rounding is perfectly legal … provided it’s done right. Use it as a means to an end for committing wage theft and you put yourself at risk of an expensive FLSA lawsuit.
A little about Joseph Patterson

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