WAGE CALCULATION 101 « Law Offices of Timothy Bowles | Top Employment Law Firm in Los Angeles

WAGE CALCULATION 101

A Guideline for Proper Time Rounding Policies under California and Federal Law

 

Employees often clock in and out a few minutes early or late at beginning and end of day or for meal breaks. Is an employer required to calculate all those extra or short minutes in determining an employee’s wages? Fortunately, the answer is “No.”

The Fair Labor Standards Act of 1938 (“FLSA”) 29 U.S.C. § 785.48 and the California DLSE Manual §§ 47.1 and 47.2  permit employers to round such minutes up and down to simplify administration of wage payments if done in an appropriate fashion.

The federal regulation recognizes that certain industries that use time clocks have had a “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.” The regulation accepts this practice, “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.” California adopts the federal language in the Division of Labor Standards Enforcement (DLSE) Manual.

For example, consider an employee scheduled to work from 8: 00 am to 4:00 pm and paid $20 per hour (equivalent to $0.33 per minute). If the employee leaves at 3:58 p.m., the employer could round his departure time to 4:00 p.m. and he would be paid for two minutes that he did not work. If the same employee leaves work at 4:05 p.m. on another day, his work time could be rounded to 4 p.m. He would gain $.66 on the first day and lose $1.65 on the second. As this happens over time, the employee would gain and lose minutes of pay, but these rounded amounts would tend to result in compensating the employee about the same amount as if every minute were counted in both directions.

In Corbin v. Time Warner Entertainment-Advance/Newhouse Partnership (May, 2016), the federal Ninth Circuit Court of Appeals — over California and several other western states –  rejected Mr. Corbin’s challenge to Time Warner’s time rounding policies under the FLSA and California law, observing that focusing on small resulting personal imbalances was misguided: “This case turns on $15.02 and one minute. $15.02 represents the total amount of compensation that Plaintiff . . . alleges he has lost due to his employer’s . . . compensation policy that rounds all employee time stamps to the nearest quarter-hour.”

The court confirmed the purpose of a time rounding policy is to enable employers “to calculate wages efficiently.” As a result, “in any given pay period, employees come out ahead and sometimes they come out behind, but the policy is meant to average out in the long-term.” It also ruled that a time rounding policy does not mean that every employee must be paid every cent of wages that employee would have earned without time rounding. Rather, the time rounding regulation applies to “employees” in the aggregate.

If you are engaging in time rounding or would like to do so, you should have a written, neutral rounding policy that explains how your company will evenhandedly apply rounding up and down to a specific time increment, such as five, ten, or 15 minutes. This policy should be in your employment handbook or issued separately, and your employees should acknowledge its receipt in writing. To reduce the chances of possible expensive challenges such as the Corbin case, it is good practice to have an experienced attorney draft or review such policy.

For further information, contact one of our attorneys: Tim Bowles, Cindy Bamforth or Helena Kobrin.

Helena Kobrin
August 19, 2016