Written By: Stephen Scott | Link to Original Article
As a parent of young kids, I recognize that time is a malleable construct. A one-minute warning to my son that we are getting in the car could really mean 10 seconds or 10 minutes if my daughter starts yelling at me that she needs to put her shoes and socks on “myself.”
For years, employers applied a similar esoteric concept of time with an age-old tradition of rounding time clock entries to the nearest 15 minutes. It’s been an accepted practice under federal and most state laws, so long as it maintains a veneer of neutrality. The essence of rounding typically adheres to a system often dubbed the “7-Minute Rule:” minutes 0-7 are rounded to 0 minutes, minutes 8-22 to 15 minutes, minutes 23-37 to 30 minutes, minutes 38-52 to 45 minutes, and minutes 53-60 to 60 minutes.
The prevailing wisdom suggests that neither employees nor employers face a significant disadvantage because the pay ultimately balances out. To illustrate, an employee might experience underpayment when time is rounded down, but will, in theory, receive overpayment when time is rounded up, resulting in a fair equilibrium by the close of the pay period.
Yet this practice harks back to an era when employers relied on mechanical time clocks and manual payroll calculations. Fast-forward to today, and the landscape has shifted dramatically. The digital age has ushered in electronic time clocks capable of recording time down to the minute and instantly crunching precise pay figures. In this brave new world of technology, the notion of time clock rounding takes on a riskier hue.
Case law is starting to catch up to the realities of the digital age. In Eisele v. Home Depot U.S.A. Inc., the plaintiff argued that there is no Oregon law that allows for rounding of employee hours, while the defendant argued that the court should adopt federal regulation 29 C.F.R. § 785.48(b) because there is no explicit prohibition. In support of its position, the defendant cited Frances Du Ju v. Kelly Servs. Inc. as precedent. However, the guidance statement from the Bureau of Labor and Industry (BOLI) that the Frances Du Ju court relied on was no longer available on the BOLI website. Instead, at the time of the lawsuit, BOLI’s site said that while federal regulations may be instructive, they are not bound by them and will assess each case individually. The Eisele court ultimately concluded that Oregon law does not allow for time rounding because Oregon requires employees to be paid for all hours worked.
In response, BOLI updated its website to say, “while the US DOL allows a more permissive ‘rounding’ approach under the Fair Labor Standards Act, Oregon requires that employees be paid for all hours worked. While employers may apply a rounding system to the times when employees clock in and out, employers also need to implement precautions to ensure employees are getting paid for all work time each pay period. For example, employers could use a rounding system and adjust hours at the end of each pay period to capture hours worked that may have been excluded by the rounding system. Alternatively, employers could adopt a rounding system that always rounds hours in the employee’s favor.”
The urgency for employers to revise their time clock policies has never been more apparent than now, particularly if an organization still adheres to the practice of “rounding.” It’s a moment for reflection and action. Think of it this way: BOLI and the Oregon District Court have effectively transitioned from a lenient, almost parental “2-minute warning” approach to a more stringent “Siri, set an alarm for 2 minutes” stance.
Failure to do so could expose a company to potential legal risks and liabilities. In an era when precision and transparency are valued, outdated time clock practices may no longer suffice. Therefore, the time has come for employers to recalibrate their approach, embrace modern timekeeping tools, and ensure compliance with evolving legal standards. By taking proactive steps now, organizations can minimize potential exposure.
Stephen Scott is a partner in the Portland office of Fisher Phillips, a national firm dedicated to representing employers’ interests in all aspects of workplace law. Contact him at 503-205-8094 or smscott@fisherphillips.com.
The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the author and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. Neither the author nor the DJC guarantees the accuracy or completeness of any information published herein.