Saturday, December 14, 2013
Rounding, sounds like some bad western movie right? Rounding is the term used by the Department of Labor (DOL) to describe how a business can resolve minor differences in non-exempt employees work time.
The best practice is that a non-exempt employee should be paid for every minute they are working, and if the time worked exceeds 40 hours in a 7 day week they should be compensated at time and a half for all time over 40 hours. The enforcement from both the federal and state DOL agencies has been tilted toward the non-exempt employee. The general application is that the non-exempt employee must be paid for every minute they are clocked in, even if that time is unproductive.
Let us consider the actual wording of the rules.
§785.47 Where records show insubstantial or insignificant periods of time.In recording working time under the Act, insubstantial or insignificant periods of time beyond the scheduled working hours, which cannot as a practical administrative matter be precisely recorded for payroll purposes, may be disregarded. The courts have held that such trifles are de minimis. (
Anderson v.
Mt. Clemens Pottery Co., 328 U.S. 680 (1946)) This rule applies only where there are uncertain and indefinite periods of time involved of a few seconds or minutes duration, and where the failure to count such time is due to considerations justified by industrial realities
. An employer may not arbitrarily fail to count as hours worked any part, however small, of the employee’s fixed or regular working time or practically ascertainable period of time he is regularly required to spend on duties assigned to him. (emphasis added)§785.48 Use of time clocks.b)
?Rounding? practices. 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 most popular rounding system is called the ?7 minute rule?. The ?7 minute rule? allows the employee the opportunity to clock in 7 minutes on either side of the appointed time and the time starts at the scheduled time. If the employee clocks in 8 minutes on either side the time starts on the quarter hour.
What is not allowed is for the employer to make the arbitrary decision not to pay for the first 5 or 10 minutes of the shift on the assumption that the employee is not working. In addition there is some language in the code that seems to indicate that an employer can ignore the time an employee clocks in and does not work. An example would be an employee is scheduled to be at work at 7 am. The employee arrives at 6:15 am, clocks in and goes to the break room to drink coffee. While the code indicates this 45 minutes can be subtracted from the employees work time, the application during audit has been, if the employee is clocked in they must be paid, so be careful. Best practice is not to allow employees to clock in until they are scheduled to start work.
To get more information on rounding and the time keeping guidelines for non-exempt employees contact Gary at
gary@illuminaregroupinc.com or 615-542-1919.
IRS CIRCULAR 230 ? DISCLOSURE NOTICE: IRS Circular 230 regulates written communications
about federal tax matters between tax advisors and their clients. To the extent the preceding correspondence and/or any attachment is a written tax advice communication, it is not a full ?covered opinion?. Accordingly, this advice is not intended and cannot be used for the purpose of avoiding penalties that may be imposed by the IRS regarding the transaction or matters discussed herein.