Time clocks — Rounding vs. non-work time

Scope

An employer can discipline employees for working unauthorized hours, but it cannot refuse to pay them. It is management’s responsibility to enforce timecard rules and to take actions to make sure non-work time is not abused.

Regulatory citations

• 29 CFR 785.13— Duty of management.
• 29 CFR 785.48— Use of time clocks.

Key definitions

• None

Summary of requirements

Duty of management (785.13). “In all such cases it is the duty of the management to exercise its control and see that the work is not performed if it does not want it to be performed. It cannot sit back and accept the benefits without compensating for them. The mere promulgation of a rule against such work is not enough. Management has the power to enforce the rule and must make every effort to do so.”

Use of time clocks (785.48). The key provision has been underlined for emphasis. (a) Differences between clock records and actual hours worked. “Time clocks are not required. In those cases where time clocks are used, employees who voluntarily come in before their regular starting time or remain after their closing time, do not have to be paid for such periods provided, of course, that they do not engage in any work. Their early or late clock punching may be disregarded. Minor differences between the clock records and actual hours worked cannot ordinarily be avoided, but major discrepancies should be discouraged since they raise a doubt as to the accuracy of the records of the hours actually worked.”

Combining the regulations. You can see how these regulations work together. For example, if an employee punches in 15 minutes early, then sits around drinking coffee and chatting with co-workers, the employee is not “working” and doesn’t have to be paid for that time. However, if the employee is actually working, the individual must be paid, even if the employer didn’t authorize the overtime (though it can still discipline the employee for working unauthorized hours).

There isn’t any particular guidance on how to change the timecard, but the employee should be required to initial any changes. This will show that the company did not change the timecard without the employee’s knowledge (which may otherwise look like an unlawful effort to avoid paying overtime). It will also let the employee know the company is aware that no work was completed for a certain time while the employee was punched in. This is essentially an attempt to steal from the company (to receive pay without working). The employee can be disciplined for this, which should help reduce future occurrences.

Rounding practices. As noted, the regulation discusses “rounding” of timecards. Here is the applicable paragraph (underlining added for emphasis).

(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.”

For example, a company might use a “seven minute” rule, where a time punch within seven minutes of the nearest quarter-hour is rounded to the nearest interval, whether down or up. Thus, if an employee punches in at 7:54 a.m., and punches out at 5:12 p.m., that individual would be paid from 8:00 a.m. to 5:15 p.m. (rounding down and up in each case).

The law says rounding is allowed as long as it averages out to the actual number of working hours. However, if rounding is only done to the “disadvantage” of the employee, it would not be legal because it would result in paying the employee for fewer hours that the employee actually worked.

If the timecard was rounded down in this example (ending at 5:00), the employee would be “shorted” 15 minutes of pay. Of course, this assumes the employee actually worked during that time. If the employee finished working at 5:02 but simply didn’t punch out for another 10 minutes, the employer does not have to pay for that time. However, the late punch-out should not be “rounded” down, but instead the employee should be required to initial a change to the timecard.

Disregarding time. The law allows employers to “disregard” early or late punching if the employee does not actually perform any work. For example, if an employee arrives 20 minutes early, punches in, and then sits around drinking coffee until the shift starts, the employer is not obligated to pay for that time. However, this habit should be discouraged because, as the law says, regular discrepancies between the recorded hours and the paid hours may raise doubts about the accuracy of your records.

The sad fact is that some employees arrive early (or even on time), punch in, but don’t begin working right away. Although this time can be disregarded, the regulation warns that company records should reflect the hours worked as accurately as possible. Regular changes to timecards may create the impression that the company is “shorting” the employees or unlawfully trying to avoid paying overtime.

Early or late punching (or loitering) is a disciplinary issue, not a “rounding” issue. Employees can be told that if they are clocked in, they are expected to be working. They can be disciplined or terminated for falsifying timecards (knowingly punching in without intending to work, which is essentially stealing from the company) or for wasting time when they should be working.