Q: Under federal statutes, can an employer round employees’ time up or down when they clock in? 

A: Yes, but not in a manner where the employees are not fully compensated for all the time they work. 

Some employers track employee hours in 5-, 10-, or 15-minute increments, and the Fair Labor Standards Act (FLSA) allows an employer to round employee time to the nearest quarter hour. The FLSA recognizes that it can be impractical to count time down to the minute. An employer, however, can violate FLSA if the employee is not fully compensated for the time they work or if the employer always rounds down. Thus, if an employer rounds down, it must also round up. Of course, if there is a situation where it is practical to count time down to the minute, such as with digital time tracking, then counting each minute eliminates risk from a FLSA rounding claim. 

In the scenario where an employer must round, there are some safer ways to do it, such as: 

• Rounding in favor of the employer despite being more expensive for them. This eliminates risk because it will always favor the employee. 
• Using the start/stop method. The employer can round down when the employee clocks in and round up when the employee clocks out, or vice versa. As an example, an employee who clocks in at 8:56 AM for a 9:00 AM shift would not be paid for those four minutes. Likewise, an employee who clocks out early at 4:56 PM for a shift ending at 5:00 PM would still be paid for those unworked four minutes. Some employers, however, have been found liable for undercompensating employees¹ when this facially neutral policy is not applied neutrally.
• Setting the time clock to pay in 5-, 10-, or 15-minute increments. As an example, if the employer sets the clock to pay in 10-minute intervals and the employee clocks in at 9:05 AM, then the employer would round down to 9:00 AM. If the employee clocks in at 9:06 AM, then the employer would round up to 9:10 AM. 

Regardless of the rounding method chosen, the employer has an obligation to audit their payroll practices to make sure the implementation of the rounding procedure is neutral or favors the employee. The employer cannot rely on a facially neutral policy as a defense if employees are routinely undercompensated. Employers should also clearly identify their rounding policy in the handbook so employees are aware of it.  

If the employer has knowledge of its employees working, it must pay them accordingly. An employer may not arbitrarily fail to count as hours worked any part, however small, of the employees' fixed or regular working time or practically ascertainable period of time the employee is regularly required to spend on duties assigned to them. Rounding is only permitted when there are uncertain or indefinite periods of time of a few seconds or minutes duration.² Employers who do not properly round are subject to FLSA claims and state law claims for underpaid wages. 

This article only covers federal statutes, and employers should also check state and local legislation as well comply with any differences with federal law. Each employer has different needs. If you are an employer with questions about how to pay employees or applicable state and federal employment laws, please reach out to an experienced Wilson Elser employment attorney.
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^{1 Houston v. Saint Luke's Health Sys., 76 F.4th 1145, 1151 (8th Cir. 2023).}

^{2 29 CFR 785.47.}