The Eighth Circuit Court of Appeals has allowed a claim for unpaid overtime alleging improper rounding to move forward.  Hourly employees sued St. Luke’s Health System, alleging that the automated timekeeping system the company used caused them to lose time at the beginning and end of shifts.  The timekeeping system would round to the scheduled time for compensation purposes.  For example, a worker who clocked in at 7:57 but was scheduled to start at 8:00 would be clocked in at 8:00.  A worker who clocked out early at 5:57 but was supposed to leave at 6:00 would still be paid for those three minutes.  The workers alleged violations of the federal overtime law known as the Fair Labor Standards Act, or FLSA and Missouri state law.

After discovery, each side retained experts.  While the experts disagreed as to their specific findings, they both concluded that the rounding policy benefited the company more often than it did the employees.  The district court granted summary judgment, finding no violation of the FLSA or Missouri state law. 

Federal regulations permit employers to “round” an employee’s clocked start and end times for ease in calculating time worked. 29 C.F.R. § 785.48(b). Time clocks are not required, but:

“[I]n 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.” Id. § 785.48(a). 

Here, the parties stipulated that the employees engaged in compensable work at all times “on the clock.” The regulation continues:

“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.” 29 C.F.R. § 785.48(b). 

In this case, the parties agreed that the rounding policy is facially neutral, but they disagreed on whether, as applied, it failed “over a period of time” to compensate employees “for all the time they have actually worked.” See 29 C.F.R. § 785.48(b). As an initial matter, St. Luke’s argues that a facially neutral rounding policy can be neutral in application even if some employees are negatively impacted over a given period. The employees, on the other hand, argued that the proper focus should be on what happens to employees in the long term.

The appellate court found that facially neutral rounding policies could still violate the FLSA.  It held “that the employees have raised a genuine dispute that the rounding policy, as applied, did not average out over time. The district court therefore erred in granting summary judgment on the FLSA and Missouri wage claims.” For the same reasons, it vacated the state law unjust enrichment claims.   

This case is important because it shows that automated timekeeping software that uses rounding can violate federal overtime laws.  If you have worked for a company in the past three years that has used timekeeping software that has resulted in time being rounded down, contact an experienced overtime attorney as soon as possible to learn of your legal rights.  Josh Borsellino has represented hundreds of workers on claims for unpaid wages and fights to protect their legal rights.  For a free, confidential, no-obligation consultation, email Josh here or call him at 817.908.9861.