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May 13, 2010
3 Key Questions About Overtime Rounding Rules

In a BLR webinar titled "Reducing Overtime Costs: What You Legally Can—and Can't—Do to Keep Workers at Their Straight-Time Rates," Laura P. Worsinger, Esq., answered the following three questions about overtime rounding rules:

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Question 1. Can an employer round for early punch-ins and late-punch-outs only? No, the U.S. Department of Labor (DOL) would likely find a violation where, on average, the system favored the employer.

Rounding forward in cases of early punch-ins, but not rounding back in cases of late punch-ins, would benefit the employer only and cause the employee to lose compensable time.

Such a practice would likely result in the imposition of liability for unpaid wages and overtime.

A rounding practice will be accepted by the DOL only when 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.

Question 2. Can an employer round forward if it requires workers to show up 7 minutes early to punch in? Rounding would not be appropriate in such circumstances. Employees who voluntarily come in before 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.

The term "voluntary" is key. If employer directs employees to be on the premises early or late, then the employees should be paid for that time, and rounding practices should not be used to the benefit of the employer.

Question 3. How do rounding practices affect overtime pay? Let's say that an employee's schedule is 7 a.m. to 3:30 p.m. with a 30-minute unpaid lunch break. The employee receives overtime compensation after 40 hours in a workweek.

The employee clocks in 10 minutes early every day and clocks out 7 minutes late each day. The employer follows the standard rounding rules. Is the employee entitled to overtime compensation? Yes.

If the employer rounds back a quarter hour each morning to 6:45 a.m. and rounds back each evening to 3:30 p.m., the employee will show a total of 8.25 hours per day and 41.25 hours worked during that workweek. As a result, the employee will be entitled to additional overtime compensation for the 1.25 hours over 40.

Laura P. Worsinger, Esq. is Of Counsel with the Los Angeles office of Dykema Gossett PLLC. She has broad counseling and litigation experience and specializes in the defense of employers in individual and class actions involving wage and hour violations, misclassification, discrimination, wrongful termination, and other employment-related proceedings. She can be contacted at lworsinger@dykema.com.

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