Time Clocks, Rounding and The de Minimis Rule
Rounding timestamps up or down to avoid minor variations in hours worked is permissible if the practice is neutral on its face and employees are not affected adversely by its application. Nevertheless, the de minimis rule requires employers to pay hourly employees for even small amounts of time.
RoundingRounding is the practice of rounding punch-in and punch-out times for hourly employees to the nearest hour, quarter hour, etc. For example, if Jane punches in at 7:57 am and punches out at 4:58 pm, most time clocks will round the punch-in time to 8:00 am and the punch-out time to 5:00 pm.
Rounding is acceptable in California as long as: 1) the time recording policy is neutral on its face and 2) in practice employees on average are benefited or are at least not affected adversely by application of the policy. See's Candy v. Superior Court, 210 Cal.App.4th 889 (2012). In other words, the average effect of the rounding policy must either pay employees for every minute of time worked, or pay them slightly more than their time worked. A policy that appears neutral, but which in practice on average pays employees for less than all time worked, is unlawful.
The De Minimis RuleWhile they are related, rounding and the de minimus rule are two different concepts. As noted previously, rounding involves minor modifications to an employee's time to avoid having to pay an hourly employee on an eight hour shift for 7 hours and 57 minutes on Monday and 8 hours and 2 minutes on Tuesday simply because the employee did not punch in or out precisely at the beginning and end of their shift.
The de minimis rule held that an employer was not required to pay an hourly employee for minor amounts of time worked. It was rejected by the California Supreme Court in Troester v. Starbucks, 5 Cal.5th 829 (2018). The plaintiff in the Troester case was an hourly employee who was regularly required to spend a few minutes every day off the clock closing up the store. The California Supreme Court rejected the argument that Starbucks was not required to pay for the time spent closing up because, even though it was only a few minutes each day, over the course of only a single month it involved more than an hour's worth of unpaid time.
The Supreme Court was careful to say that it was limiting its holding to the facts presented, in which the employee was regularly required to spend a few minutes every day off the clock closing up the store. There is still a bit of a de minimis rule in effect. For example, an employee will not be entitled to sue for a few minutes of time over the course of an entire year, or for minor amounts of time that occur infrequently.
At first blush, it may seem that rejection of the de minimis rule makes rounding unlawful, but that is not the case. An employer with a rounding policy that meets the two requirements noted above (neutrality and no adverse affect) will in fact on average be paying an employee for all time worked. (The Supreme Court discussed the See’s Candy rounding case in its Troester decision and noted that the rule adopted there compensated employees for all time worked.)
Nevertheless, what is a "minor" amount of time and how the average employee is affected by a rounding policy may vary depending on the group being considered. For example, an employer with 4,000 employees may have a rounding policy that, on average, benefits the employer, while a subgroup of 500 employees for that same employer may not be affected at all or even be benefited by the same rounding policy. What this means is that a rounding policy that is neutral or involves a de minimis underpayment of a minute or two for a single employee may be unlawful when a larger group of employees is examined.
Federal Rounding GuidelinesFederal law with respect to rounding is similar to California law, and is contained in the Federal Code of Federal Regulations, 29 CFR § 785.48 "Use of time clocks." That section provides:
(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.
(b) “Rounding” practices. It has been found that …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.