The federal Fair Labor Standards Act (FLSA) regulations recognize 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 1/10 or quarter of an hour. Presumably, this arrangement averages out, so that the employees are fully compensated for all the time they actually work.” See 29 C.F.R. § 785.48(b). The regulation goes on to state that “[f]or 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 actually worked.”
Until recently, the Division of Wage and Hour Compliance at the New Jersey Department of Labor and Workforce Development had rejected the federal rounding rule and took the position that while the U.S. Department of Labor allows rounding practices that average out “over a period of time,” the Division would assess the impact of rounding on a weekly basis and require rounding to be to the benefit of the employee each week. However, in what is good news for New Jersey employers, the New Jersey Department of Labor and Workforce Development has reconsidered its stance on the issue and has formally adopted, verbatim, the USDOL’s federal rounding rule.
Good news aside, all employers who round in accordance with
federal and New Jersey law must follow these rules to remain in compliance:
- the rounding must work both ways (i.e., both for and against the employer);
- the rounding increments cannot exceed a quarter of an hour; and
- the rounding over time cannot disproportionately benefit the employer.
Employers that fail to follow these rules (e.g., by only rounding in favor of the employer) could be liable for minimum wage and
overtime violations.