The history of wage and hour class and collective actions has followed a fairly distinct path. First came claims alleging that employees had been misclassified as exempt under the FLSA and/or state law. Next came claims alleging employees had not been paid for all time worked or, in state actions, that employees had not received required meal and rest periods.

Many have wondered what the next wave of class actions might be. That question appears to have been answered—time-rounding claims.

Why, one might ask, would plaintiffs bring claims regarding time rounding when the law is clear that time rounding is lawful?

The answer is not as straightforward as one might suspect.

It is true, of course, that regulations and court decisions have confirmed that employers may use evenhanded time-rounding policies—that is, policies that round employees’ time either up or down to the nearest five-, six-, or 15-minute increment are lawful on their face.^[5]

But what about in practice? Is the impact of time rounding evenhanded as it is actually applied to employees?

And that is the basis of the time-rounding claims brought by employees, which appear to be the beginning of the next wave of class and collective actions.

In these cases, plaintiffs typically allege that while time-rounding policies may be neutral on their face, they are not neutral in practice. Specifically, plaintiffs argue that their time and payroll records reveal that they and other employees are regularly disadvantaged by time rounding to the financial benefit of their employers—and that the total amounts underpaid to all employees are enormous.

In connection with that argument, plaintiffs also often argue that time-rounding policies must be read in connection with their employers’ other policies, such as attendance and tardiness policies. They argue that if employees face discipline for being late to work, or for being late returning from a meal period, it is more likely that employees will arrive at work early or return to work early—meaning that time rounding is more likely to disadvantage employees.

On first glance, these theories appear to be supported by logic. On second glance, however, they may fall apart. While it is true that an employee might be more likely to report to work early than late because of the employer’s attendance policy, time rounding could still benefit the employee.

For example, if an employer has a policy by which employees’ punch times are rounded to the nearest 15 minutes, an employee who shows up three minutes early to avoid discipline will be disadvantaged. But an employee who reports to work eight minutes early will have his or her time rounded to the nearest 15 minutes such that he or she would actually gain seven minutes. And even the employee who reports to work seven minutes or less early such that the start time is rounded up could still benefit from time rounding depending on when he or she leaves work at the end of the day. For instance, while an employee who reports to work three minutes early might lose three minutes of time to time rounding at the start of the day, if he or she left work eight minutes late, he or she would gain more time at the end of the day such that the total impact of rounding benefited him or her for that day.

There is another problem with many time-rounding claims brought by plaintiffs. Specifically, plaintiffs and their counsel often ask the courts to assume that all time that an employee is “on the clock” is compensable. However, there is valid argument that employees are not entitled to be paid for time engaged in personal activities after they punch in at the start of the day but before they commence work.^[6] For instance, an employee who arrives at work early and punches in, then sits in the break room reading a newspaper and drinking coffee for 10 minutes, arguably is not entitled to be paid for that time. And that non-compensable, pre-shift time could be the difference between whether an employer’s time-rounding policy is neutral in practice or not.

Ultimately, with more and more time-rounding class actions and collective actions being filed, employers should ask themselves a critical question: Do we really want a time-rounding policy and, if so, why?

There are, of course, entirely legitimate reasons for an employer to maintain time-rounding policies. While the argument that time-rounding policies make cutting paychecks easier administratively may not be as sound as it once was given the ease with which compensation can be calculated electronically, the desire to have a healthy work environment where employees do not feel hounded to commence work immediately upon punching in is a very reasonable one. So, too, are issues dealing with the location of time clocks or lines to punch in and out.

That said, any employer that is looking to save labor costs through time rounding not only does not have a legitimate reason to maintain a policy but will have a difficult time explaining itself in litigation.

Takeaway

As time-rounding class actions become more prevalent, it will not be a surprise to see more and more employers abandon what was once considered a “best practice” simply to avoid the possibility of litigation and the risks and costs that follow. Those that stick with the policies will need to be prepared to defend them—and being able to show that employees spend a couple minutes getting coffee before commencing work could make the difference in defeating a class certification motion or in prevailing on the merits.