by On August 11, 2023, the Eighth Circuit Court of Appeals issued an opinion that allows a class action lawsuit to go forward on the issue of whether an employer’s practice of rounding recorded employee work time was lawful. In Houston v Saint Luke’s Health Systems, a former employee filed a lawsuit on behalf of herself and similarly situated employees on the claim that the employer violated the Fair Labor Standards Act (FLSA) due to the way its timekeeping system rounded worker time in paying for hours worked. The employer’s automated system rounded off time within six minutes of a shift’s scheduled start or end. For example, an employee who clocked in for a 9 to 5 shift as early as 8:54 a.m. or as late as 9:06 a.m. would be paid as if the worker had started work at 9 a.m.
The U.S. Department of Labor (DOL), the federal agency that enforces the FLSA, allows employers to round worker time up or down to the closest quarter hour if the rounded hours average out to compensate employees properly. The plaintiffs initially failed to convince a federal district court judge that their employer’s practice was unlawful based on their evidence that employees lost more money from rounding down minutes over years of employment than they gained from rounding up. The judge granted summary judgment for the employer, and the plaintiffs appealed.
The Eighth Circuit Court of Appeals reversed the lower court’s decision and ordered that the lawsuit could proceed. The Eighth Circuit held that the plaintiffs had raised a genuine dispute that the employer’s system did not average out to adequately compensate employees.
The Eighth Circuit provides appellate review of federal cases brought in Arkansas, Iowa, Missouri, Minnesota, Nebraska, North Dakota, and South Dakota. This case is getting attention outside these states, partly because there have been very few federal appellate cases on the topic of timekeeping rounding and partly because the DOL filed a brief in support of the plaintiff’s position during the appeal. Even though the DOL’s own rules specifically allow this kind of rounding to be done by the employer, the plaintiffs and the DOL pointed to the actual impact of the otherwise lawful practice as being unlawful.
Employers may want to consider ways to avoid the likelihood of being challenged on their rounding practices:
1. Be transparent with employees: Employees should be informed of rounding practices. Done according to DOL rules, it is a lawful practice. The issue in this case is whether the legal practice had an unlawful impact.
2. Pay attention to complaints from individuals that rounding is unfair: If you get a complaint, review your records to see if the individual benefited from the rounding practice over time.
3. Set the rounding process to always favor employees: Some companies choose to set up their rounding formula to always favor employees. Time is never rounded down. Other companies practice rounding in favor of the employee for start times and in favor of the employer for end-of-shift times. These practices are not unlawful if consistently and neutrally applied.
4. Periodically audit the impact of your rounding practice: Don’t wait to get sued to find out who is coming out ahead in the long term. Over a year or two, did the employer or the employees benefit from the practice?
5. Stop rounding: The rule allowing rounding of timekeeping was developed back in 1955, an age before automated timekeeping systems. The Eighth Circuit opinion pointed out that current computerized timekeeping systems make it easier for employers to pay based on actual reported hours. Rounding is no longer the business necessity it may have been decades ago.
