Ninth Circuit Approves Employers' Use of Time-Rounding System

On May 2, 2016, the Court of Appeals for the Ninth Circuit upheld an employer’s use of a time-keeping system rounding employee work-time to the nearest quarter hour.  Though lower district courts have previously upheld this practice, the Ninth Circuit’s opinion in Corbin v. Time Warner Entertainment is the first published opinion by a federal appeals court on this topic and adds clarity and guidance that employers can follow.   

Employers frequently use time rounding systems to calculate payment of wages without having to parse out minutes, while at the same time still providing full compensation to employees over a period of time.  One example of rounding, such as the one used in Corbin, occurs when an employer uses the “7-minute rule,” rounding down when an employee works between 1 and 7 minutes and rounding up when an employee works between 8 and 14 minutes. 

In Corbin, the employee argued that his employer had failed to pay him a total of $15.02 in compensation over a 13-month period because of the employer’s time-keeping system that rounded his time up or down to the nearest quarter-hour.  The employee posited that any compensation loss due to the operation of a company’s rounding policy violates the federal rounding regulation 29 C.F.R. § 785.48(b).  Rejecting the employee’s argument, the Court noted that, to pass muster, an employer’s rounding policy must be neutral both facially and as applied, neither favoring the employer nor the employee, so that the employee is paid his or her full compensation over a period of time.  Rounding systems that only round down are not permissible.  In validating the employer’s rounding policy, the court noted that though the employee was underpaid the amount claimed, his compensation may have averaged out given a few more pay periods. 

Employers using, or thinking about using, a rounding system must ensure that the process is neutral and applied consistently to all employees subject to the policy, and that all employees follow the company’s time entry requirements.

Electronic Alerts are written by Barran Liebman attorneys for their clients and friends. Alerts are not intended as legal advice, but as employment law, labor law, and employee benefits announcements.