Rounding Up and Rounding Down and the FLSA
Department of Labor regulations allow employers to round the calculation of work hours to the nearest quarter hour for purposes of counting hours worked under the Fair Labor Standards Act, as long as the rounding is done neutrally; i.e., the employer rounds up and also rounds down. See 29 C.F.R. § 785.48(b). The idea behind permissible rounding is that neither employee nor employer are favored if there is neutral rounding up and rounding down. This gives employers a practical and efficient way to calculate hours worked and wages paid under the FLSA.
The U.S. Court of Appeals for the Ninth Circuit, in a case involving permissible rounding at a call center for Time Warner, issued the first reported case upholding and applying the DOL’s neutral rounding policies in interpreting the FLSA. The Federal Court also held that under California’s own FLSA, the federal interpretation would apply since nothing in California’s law prohibited neutral permissible rounding. Corbin v. Time Warner Entm’t-Advance/Newhouse P’ship, No. 13-55622, 2016 WL 1730403, at *1 (9th Cir. May 2, 2016).
Minnesota also has a state FSLA and, for Minnesota employers, it is likely that the state FLSA will be interpreted according to the DOL policies. As in the Time Warner case, Minnesota’s FLSA overtime law does not have requirements that would counter allowing for neutral permissible rounding.
Takeaway: Minnesota employers using rounding up or rounding down payroll software based upon neutral principals and neutrally applied can likely look to the DOL regulations as providing guidance and safe harbor under federal and state law. Golfers round down, taxi cab drivers round up, and now employers can do both.