Employers need to ensure that they comply with all state and federal regulations. Federal and state laws control working conditions and payroll practices. Wages, particularly those due to hourly workers, are often a source of conflict in employer-employee relationships.
Under the federal Fair Labor Standards Act (FLSA), employees have a right to minimum wage when paid on an hourly basis. They may also have a right to overtime pay in certain circumstances. They should receive pay based on how long they work. In scenarios where workers can show that their employers did not conform to fair pay standards, they may be able to file civil lawsuits seeking reimbursement for unpaid wages.
One of the employment scenarios that could lead to wage disputes involves a company paying workers in increments of time greater than a minute. Payroll rounding when calculating wages is a common practice. Does it justify a wage and hour lawsuit?
Time clock rounding is typically legal
The FLSA and Texas state regulations allow for time clock rounding, provided that employers round the time worked fairly. Typically, the largest increment they can use when estimating time worked is 15 minutes. So long as companies accurately track the time that employees are on the clock and pay them for that time, rounding to larger increments to streamline wage calculations is permissible.
However, the company must ensure that it is neutral when choosing whether to round up or round down while calculating time worked for payroll purposes. If employees can show that the company consistently rounds down but does not round up when necessary, that could theoretically lead to allegations of wage theft and a lawsuit against the company.
The practice of rounding time worked and using increments larger than a minute to calculate pay is not automatically a wage violation. Maintaining thorough and accurate timekeeping records and advising workers of company payroll practices during the onboarding process can limit the likelihood of unnecessary and frivolous wage lawsuits brought by workers with unrealistic expectations.
Companies can often defend against claims that they violated workers’ rights. Employers may need help validating the legality of employment practices and responding to pending business litigation brought by workers who insist they haven’t received their wages in full, and that’s okay.