A California Court of Appeals decision against Home Depot prompted the retailer to change its timesheet rounding policy. 

Some History

Like many retailers in the U.S., Home Depot follows the Fair Labor Standards Act (FLSA).  FLSA was signed into law by President Franklin Roosevelt in 1938, establishing a 40-hour work-week, overtime rates, and other labor-related guidelines.  Because it was difficult to calculate pay to the minute then, Timesheet Rounding was implemented in many industries.  Timesheet Rounding is the practice of adjusting employee time to the nearest set increment, usually to the nearest 5 minutes, one-tenth of an hour, or a quarter of an hour.  For instance, if an employer that rounds to the nearest 5-minute interval has an employee clock in for work at 9:05 or 8:57, an employer’s rounding rules may treat that employee as starting at 9:00.

However, Timesheet Rounding cannot be to the detriment of the employee.  The Code of Federal Regulations states, “For enforcement purposes this practice of computing working time will be accepted, provided that it is used in such a manner that it will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked.”  In other words, the total rounding up or down of an employee’s hours cannot be less than the actual time worked.

Courts in California

California sets guidelines under Labor Code section 510 when it comes to pay, and in some instances, they are stricter than federal guidelines.  California courts commonly reference the line in the Labor Code stating “employees will be paid for all work performed” when issuing rulings.  For example, a 2021 court ruling stated, “employers cannot engage in the practice of rounding time punches — that is, adjusting the hours that an employee has actually worked to the nearest preset time increment — in the meal period context.”  The intent is that an employee must have their entire 30-minute break available without rounding.  However, there are currently no California regulations specifically addressing timesheet rounding.

The California Court of Appeals recently used the ‘paid for all work performed’ argument with their ruling against Home Depot.  “[The plaintiff] …alleged that Home Depot’s electronic timekeeping system captured each minute worked by employees, but that due to Home Depot’s quarter-hour rounding policy, employees were paid for less time than reflected in Home Depot’s timekeeping system.”  In an audit of Home Depot’s timekeeping system, it was found that during their employment since 2015, the plaintiff suffered a total net loss of 470 minutes, or approximately 7.83 hours, due to rounding.

So, even though Home Depot followed FLSA guidelines and no guidelines in the California Labor Code regulated “rounding”, the court observed some employees were not paid for all work performed, thus having a triable issue of material fact.  They stated, “if an employer, as in this case, can capture and has captured the exact amount of time an employee has worked during a shift, the employer must pay the employee for ‘all the time’ worked.”

Because of this court decision, beginning on January 16, Home Depot will pay employees to the nearest minute based on when they clock in and out.  Home Depot is still considering whether to appeal this decision to the California Supreme Court.

How can we help?

It is vitally important to align timesheet rounding to current federal, state, and local guidelines.  Time Equipment Company‘s world-class time and attendance system establish rounding parameters to meet these guidelines.  In addition, we can create proper integration to our payroll service or any payroll software no matter how you round time or pay to the minute. 

For more information, please contact Time Equipment Company at sales@timeequipment.com or 800-997-8463.

*This information simplifies complex Acts as it is understood by Time Equipment Company. It is not to be taken as legal advice. The regulations for this program are changing. For further information contact your state or local Department of Labor.