Overtime and minimum wage go hand in hand. There are very few instances where you will fail to pay your workers the mandatory minimum wage. When it does happen, on occasion, is when employers engage in rounding.
Before we go any further, the mandatory minimum hourly wage can be found at https://labor.ny.gov/workerprotection/laborstandards/workprot/lshmpg.shtm. There is little to no point to me listing the actual dollar amount in this blog because, as you can see from the state’s web page, it is constantly changing.
Rounding is when employers round the employees’ time to the nearest five, six or fifteen minutes of an hour. New York has no independent rounding regulations, so the state follows the federal guidelines, which establish these three rounding time periods.
Rounding arose out of challenges surrounding calculating pay for large work forces, specifically those which use time cards or have some other mechanical impediment to time calculation. Time card use often resulted in delays due to waiting on line to punch out or in. Rounding is permissible so long as it does not result in a failure to compensate an employee for all of the time they have actually worked. The key to rounding correctly is to understand that it must be consistent. You cannot only round down, you must round up where appropriate. Keep in mind, though, that the more time you round, the more you risk violating the wage theft protection act and the fair labor standards act. The more consistent you are, the less likely you will gain the attention of the DOL, and the less likely you will inadvertently violate any wage and hour laws.
Some good ideas to stay consistent, and avoid unforeseen and unintended consequences of rounding are as follows.
1 – Don’t round meal breaks. Meal breaks are compensable if the worker does not take the full half hour break. Therefore, any rounding of meal breaks will appear suspicious to the DOL and any state agencies investigating the matter, who will treat them as potential violations of the FLSA.
2 – Use the smallest interval which you can accommodate.
3 – When rounding, either:
a) Always round in favor of the employee; or
b) Consistently round sign in in favor of the employee and sign out in favor of the employer, unless to do
so would result in paying workers on average less than for time worked.
Doing this consistently will prevent the likelihood of an investigation by the state or the DOL, and will help you establish that you were not attempting to violate the FLSA if you do get investigated.
Also consider whether you need to round at all. Unless you have a large workforce which uses time cards, rounding will likely raise the suspicion of the DOL. Without some sort of impediment to accurate time recording, rounding may not be permissible.
Although rounding time is sometimes permissible, rounding to the nearest cent is not. Sometimes you will end up with an employee who has earned $548.451 in a week. The temptation will be to pay $548.45, and many computer programs will generate a check for $548.45. However, the proper amount to pay this worker is $548.46. Why? Because the minimum wage statute is just that. It states, in relevant part, “Every employer shall pay to each of its employees for each hour worked a wage of not less than…”. Paying the employee an amount rounded down to the nearest 1/10th of a cent is less than the statutory minimum wage. Therefore, all rounding of amounts paid must be rounded up, not to the nearest cent.